Malaysian Economy: 2016 uneventful but 2017 is not rosy either


January 20, 2017

Malaysian Economy: 2016 uneventful but 2017 is not rosy either

By Dr. Shankaran Nambiar

2016 has been rather eventful for the Malaysian economy. The growth rate — the one big indicator of macroeconomic health — has crumbled. From a past average of 5 per cent in real GDP growth, 2016 is likely to see something like 4.2 per cent.

Related imageLike Tun Dr. Mahathir Mohamad in 1997, Najib Razak can now blame the Jews for Malaysia’s Economic Woes, instead of his inept economic management

What is of more concern is that growth in the country is mostly fuelled by domestic demand, which grew by 6.3 per cent in the second quarter of the year — picking up from the 3.6 per cent growth of the first quarter. Domestic demand has its limits given the small size of the domestic economy and the short duration that domestic demand can push growth for.

By contrast, external demand has taken a thrashing in the past months. Growth in net exports shrank by 3.8 per cent in 2015, sank to negative 12.4 per cent in the first quarter of 2016, and remained dismal in the second quarter at negative 7 per cent.

External demand is unlikely to rise again soon. The Japanese economy is not showing signs of any major pick-up. The Chinese economy is heading for a (hopefully gentle) slowdown, and Europe is unlikely to provide export demand for Malaysia due to Brexit and the fear of its potential successors. Malaysia will have to look to the improving US economy for help in spurring its export numbers.

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Asking Money from taxpayers

But there is also a flip side to the strengthening US economy. The Trump administration may roll-up the TPP, hurting Malaysian trade and investment — both crucial variables for Malaysia’s economy at this juncture. What’s more, the Federal Reserve’s decision to hike up interest rates in December 2016 was not in Malaysia’s favour. The hint that there may be at least three more rate hikes to come in 2017 is not welcome news and raises the threat of the ringgit sliding further against the US dollar.

It is not surprising, therefore, that export growth was at 2.7 per cent in the first quarter of 2016 and dropped to 1.4 per cent in the second quarter. Average export growth for the first eight months of this year has been a mere 0.9 per cent (it was 6.3 per cent in 2014). If this trend persists, the trade balance will likely shrink.

Image result for Malaysia's Corruption

Against this rather stark background, the rationale for Malaysia’s 2017 budget becomes understandable. The budget is primarily targeted at increasing domestic demand. Its measures include RM2.6 billion (approximately US$579 million) more financial aid for the 1Malaysia People’s Aid program and various other programs to increase access to housing — particularly for those in the bottom 40 per cent (B40) of income-earners. There are also incentives for public servants as well as RM50 million (approximately US$11 million) to train 20,000 graduates to enhance their employability.

While these efforts will likely increase domestic demand, their appropriateness is questionable. For instance, the intention of extending financial assistance to the B40 runs against the grain of upholding a market-oriented, subsidy-free economy. Once financial aid is provided it will be difficult to withdraw it. As for graduate employability, the problem should be treated as a structural one, rather than ad hoc and directed at only 20,000 graduates. And the policies for improving access to affordable housing are insufficient given the enormity of the problem.

Nevertheless, it is noteworthy that the government is committed to fiscal discipline and also determined to close the fiscal gap. A widening deficit will be detrimental at this point, although if there had been a good record on this score in earlier years it might have been a convenient tool to reach for.

The rapidly slipping value of the ringgit against the US dollar is another flash point. Although most emerging markets have experienced drops in their respective currencies against the dollar, the ringgit has suffered the biggest relative fall in the region. One reason for this is the perceived decline in good governance. Although the Malaysian authorities have cleared 1MDB of any wrong-doing, continued reporting in international media and the US Department of Justice’s interest on the matter may have put off some foreign investors.

In the face of the falling ringgit, Bank Negara Malaysia (BNM) has reminded market players that the ringgit is still not a fully internationalised currency. BNM has requested that non-resident foreign banks don’t engage in non-deliverable forward-related (NDF) transactions. In restricting NDF trade the central bank is only ‘re-enforcing’ existing rules against offshore trading of the ringgit. But foreign traders have been sceptical of the move.

Another measure to curb the falling ringgit has been to impose the requirement that exporters can only retain up to 25 per cent of export proceeds in a foreign currency, while the remainder must be converted into ringgit. Bank Negara Malaysia has stated that exporters are free to convert currency to meet up to six months of loan obligations not denominated in ringgit, stoutly denying claims that these measures are tantamount to capital controls. Nevertheless, they are interventions in the market and disrupt the decision-making process of exporters.

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2017 may not be rosy for the Malaysian economy. Taking a pessimistic view, the growth forecast could slip to the range of 4–4.2 per cent for the next year. We can take solace in the fact that the fuzzy edges of oncoming negative news can be vaguely seen in the distance and it is easy to count on Malaysia’s seasoned and expert policymakers to manage these predictable shocks.

Dr.Shankaran Nambiar is the author of the recently published book Malaysia in Troubled Times. He is also a senior research fellow at the Malaysian Institute of Economic Research. The views expressed in this article are his own.

This article is part of an EAF special feature series on 2016 in review and the year ahead.

Malaysians are concerned with the Economy


January 19, 2017

Donald Trump aside, Malaysians are concerned with the Economy

by Martin Khor@www.thestar.com.my

As the new year gets underway, ordinary citizens are concerned about the rising cost of living, the ringgit’s low level and the outflow of capital.

Image result for Felda Global Ventures a messMaking Malaysia messy is his forte

WHILE Donald Trump’s inauguration as the new United States President will hog the headlines this week, it is the bread-and-butter issues that preoccupy the man and woman in the street as the new year gets into stride.

In Malaysia, a major talking point is the state of the economy. Three issues are worrying the ordinary Malaysian – rising prices, the fall of the ringgit and the outflow of capital. Each is an issue in its own right, but they are also all interlinked.

Inflation has become a hot issue because it is accelerating and will continue to do so. There are one-off factors influencing retail prices, such as the removal of the cooking oil subsidy, the weather affecting vegetable output or the slight recovery of the world oil price.

 But prices across the board are affected by the weakening of the ringgit since this increases the prices of imports.

Malaysia is very dependent on imports for a wide range of products, from food and household utensils to machinery and components for making cars, computers and all kinds of other goods.

As the most recent ringgit plunge started in mid November, prices of products that have high import content may not have fully risen yet because the shops are still clearing stocks bought earlier. But you can expect the new prices to kick in more and more.

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Irwan Siregar —  Fox in the  Malaysian Financial Hen House

The second issue is the ringgit decline itself, which has bad and good effects, with some sectors and people losing and others benefiting. The negative effects include:

  • Consumers having to pay higher prices for imported goods and services.
  • Traders and retail shops getting less business as the demand for the dearer imports goes down.
  •  Manufacturers and construction firms paying higher costs for parts and production inputs, which will translate into higher consumer prices and eventually higher house prices.
  • Parents with children studying abroad must fork out more ringgit even if the fees and hostel rent remain the same.
  • The Government and its enterprises and private companies that took loans in foreign currencies lose significantly as they have to spend more ringgit to service their loans.

Among the good effects:

  • Smallholders and companies exporting palm oil, rubber, petroleum and other commodities will receive more revenue in ringgit terms.
  • Local manufacturers exporting goods such as rubber gloves and furniture become more competitive as they can reduce their prices in foreign currency, or else they receive more in ringgit if they retain their international prices.
  • The tourism and hotel business should thrive since it’s cheaper for foreigners to visit Malaysia. Locals who now can’t afford to travel abroad may also spend their holidays in the country.

On balance, will the gains outweigh the losses? From a public perspective, this is unlikely as the higher cost of living will affect all Malaysians, especially the poor and middle classes, and the higher external debt repayment will affect the public and the economy overall.

The prospect of further depreciation of the ringgit also has a bearing on capital flows, the third issue. Malaysia is one of the countries most vulnerable to the shocks of foreign funds moving out, because so much capital was allowed to move in.

In recent years, a new type of vulnerability emerged when foreign funds were welcomed to invest in government bonds denominated in ringgit.

It was originally thought that foreign loans in ringgit would be safe as the borrower would avoid the foreign exchange risk, as contrasted with loans denominated in US dollars.

This is true but the sheer volume of bonds now owned by foreigners makes the economy vulnerable to large outflows in a short period.

Comparison is usually made between potential capital outflows and the level of foreign reserves. The reserves as at December 30, 2016 were US$94.6bil (RM424bil).

The total foreign debt outstanding was RM865bil at the end of September 2016.

Of this, offshore borrowing (in foreign currency) was RM472bil, and ringgit-denominated government bonds held by non-residents were worth RM211bil, according to Bank Negara data.

Some of the investors have a long-term commitment and not everyone will move in the same direction at the same time, but in recent weeks external conditions such as a rise in US interest rates (and anticipation of more rises in 2017) have prompted capital outflows from emerging economies, including Malaysia.

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The country also has high foreign participation in the stock market (22.6% in November 2016), and in recent months there has also been a net withdrawal of equities by foreigners.

November 2016 was a bad month, as foreigners withdrew from the country RM19.9bil of government securities, and RM4.2bil of equities, according to a report in The Star (January 7, 2017). The potential and probability of more capital outflows in 2017 is a factor weighing on the perception of the ringgit’s prospects.

A high trade surplus has previously acted as a strong buffer against potential large capital outflows. The trade and current account balances are still positive, but the surpluses have been declining.

Government measures could help, such as the requirement that exporters convert 75% of their ex­­port proceeds from foreign currencies to ringgit.

Other measures can be considered if the situation does not improve. For example, companies and funds, starting with government-linked ones, can be discouraged from investing abroad – for the time being at least.

Malaysia has ruled out more drastic measures such as capital controls and pegging of the ringgit.

Developments in these three economic issues will be closely watched, not least by the public whose pockets are affected, as the year progresses.

External events could improve the situation, such as if prices of Malaysia’s export commodities increase, or could worsen it, especially if the US raises its interest rates further and if Trump really pursues protectionist policies.

However, domestic policies to respond to the problems are crucial and there should be a comprehensive plan to tackle these issues, since they may persist as 2017 progresses.

Martin Khor (director@southcentre.org) is executive director of the South Centre. The views expressed here are entirely his own.

Theresa May–A Global Britain Post BREXIT


January 17, 2017

Theresa May– A Global Britain Post BREXIT

In a major speech on Tuesday, the British Prime Minister Theresa May outlined a 12-point plan on what relationship Britain will seek to have with the E.U. once it leaves the bloc. Here’s the text of her speech, as delivered at London’s Lancaster House on January 17, 2017

A little over six months ago, the British people voted for change.

They voted to shape a brighter future for our country.

They voted to leave the European Union and embrace the world.

And they did so with their eyes open: accepting that the road ahead will be uncertain at times, but believing that it leads towards a brighter future for their children – and their grandchildren too.

And it is the job of this Government to deliver it. That means more than negotiating our new relationship with the EU. It means taking the opportunity of this great moment of national change to step back and ask ourselves what kind of country we want to be.

My answer is clear. I want this United Kingdom to emerge from this period of change stronger, fairer, more united and more outward-looking than ever before. I want us to be a secure, prosperous, tolerant country – a magnet for international talent and a home to the pioneers and innovators who will shape the world ahead. I want us to be a truly Global Britain – the best friend and neighbour to our European partners, but a country that reaches beyond the borders of Europe too. A country that gets out into the world to build relationships with old friends and new allies alike.

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I want Britain to be what we have the potential, talent and ambition to be. A great, global trading nation that is respected around the world and strong, confident and united at home.

A Plan for Britain

That is why this Government has a Plan for Britain. One that gets us the right deal abroad but also ensures we get a better deal for ordinary working people at home.

It’s why that plan sets out how we will use this moment of change to build a stronger economy and a fairer society by embracing genuine economic and social reform.

Why our new Modern Industrial Strategy is being developed, to ensure every nation and area of the United Kingdom can make the most of the opportunities ahead. Why we will go further to reform our schools to ensure every child has the knowledge and the skills they need to thrive in post-Brexit Britain. Why as we continue to bring the deficit down, we will take a balanced approach by investing in our economic infrastructure – because it can transform the growth potential of our economy, and improve the quality of people’s lives across the whole country.

It’s why we will put the preservation of our precious Union at the heart of everything we do. Because it is only by coming together as one great union of nations and people that we can make the most of the opportunities ahead.

The result of the referendum was not a decision to turn inward and retreat from the world.

Because Britain’s history and culture is profoundly internationalist.

We are a European country – and proud of our shared European heritage – but we are also a country that has always looked beyond Europe to the wider world. That is why we are one of the most racially diverse countries in Europe, one of the most multicultural members of the European Union, and why – whether we are talking about India, Pakistan, Bangladesh, America, Australia, Canada, New Zealand, countries in Africa or those that are closer to home in Europe – so many of us have close friends and relatives from across the world.

Instinctively, we want to travel to, study in, trade with countries not just in Europe but beyond the borders of our continent. Even now as we prepare to leave the EU, we are planning for the next biennial Commonwealth Heads of Government meeting in 2018 – a reminder of our unique and proud global relationships.

A message from Britain to the rest of Europe

And it is important to recognise this fact. June the 23rd was not the moment Britain chose to step back from the world. It was the moment we chose to build a truly Global Britain.

I know that this – and the other reasons Britain took such a decision – is not always well understood among our friends and allies in Europe. And I know many fear that this might herald the beginning of a greater unravelling of the EU.

But let me be clear: I do not want that to happen. It would not be in the best interests of Britain. It remains overwhelmingly and compellingly in Britain’s national interest that the EU should succeed. And that is why I hope in the months and years ahead we will all reflect on the lessons of Britain’s decision to leave.

So let me take this opportunity to set out the reasons for our decision and to address the people of Europe directly.

It’s not simply because our history and culture is profoundly internationalist, important though that is. Many in Britain have always felt that the United Kingdom’s place in the European Union came at the expense of our global ties, and of a bolder embrace of free trade with the wider world.

There are other important reasons too.

Our political traditions are different. Unlike other European countries, we have no written constitution, but the principle of Parliamentary Sovereignty is the basis of our unwritten constitutional settlement. We have only a recent history of devolved governance – though it has rapidly embedded itself – and we have little history of coalition government. The public expect to be able to hold their governments to account very directly, and as a result supranational institutions as strong as those created by the European Union sit very uneasily in relation to our political history and way of life.

And, while I know Britain might at times have been seen as an awkward member state, the European Union has struggled to deal with the diversity of its member countries and their interests. It bends towards uniformity, not flexibility. David Cameron’s negotiation was a valiant final attempt to make it work for Britain – and I want to thank all those elsewhere in Europe who helped him reach an agreement – but the blunt truth, as we know, is that there was not enough flexibility on many important matters for a majority of British voters.

Now I do not believe that these things apply uniquely to Britain. Britain is not the only member state where there is a strong attachment to accountable and democratic government, such a strong internationalist mindset, or a belief that diversity within Europe should be celebrated. And so I believe there is a lesson in Brexit not just for Britain but, if it wants to succeed, for the EU itself.

Because our continent’s great strength has always been its diversity. And there are two ways of dealing with different interests. You can respond by trying to hold things together by force, tightening a vice-like grip that ends up crushing into tiny pieces the very things you want to protect. Or you can respect difference, cherish it even, and reform the EU so that it deals better with the wonderful diversity of its member states.

So to our friends across Europe, let me say this.

Our vote to leave the European Union was no rejection of the values we share. The decision to leave the EU represents no desire to become more distant to you, our friends and neighbours. It was no attempt to do harm to the EU itself or to any of its remaining member states. We do not want to turn the clock back to the days when Europe was less peaceful, less secure and less able to trade freely. It was a vote to restore, as we see it, our parliamentary democracy, national self-determination, and to become even more global and internationalist in action and in spirit.

We will continue to be reliable partners, willing allies and close friends. We want to buy your goods and services, sell you ours, trade with you as freely as possible, and work with one another to make sure we are all safer, more secure and more prosperous through continued friendship.

You will still be welcome in this country as we hope our citizens will be welcome in yours. At a time when together we face a serious threat from our enemies, Britain’s unique intelligence capabilities will continue to help to keep people in Europe safe from terrorism. And at a time when there is growing concern about European security, Britain’s servicemen and women, based in European countries including Estonia, Poland and Romania, will continue to do their duty.

We are leaving the European Union, but we are not leaving Europe.

And that is why we seek a new and equal partnership – between an independent, self-governing, Global Britain and our friends and allies in the EU.

Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out. We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave.

No, the United Kingdom is leaving the European Union. And my job is to get the right deal for Britain as we do.

Objectives and Ambitions

So today I want to outline our objectives for the negotiation ahead. 12 objectives that amount to one big goal: a new, positive and constructive partnership between Britain and the European Union.

And as we negotiate that partnership, we will be driven by some simple principles: we will provide as much certainty and clarity as we can at every stage. And we will take this opportunity to make Britain stronger, to make Britain fairer, and to build a more Global Britain too.

Certainty and clarity

1. Certainty

The first objective is crucial. We will provide certainty wherever we can.

We are about to enter a negotiation. That means there will be give and take. There will have to be compromises. It will require imagination on both sides. And not everybody will be able to know everything at every stage.

But I recognise how important it is to provide business, the public sector, and everybody with as much certainty as possible as we move through the process.

So where we can offer that certainty, we will do so.

That is why last year we acted quickly to give clarity about farm payments and university funding.

And it is why, as we repeal the European Communities Act, we will convert the “acquis” – the body of existing EU law – into British law.

This will give the country maximum certainty as we leave the EU. The same rules and laws will apply on the day after Brexit as they did before. And it will be for the British Parliament to decide on any changes to that law after full scrutiny and proper Parliamentary debate.

And when it comes to Parliament, there is one other way in which I would like to provide certainty. I can confirm today that the Government will put the final deal that is agreed between the UK and the EU to a vote in both Houses of Parliament, before it comes into force.

A Stronger Britain

Our second guiding principle is to build a stronger Britain.

2. Control of our own laws

That means taking control of our own affairs, as those who voted in their millions to leave the European Union demanded we must.

So we will take back control of our laws and bring an end to the jurisdiction of the European Court of Justice in Britain.

Leaving the European Union will mean that our laws will be made in Westminster, Edinburgh, Cardiff and Belfast. And those laws will be interpreted by judges not in Luxembourg but in courts across this country.

Because we will not have truly left the European Union if we are not in control of our own laws.

3. Strengthen the Union

A stronger Britain demands that we do something else – strengthen the precious union between the four nations of the United Kingdom.

At this momentous time, it is more important than ever that we face the future together, united by what makes us strong: the bonds that unite us as a people, and our shared interest in the UK being an open, successful trading nation in the future.

And I hope that same spirit of unity will apply in Northern Ireland in particular over the coming months in the National Assembly elections, and the main parties there will work together to re-establish a partnership government as soon as possible.

Foreign affairs are of course the responsibility of the UK Government, and in dealing with them we act in the interests of all parts of the United Kingdom. As Prime Minister, I take that responsibility seriously.

I have also been determined from the start that the devolved administrations should be fully engaged in this process.

That is why the Government has set up a Joint Ministerial Committee on EU Negotiations, so ministers from each of the UK’s devolved administrations can contribute to the process of planning for our departure from the European Union.

We have already received a paper from the Scottish Government, and look forward to receiving a paper from the Welsh Government shortly. Both papers will be considered as part of this important process. We won’t agree on everything, but I look forward to working with the administrations in Scotland, Wales and Northern Ireland to deliver a Brexit that works for the whole of the United Kingdom.

Part of that will mean working very carefully to ensure that – as powers are repatriated from Brussels back to Britain – the right powers are returned to Westminster, and the right powers are passed to the devolved administrations of Scotland, Wales and Northern Ireland.

As we do so, our guiding principle must be to ensure that – as we leave the European Union – no new barriers to living and doing business within our own Union are created,

That means maintaining the necessary common standards and frameworks for our own domestic market, empowering the UK as an open, trading nation to strike the best trade deals around the world, and protecting the common resources of our islands.

And as we do this, I should equally be clear that no decisions currently taken by the devolved administrations will be removed from them.

4. Maintain the Common Travel Area with Ireland

We cannot forget that, as we leave, the United Kingdom will share a land border with the EU, and maintaining that Common Travel Area with the Republic of Ireland will be an important priority for the UK in the talks ahead.

There has been a Common Travel Area between the United Kingdom and the Republic of Ireland for many years. Indeed, it was formed before either of our two countries were members of the European Union. And the family ties and bonds of affection that unite our two countries mean that there will always be a special relationship between us.

So we will work to deliver a practical solution that allows the maintenance of the Common Travel Area with the Republic, while protecting the integrity of the United Kingdom’s immigration system.

Nobody wants to return to the borders of the past, so we will make it a priority to deliver a practical solution as soon as we can.

A Fairer Britain

The third principle is to build a fairer Britain. That means ensuring it is fair to everyone who lives and works in this country.

5. Control of immigration

And that is why we will ensure we can control immigration to Britain from Europe.

We will continue to attract the brightest and the best to work or study in Britain – indeed openness to international talent must remain one of this country’s most distinctive assets – but that process must be managed properly so that our immigration system serves the national interest.

So we will get control of the number of people coming to Britain from the EU.

Because while controlled immigration can bring great benefits – filling skills shortages, delivering public services, making British businesses the world-beaters they often are – when the numbers get too high, public support for the system falters.

In the last decade or so, we have seen record levels of net migration in Britain, and that sheer volume has put pressure on public services, like schools, stretched our infrastructure, especially housing, and put a downward pressure on wages for working class people. As Home Secretary for six years, I know that you cannot control immigration overall when there is free movement to Britain from Europe.

Britain is an open and tolerant country. We will always want immigration, especially high-skilled immigration, we will always want immigration from Europe, and we will always welcome individual migrants as friends. But the message from the public before and during the referendum campaign was clear: Brexit must mean control of the number of people who come to Britain from Europe. And that is what we will deliver.

6. Rights for EU nationals in Britain, and British nationals in the EU

Fairness demands that we deal with another issue as soon as possible too. We want to guarantee the rights of EU citizens who are already living in Britain, and the rights of British nationals in other member states, as early as we can.

I have told other EU leaders that we could give people the certainty they want straight away, and reach such a deal now.

Many of them favour such an agreement – one or two others do not – but I want everyone to know that it remains an important priority for Britain – and for many other member states – to resolve this challenge as soon as possible. Because it is the right and fair thing to do.

7. Protect workers’ rights

And a fairer Britain is a country that protects and enhances the rights people have at work.

That is why, as we translate the body of European law into our domestic regulations, we will ensure that workers rights are fully protected and maintained.

Indeed, under my leadership, not only will the Government protect the rights of workers’ set out in European legislation, we will build on them. Because under this Conservative Government, we will make sure legal protection for workers keeps pace with the changing labour market – and that the voices of workers are heard by the boards of publicly-listed companies for the first time.

A Truly Global Britain

But the great prize for this country – the opportunity ahead – is to use this moment to build a truly Global Britain. A country that reaches out to old friends and new allies. A great, global, trading nation. And one of the firmest advocates for free trade anywhere in the world.

8. Free trade with European markets

That starts with our close friends and neighbours in Europe. So as a priority, we will pursue a bold and ambitious Free Trade Agreement with the European Union.

This agreement should allow for the freest possible trade in goods and services between Britain and the EU’s member states. It should give British companies the maximum freedom to trade with and operate within European markets – and let European businesses do the same in Britain.

But I want to be clear. What I am proposing cannot mean membership of the EU’s Single Market.

European leaders have said many times that membership means accepting the “four freedoms” of goods, capital, services and people. And being out of the EU but a member of the Single Market would mean complying with the EU’s rules and regulations that implement those freedoms, without having a vote on what those rules and regulations are. It would mean accepting a role for the European Court of Justice that would see it still having direct legal authority in our country.

It would to all intents and purposes mean not leaving the EU at all.

And that is why both sides in the referendum campaign made it clear that a vote to leave the EU would be a vote to leave the Single Market.

So we do not seek membership of the Single Market. Instead we seek the greatest possible access to it through a new, comprehensive, bold and ambitious Free Trade Agreement.

That Agreement may take in elements of current Single Market arrangements in certain areas – on the export of cars and lorries for example, or the freedom to provide financial services across national borders – as it makes no sense to start again from scratch when Britain and the remaining Member States have adhered to the same rules for so many years.

But I respect the position taken by European leaders who have been clear about their position, just as I am clear about mine. So an important part of the new strategic partnership we seek with the EU will be the pursuit of the greatest possible access to the Single Market, on a fully reciprocal basis, through a comprehensive Free Trade Agreement.

And because we will no longer be members of the Single Market, we will not be required to contribute huge sums to the EU budget. There may be some specific European programmes in which we might want to participate. If so, and this will be for us to decide, it is reasonable that we should make an appropriate contribution. But the principle is clear: the days of Britain making vast contributions to the European Union every year will end.

9. New trade agreements with other countries

But it is not just trade with the EU we should be interested in. A Global Britain must be free to strike trade agreements with countries from outside the European Union too.

Because important though our trade with the EU is and will remain, it is clear that the UK needs to increase significantly its trade with the fastest growing export markets in the world.

Since joining the EU, trade as a percentage of GDP has broadly stagnated in the UK. That is why it is time for Britain to get out into the world and rediscover its role as a great, global, trading nation.

This is such a priority for me that when I became Prime Minister I established, for the first time, a Department for International Trade, led by Liam Fox.

We want to get out into the wider world, to trade and do business all around the globe. Countries including China, Brazil, and the Gulf States have already expressed their interest in striking trade deals with us. We have started discussions on future trade ties with countries like Australia, New Zealand and India. And President Elect Trump has said Britain is not “at the back of the queue” for a trade deal with the United States, the world’s biggest economy, but front of the line.

I know my emphasis on striking trade agreements with countries outside Europe has led to questions about whether Britain seeks to remain a member of the EU’s Customs Union. And it is true that full Customs Union membership prevents us from negotiating our own comprehensive trade deals.

Now, I want Britain to be able to negotiate its own trade agreements. But I also want tariff-free trade with Europe and cross-border trade there to be as frictionless as possible.

That means I do not want Britain to be part of the Common Commercial Policy and I do not want us to be bound by the Common External Tariff. These are the elements of the Customs Union that prevent us from striking our own comprehensive trade agreements with other countries. But I do want us to have a customs agreement with the EU.

Whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived position. I have an open mind on how we do it. It is not the means that matter, but the ends.

And those ends are clear: I want to remove as many barriers to trade as possible. And I want Britain to be free to establish our own tariff schedules at the World Trade Organisation, meaning we can reach new trade agreements not just with the European Union but with old friends and new allies from outside Europe too.

10. The best place for science and innovation

A Global Britain must also be a country that looks to the future. That means being one of the best places in the world for science and innovation.

One of our great strengths as a nation is the breadth and depth of our academic and scientific communities, backed up by some of the world’s best universities. And we have a proud history of leading and supporting cutting-edge research and innovation.

So we will also welcome agreement to continue to collaborate with our European partners on major science, research, and technology initiatives.

From space exploration to clean energy to medical technologies, Britain will remain at the forefront of collective endeavours to better understand, and make better, the world in which we live.

11. Cooperation in the fight against crime and terrorism

And a Global Britain will continue to cooperate with its European partners in important areas such as crime, terrorism and foreign affairs.

All of us in Europe face the challenge of cross-border crime, a deadly terrorist threat, and the dangers presented by hostile states. All of us share interests and values in common, values we want to see projected around the world.

With the threats to our common security becoming more serious, our response cannot be to cooperate with one another less, but to work together more. I therefore want our future relationship with the European Union to include practical arrangements on matters of law enforcement and the sharing of intelligence material with our EU allies.

I am proud of the role Britain has played and will continue to play in promoting Europe’s security. Britain has led Europe on the measures needed to keep our continent secure – whether it is implementing sanctions against Russia following its action in Crimea, working for peace and stability in the Balkans, or securing Europe’s external border. We will continue to work closely with our European allies in foreign and defence policy even as we leave the EU itself.

A phased approach

12. A smooth, orderly Brexit

These are our objectives for the negotiation ahead – objectives that will help to realise our ambition of shaping that stronger, fairer, Global Britain that we want to see.

They are the basis for a new, strong, constructive partnership with the European Union – a partnership of friends and allies, of interests and values. A partnership for a strong EU and a strong UK.

But there is one further objective we are setting. For as I have said before – it is in no one’s interests for there to be a cliff-edge for business or a threat to stability, as we change from our existing relationship to a new partnership with the EU.

By this, I do not mean that we will seek some form of unlimited transitional status, in which we find ourselves stuck forever in some kind of permanent political purgatory. That would not be good for Britain, but nor do I believe it would be good for the EU.

Instead, I want us to have reached an agreement about our future partnership by the time the two-year Article Fifty process has concluded. From that point onwards, we believe a phased process of implementation, in which both Britain and the EU institutions and member states prepare for the new arrangements that will exist between us will be in our mutual self-interest. This will give businesses enough time to plan and prepare for those new arrangements.

This might be about our immigration controls, customs systems or the way in which we cooperate on criminal justice matters. Or it might be about the future legal and regulatory framework for financial services. For each issue, the time we need to phase-in the new arrangements may differ. Some might be introduced very quickly, some might take longer. And the interim arrangements we rely upon are likely to be a matter of negotiation.

But the purpose is clear: we will work to avoid a disruptive cliff-edge, and we will do everything we can to phase in the new arrangements we require as Britain and the EU move towards our new partnership.

The Right Deal for Britain

So, these are the objectives we have set. Certainty wherever possible. Control of our own laws. Strengthening the United Kingdom. Maintaining the Common Travel Area with Ireland. Control of immigration. Rights for EU nationals in Britain, and British nationals in the EU. Enhancing rights for workers. Free trade with European markets. New trade agreements with other countries. A leading role in science and innovation. Cooperation on crime, terrorism and foreign affairs. And a phased approach, delivering a smooth and orderly Brexit.

This is the framework of a deal that will herald a new partnership between the UK and the EU.

It is a comprehensive and carefully considered plan that focuses on the ends, not just the means – with its eyes fixed firmly on the future, and on the kind of country we will be once we leave.

It reflects the hard work of many in this room today who have worked tirelessly to bring it together and to prepare this country for the negotiation ahead.

And it will, I know, be debated and discussed at length. That is only right. But those who urge us to reveal more – such as the blow-by-blow details of our negotiating strategy, the areas in which we might compromise, the places where we think there are potential trade-offs – will not be acting in the national interest.

Because this is not a game or a time for opposition for opposition’s sake. It is a crucial and sensitive negotiation that will define the interests and the success of our country for many years to come. And it is vital that we maintain our discipline.

That is why I have said before – and will continue to say – that every stray word and every hyped up media report is going to make it harder for us to get the right deal for Britain. Our opposite numbers in the European Commission know it, which is why they are keeping their discipline. And the ministers in this Government know it too, which is why we will also maintain ours.

So however frustrating some people find it, the Government will not be pressured into saying more than I believe it is in our national interest to say. Because it is not my job to fill column inches with daily updates, but to get the right deal for Britain. And that is what I intend to do.

A new partnership between Britain and Europe

I am confident that a deal – and a new strategic partnership between the UK and the EU – can be achieved.

This is firstly because, having held conversations with almost every leader from every single EU member state; having spent time talking to the senior figures from the European institutions, including President Tusk, President Juncker, and President Schulz; and after my Cabinet colleagues David Davis, Philip Hammond and Boris Johnson have done the same with their interlocutors, I am confident that the vast majority want a positive relationship between the UK and the EU after Brexit. And I am confident that the objectives I am setting out today are consistent with the needs of the EU and its Member States.

That is why our objectives include a proposed Free Trade Agreement between Britain and the European Union, and explicitly rule out membership of the EU’s Single Market. Because when the EU’s leaders say they believe the four freedoms of the Single Market are indivisible, we respect that position. When the 27 Member States say they want to continue their journey inside the European Union, we not only respect that fact but support it.

Because we do not want to undermine the Single Market, and we do not want to undermine the European Union. We want the EU to be a success and we want its remaining member states to prosper. And of course we want the same for Britain.

And the second reason I believe it is possible to reach a good deal is that the kind of agreement I have described today is the economically rational thing that both Britain and the EU should aim for. Because trade is not a zero sum game: more of it makes us all more prosperous. Free trade between Britain and the European Union means more trade, and more trade means more jobs and more wealth creation. The erection of new barriers to trade, meanwhile, means the reverse: less trade, fewer jobs, lower growth.

The third and final reason I believe we can come to the right agreement is that cooperation between Britain and the EU is needed not just when it comes to trade but when it comes to our security too.

Britain and France are Europe’s only two nuclear powers. We are the only two European countries with permanent seats on the United Nations Security Council. Britain’s armed forces are a crucial part of Europe’s collective defence.

And our intelligence capabilities – unique in Europe – have already saved countless lives in very many terrorist plots that have been thwarted in countries across our continent. After Brexit, Britain wants to be a good friend and neighbour in every way, and that includes defending the safety and security of all of our citizens.

So I believe the framework I have outlined today is in Britain’s interests. It is in Europe’s interests. And it is in the interests of the wider world.

But I must be clear. Britain wants to remain a good friend and neighbour to Europe. Yet I know there are some voices calling for a punitive deal that punishes Britain and discourages other countries from taking the same path.

That would be an act of calamitous self-harm for the countries of Europe. And it would not be the act of a friend.

Britain would not – indeed we could not – accept such an approach. And while I am confident that this scenario need never arise – while I am sure a positive agreement can be reached – I am equally clear that no deal for Britain is better than a bad deal for Britain.

Because we would still be able to trade with Europe. We would be free to strike trade deals across the world. And we would have the freedom to set the competitive tax rates and embrace the policies that would attract the world’s best companies and biggest investors to Britain. And – if we were excluded from accessing the Single Market – we would be free to change the basis of Britain’s economic model.

But for the EU, it would mean new barriers to trade with one of the biggest economies in the world. It would jeopardise investments in Britain by EU companies worth more than half a trillion pounds. It would mean a loss of access for European firms to the financial services of the City of London. It would risk exports from the EU to Britain worth around £290 billion every year. And it would disrupt the sophisticated and integrated supply chains upon which many EU companies rely.

Important sectors of the EU economy would also suffer. We are a crucial – profitable – export market for Europe’s automotive industry, as well as sectors including energy, food and drink, chemicals, pharmaceuticals, and agriculture. These sectors employ millions of people around Europe. And I do not believe that the EU’s leaders will seriously tell German exporters, French farmers, Spanish fishermen, the young unemployed of the Eurozone, and millions of others, that they want to make them poorer, just to punish Britain and make a political point.

For all these reasons – and because of our shared values and the spirit of goodwill that exists on both sides – I am confident that we will follow a better path. I am confident that a positive agreement can be reached.

It is right that the Government should prepare for every eventuality – but to do so in the knowledge that a constructive and optimistic approach to the negotiations to come is in the best interests of Europe and the best interests of Britain.

Conclusion

We do not approach these negotiations expecting failure, but anticipating success.

Because we are a great, global nation with so much to offer Europe and so much to offer the world.

One of the world’s largest and strongest economies. With the finest intelligence services, the bravest armed forces, the most effective hard and soft power, and friendships, partnerships and alliances in every continent.

And another thing that’s important. The essential ingredient of our success. The strength and support of 65 million people willing us to make it happen.

Because after all the division and discord, the country is coming together.

The referendum was divisive at times. And those divisions have taken time to heal.

But one of the reasons that Britain’s democracy has been such a success for so many years is that the strength of our identity as one nation, the respect we show to one another as fellow citizens, and the importance we attach to our institutions means that when a vote has been held we all respect the result. The victors have the responsibility to act magnanimously. The losers have the responsibility to respect the legitimacy of the outcome. And the country comes together.

And that is what we are seeing today. Business isn’t calling to reverse the result, but planning to make a success of it. The House of Commons has voted overwhelmingly for us to get on with it. And the overwhelming majority of people – however they voted – want us to get on with it too.

So that is what we will do.

Not merely forming a new partnership with Europe, but building a stronger, fairer, more Global Britain too.

And let that be the legacy of our time. The prize towards which we work. The destination at which we arrive once the negotiation is done.

And let us do it not for ourselves, but for those who follow. For the country’s children and grandchildren too.

So that when future generations look back at this time, they will judge us not only by the decision that we made, but by what we made of that decision.

They will see that we shaped them a brighter future.

They will know that we built them a better Britain.

Here’s What World Leaders Think Is the Greatest Risk for 2017


January 16, 2017

DAVOS 2017

Here’s What World Leaders Think Is the Greatest Risk for 2017

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Some of the world’s most powerful leaders are growing more concerned, it seems, about the world’s most powerful leaders. More so, in fact, than climate change and financial panics, like a collapse of the euro.

Weapons of mass destruction now ranks as the No. 1 concern of global leaders, according to a new survey from the World Economic Forum. And that was before Trump tweeted about the possibility of a new arms race. It’s the 12th year that the World Economic Forum has published the survey, which polls 750 of the group’s members, including CEOs and leaders and experts in various fields. The organization publishes the survey on the eve of its annual confab in Davos, which kicks off next week.

The survey was conducted in September and early October.

In a report that accompanied the survey results, the World Economic Forum wrote that a rise of nationalism and less cooperation among world powers was raising the risks of global conflicts.

Weapons of mass destruction have come up as a concern before on the survey. But they have never ranked as the biggest perceived risk in terms of potential impact in the immediate year about which the world leaders were surveyed. Last year, WMDs were the second biggest concern of world leaders behind climate change. Nonetheless, climate change remains a major worry. Of the top five worries of global leaders, the other four are related to climate change. Among those, extreme weather conditions was the No. 1 concern, followed by water crisis, major natural disasters, and the failure of climate change efforts to make a difference.

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Another big difference than in past years: The lack of concern about some sort of financial shock to the global economy. For the first eight years of the survey, from 2007 to 2014, “asset price collapse” or financial crisis ranked as the No. 1 concern on the survey. The WEF crowd is more focused on economic issues. Nonetheless, in this year’s survey, concerns about markets have largely disappeared. Not a single economic issue made it in to either the top 5 concerns of world leaders for 2017 in either the potential biggest impact category or likeliest to happen. It was the first year in the survey’s existence that an economic issue didn’t show up in either list. In both 2009 and 2010, world leaders put down economic issues as four of their five biggest risks that could have the largest impacts on the world in that year.

The lack of concern about economic issues could reflect that fact that banks and financial markets do seem more resilient following reforms that were made after the financial crisis. It could also signal complacency about world markets following a year in which major world surprises failed to jolt markets.

Instead, this year, it appears world leaders are concerned that the rise to power of a growing number of politicians that seemed to be more focused on domestic issues than in recent years. Indeed, the theme of this years annual conference in Davos is responsible leadership.

“As technological, demographic and climate pressures intensify the danger of systems failure, competition among world powers and fragmentation of security efforts makes the international system more fragile, placing collective prosperity and survival at risk,” the WEF wrote in its annual risk report.

China’s Investments–Geo-Political Implications for Malaysia


January 14, 2017

China’s Investments–Geo-Political Implications for Malaysia

by Dennis Ignatius

Image result for China's Investments in MalaysiaHe is praying for the best but not doing his best

China’s ravenous appetite for Malaysian infrastructure assets has resulted in yet another multibillion ringgit deal. In early January, a RM6.3 billion deal to redevelop and expand Penang Port was signed between two Chinese port operators (Shenzhen Yantian Port Group and Rizhao Port Group) and local partner, KAJ Development, a relatively unknown reportedly state-owned company incorporated in 2001.According to press reports, the project would increase the port’s ship handling capacity to 100,000 ships per year.

Dominating the transport sector

The Penang deal comes on the heels of KAJ Development’s RM30 billion Malacca Gateway Project with another Chinese conglomerate, Powerchina International Group. The Gateway project includes extensive land reclamation and the development of what is expected to be the biggest port in the region.

Image result for RM12.5 billion Kuala Linggi International Port

Barely 55 km away from the Malacca Gateway project, work has begun on the RM12.5 billion Kuala Linggi International Port project, funded by China Railway, Port & Engineering Group. When completed, Linggi port will become, according to a company statement, “the world’s preferred shipping hub in the Straits of Malacca” offering port facilities, storage and transshipment of crude oil and petroleum products and repair and bunkering facilities.

According to press reports, construction has gone ahead despite objections that the project could well be an environmental hazard. Not to be outdone, the Port Klang Authority is now planning to build another giant port on Carey Island which is expected to cost RM200 billion. According to reports, the transport ministry is in talks with China Merchants Group to finance the project.

On the east cost of Peninsular Malaysia, another Chinese company, Guangxi Beibu International Port Group already owns a 40% stake of Kuantan Port Consortium and is investing billions to double the port’s capacity. China is also a key investor in Sarawak’s Samalaju Industrial Port project.

At this rate, and given China’s already sizeable investments in our railway infrastructure, China will soon be the dominant player in Malaysia’s transportation sector.

Unanswered questions

Quite apart from the obvious security implications, China’s massive investments in ports and railways have also raised a number of concerns which have yet to be adequately addressed.

How much port capacity, for example, do we really need bearing in mind that we spent billions developing the Port of Tanjung Pelapas (making it one of the largest container ports in the region) and that not all of our ports are operating at fully capacity?

And how will other major port developments now being planned along the Malacca Straits, such as the mammoth Tuah project in Singapore and the China-funded Tanjung Sauh port in Indonesia’s Batam island impact overall capacity? It certainly looks like this whole port building frenzy has gone off the deep end, especially as no convincing argument has been made that such a significant increase in port capacity is even warranted.

Without credible feasibility studies and greater transparency, these projects could well end up like the Petroleum Hub project which was taken out of service in 2012 after the government had spent more than RM100 billion on land reclamation, costs which Malaysia’s long suffering taxpayers are now having to shoulder. 

It is also unclear what the actual financial arrangements are for many of these Chinese projects and what kind of concessions and guarantees Malaysia has had to offer. That some of these projects involve secret negotiations and secret agreements with companies that don’t appear to have much experience or which have been blacklisted by the World Bank, only adds to concerns about control, ownership, costs, viability and the potential for corruption.

And unlike earlier infrastructure projects where local companies retained significant oversight and decision-making authority, projects with China invariably end up with Chinese companies in charge of management, design, procurement and construction. Even the workers come from China!

Whatever happened to all our national policies about equity, local participation and transfer of technology? At the end of the day, it is hardly the kind of “equal, mutually beneficial, win-win” situation that the Chinese embassy here likes to brag about.

OBOR?

Image result for China’s One Belt One Road (OBOR) Initiative

The other thing about many of these Chinese projects is the constant reference by Malaysian politicians and businessmen to China’s One Belt One Road (OBOR) initiative. Suddenly, it is no longer about Malaysia’s national development goals or priorities but about whether or not it is relevant to OBOR.

It is perhaps a testimony to China’s increasing power and influence that many of our political and business leaders are now gamely parroting the Chinese line about how great and magical OBOR is and how fortunate we lesser mortals are to receive Chinese loans, Chinese technology and Chinese expertise to help build OBOR-related infrastructure.

What they don’t see or don’t want to acknowledge is that through clever financing arrangements, China is in fact getting us to pay for the infrastructure that it needs to establish economic primacy in the region. OBOR is primarily about China’s strategic national objectives; whatever benefits to Malaysia are purely incidental.

In the absence of a critical and in-depth assessment of whether these OBOR-related projects genuinely serve Malaysia’s interests and are worth the costs to Malaysian taxpayers, it would be ‘bodoh’ to acquiesce to it.

The geopolitical element

And let’s not be unmindful of the geopolitical considerations as well. Will we see Malaysian ports, for example, being integrated into the Chinese Navy’s regional infrastructure to support its growing naval presence in the region?

While the government is coy about the kind of naval access that has been given to the Chinese Navy for obvious political reasons, port calls by Chinese naval vessels are increasing. Two Chinese submarines, for example, quietly docked at Kota Kinabalu port recently while Chinese warships now regularly use other Malaysian port facilities.

Image result for Chinese Navy in the Straits of Malacca

China of the 21st Century is a nation of geo-strategic thinkers and state entrepreneurs–Keeping Asia secure and safe means China is safe too.

China is making strategic investments to fortify its position as the dominant player in the South China Sea with modern port facilities in ASEAN and expand trade in Chinese manufactured goods and services. It is using Malaysia to have important stakes in the Straits of Malacca (in Malacca, Penang and Johore ports). Why not, particularly when assets in Malaysia can be acquired on the cheap or profitable investments made  at inflated cost (for the benefit of corrupt UMNO and Barisan Nosional politicians). I am not against Chinese investments per se, but I am very concerned with deals done on a hush-hush basis by Najib and his cohorts. China’s moves in Asia does not end with the  South China Sea. It is back to the age-old objective of keeping the barbarians at the gate.–Din Merican

Of course, naval vessels from other countries regularly berth at our ports, and in itself is no cause for alarm. However, only China is aggressively pursuing territorial claims against Malaysia. For that reason alone, caution is called for. Does it make sense for us to facilitate the very naval force that is intruding into our waters, harassing our fishermen, laying claim to our reefs and islands and gathering data to support those claims?

Colony building

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There are also growing concerns about the massive residential and commercial development projects that are being built with Chinese capital.

The RM100 billion Forest City project, for example, one of two being built by Chinese conglomerate Country Garden, will reportedly house more than 700,000 people in a development that will include office towers, parks, hotels, shopping malls and an international school.

Meanwhile, China state-owned Greenland Group is building office towers, apartments and shops on 128 acres in Tebrau, Johor, while Guangzhou R & F Properties Co. has begun construction on the first phase of Princess Cove, another mixed development along the Johor coast, with hotels, offices, parks, shopping malls and clubhouses.

Image result for bandar malaysia – china’s new regional capital

In Kuala Lumpur, China Railway Group (CRG) will be developing the mega Bandar Malaysia project which is expected to cost between RM160 – 200 billion. Bandar Malaysia will host the world’s largest underground city together with shopping malls, indoor theme parks, a financial centre, residential and commercial units as well as the RM8.3 billion regional headquarters of China Railway.

CRG is also involved in another RM2.1 billion project in Ampang to build 7,000 residential units as well as commercial and retail outlets. In keeping with the management practices of most China-based corporations, CRG has been appointed the main contractor with sole responsibility for monitoring, managing and supervising the day-to-day construction and operations of the project.

Reports suggest that these massive residential and commercial developments in Malaysia are being marketed mainly to PRC nationals who wish to work, reside or holiday in Malaysia. Country Garden, for example, has been aggressively promoting its Forest City project in China; it is already the 11thmost popular investment destination for Chinese home buyers on Juwai.com.

In addition, relatively cheaper living costs, affordable private medical facilities, a (mostly) smog- free environment and proximity to both China and Singapore, make Malaysia a preferred retirement destination for middle-class Chinese. China’s ageing population (240 million over the age of 60 by 2020) makes for a huge potential market that Chinese developers are hoping to exploit.

If the expectations of these China-based developers are realized, we could be seeing more than a million PRC nationals living in Malaysia within a decade.

Malaysians must ask themselves whether it would be desirable to see a huge influx of citizens from just one country establishing foreign enclaves here. It is not beyond the realm of possibility that these colonies could soon evolve into exclusive, semi-autonomous zones serviced and managed by PRC nationals for the benefit of PRC nationals.

What impact will this have on the social, cultural and political fabric of our nation? How will it affect property prices? How will any downturn in the Chinese economy influence the local property market? How much of the related infrastructure costs of these projects are being borne by Malaysian taxpayers? And what kind of concessions are being given to these property developers?

Viewed from almost any perspective, therefore, Malaysia’s burgeoning economic, political and military relationship with China ought to set off alarm bells across the nation.

Image result for bandar malaysia – china’s new regional capital

The combination of a rising power with global ambitions backed by an unlimited stash of cash buying up strategic infrastructure assets, on the one hand, and a local political elite bent on staying in power at all costs tethered to cronies more interested in profits than patriotism, on the other, could prove a fatal one.

Even in the best of circumstances, it would be simply too risky to allow any one country to dominate our economy and control critical infrastructure networks the way China is now set to do. It gives China too much power and influence in the affairs of our nation and it leaves us too indebted, too exposed to a country whose intentions must be considered with some circumspection.

How far will China go to protect its position?

One thing we can be sure of, though, if history is anything to go by: the more China invests in Malaysia, the more China will be tempted to intervene and meddle in our affairs to protect its investments and ensure its strategic position is not jeopardized. Indeed, China has already begun to do so.

In a statement just this week, the Chinese embassy lashed out at opposition leaders and others for questioning the government’s policies towards China, accusing them of having ulterior motives and instigating hatred against China and warned that “China will not allow anyone to jeopardize the mutually beneficial bilateral cooperation between China and Malaysia.”

Amazingly, the Embassy also dared to presume to speak for Malaysian Chinese when it suggested that such actions by the opposition would not earn them the trust of the Malaysian Chinese community.

Clearly, the Chinese embassy now feels it has the right to threaten our politicians, inveigh against those who raise questions about China’s investments and inject itself into what is essentially a domestic discussion.

Such brazen interference in our domestic affairs will only get worse. How far will China now go to stifle domestic opposition and criticism to its increasing role in our nation? Will it work behind the scenes to prop up local pro-China leaders in much the same way as the CIA did in other countries? 

The most pressing foreign policy challenge

Tellingly, while the Chinese embassy grows bolder, many of our own leaders remain silent despite blatant acts of interfere in our domestic affairs.

In the early years of our relationship with China, our security agencies were extremely concerned that Malaysia’s ethnic Chinese community might sell out to China; who would have thought we would end up in situation where many of our politicians and officials would be so blinded to the challenges that China now presents or worse still, resign themselves to the inevitability of some sort of Chinese domination?

One minister, for instance, recently remarked in his blog that “it is futile trying to resist China’s great march forward just like it was futile to resist Western colonialism 500 years ago.” He also said that China is buying up assets all over the world and that is something that “Malaysia needs to accept or else get left behind and perish.”

Let’s be clear: this is not about trying to stop China from rising or about shunning Chinese investments but about ensuring that we don’t get colonized again, about making sure that China does not get to the point where it controls our economy and is able to dictate policy as it already does in some neighbouring countries.

Whatever it is, Malaysians must not be lulled into a false sense of complacency by all the sweet talk of mega contracts, grandiose promises of prosperity and jobs or the effusive pledges of eternal friendship for that matter.

China is no different from any other big power and we would do well to be wary when dealing with it.

Image result for tun muhammad ghazali bin shafie

As the late Tun Ghazali Shafie, arguably the best Foreign Minister we’ve ever had, was fond of reminding us at Wisma Putra: small countries on the peripheries of a big power don’t have the luxury of taking anything for granted.

At the very least, we owe it to ourselves, and to future generations, to have a national debate on this, the most pressing foreign policy challenge we now face as a nation. And the Chinese embassy would do well to butt out of it.

 

 

Dr. Munir looks back at 2016


January 7, 2017

Dr. Munir looks back at 2016

COMMENT by Dr. Munir Majid@www.thestar.com.my

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Not a single Western political leader has had the guts to tell their people they had to accept a lower standard of living, that it was time for a great reset. Build up productivity and capacity again. Meanwhile, if you go to the pub, go only once a month. If you shampoo your hair once a week, do it fortnightly. Taking holidays abroad in countries whose people you come to hate when you get home will have to take a rest. If you work only 35 hours a week, as in France, what do you expect?–Dr. Munir Majid

The descent from globalism to nativism is the defining story of 2016, but the analysis of its cause and projection of the world into 2017 by intellectual custodians of the liberal order are flawed and offer no guide on how to break the fall.

The Brexit vote in Britain in June, the election of Donald Trump in November and the threatening reactionary outcome of elections in France and Germany next year all point to the end of a certain system by which the world has operated, even if what exactly would replace it is less than clear. If the great Western nations of the world change direction, then the rest must.

A broader perspective, however, would recognise the troubles and decisions of 2016 and what might come in 2017 had a gestation period that began at least from the Western financial crisis of 2008, too often called and accepted as the global financial crisis.

What the West continues to grapple with is how to live beyond its means. There was the criminal excess of the banks leading to the 2008 crisis, of course, but underlying it was the ethic of expectation of a certain standard of living, whether or not one worked for it or was productive enough to deserve it.

Image result for trump marie le pen and putin

Marie Le Pen, Donald J. Trump and Vladimir Putin–The End of Liberal Global Order

If you do not have the means to get what you want you have to borrow to get it, unless of course you stole and pillaged. So Western states and individuals kept on borrowing, or the central banks printed money to keep the economy going, which it always did not as the money kept going out where it could be more productively used.

Not a single Western political leader has had the guts to tell their people they had to accept a lower standard of living, that it was time for a great reset. Build up productivity and capacity again. Meanwhile, if you go to the pub, go only once a month. If you shampoo your hair once a week, do it fortnightly. Taking holidays abroad in countries whose people you come to hate when you get home will have to take a rest. If you work only 35 hours a week, as in France, what do you expect?

Did any of this happen? People may lose jobs as they could not compete, but they get state support and they blame others like the migrant European workers who could work, who took jobs they did not want to do.

Immigration becomes the issue. And when refugees pour in who also bring with them the threat, and execution, of terror, an inflection point is reached. Sociologists now analyse this as a threat to identity, which certainly is used in rousing emotions during political campaigns, but there was at least equally a revolt against the economic and social condition those not doing so well in life were in.

They are now so widely called the under-served. In the case of Brexit, there was no doubt the uprising of the Little Englander, but there was also the let-us-just-bloody-well-get-out-and-see-what-happens attitude.

While some in the shires thought like this, I also know of a few non-white working class Brits who voted to get out just on this basis. When I asked one such person in London, who is a chauffeur to an unbearable boss, why he did such an irresponsible act, he tried to justify it by associating himself with the workers in Sunderland of whom he knows absolutely nothing.

The thing is, who speaks to such people? The academics and intellectuals only talk among themselves in an idiom only they can understand. Even after Trump, when they pronounced there has been a great failure to address the under-served – which the President-elect on the other hand did so well – they are still talking to and being clever with one another.

My friend Francois Heisbourg, Chairman of the International Institute for Strategic Studies, beautifully describes Marine Le Pen’s appeal to the French: “Donald Trump makes Marine Le Pen sound reasonable…..Everyone knows she’s not Trump – she knows how to use a noun and a verb and is intellectually coherent about what she wants and doesn’t want.”

What, for God’s sake, are the arguments that can be used effectively with the ordinary Frenchman that they can understand and appreciate in favour of the liberal order? Paul Krugman likens what is happening to America to how the Roman Republic was destroyed by individuals disloyal to it serving only their own selfish cause. Pray, how many among the Americans who voted for Trump know, or care, anything about the history of Rome?

The Economist, that great citadel of the liberal order, makes a clarion call for its defence and for liberals not to lose heart. How and what to do? Certainly not by talking to one another. Or by communicating in a language and idiom a lower order would not understand.

With perfect Euro-centrism an English commentator fears the Syrian conflict may turn out to be like the Thirty Years’ War (1618-1648). Has he not heard of the Palestinian struggle which has spawned much of the bloodshed in the Middle East and beyond?

There are three gaping holes in the defence of the “global” liberal order. First there is a blind spot about having to have a lower standard of living unless you earn a higher one. Second, an inability among liberal intellectuals to communicate except among themselves. Third, a reflection on the threat through western eyes only.

The second weakness is endemic. It is a truly global malady. Intellectuals, whether in the West or Malaysia or anywhere else, should not disdain populism, which is the bad word now in all the commentary on the threat to the global liberal order. They will not stoop so low – as Trump did – to gain support. Well, stoop less low or in a different way. Dirty your hands. Reach out.

We don’t communicate simply, when there are simple terms that convey meaning. We think we are so high and mighty.

Actually if you think about it – and this is especially for the blinkered Western intellectuals – the exemplar of populism, and darned effective with it, is UMNO. You may wince at the kris-wielding antics and other forms of political theatre, and you may not agree with some or most of the policies propounded, but you have to admit they rabble rouse their way to considerable support.

Yucks… but that was the yucks that caused Donald Trump to win. You have to get popular support. You do not do so talking to one another from university pulpits, in the parlours of Georgetown in Washington DC, in Hampstead or indeed at the Royal Selangor Golf Club in Kuala Lumpur.

Now, why do Western intellectuals particularly not talk about having to accept a lower standard of living? Well, they too will have to do so. The levels of income of the journalists and professors and consultants actually are very high, and they do a lot of talking outside their paid job for which they are paid more. Can they look the lowly worker in the eye and say you have to be paid less?

Image result for farewell to barack obama

Farewell and Thank You Mr. President for keeping the world  safe, despite setbacks . We in Asia will miss you for your engagement with us.

There has been a historic transfer of savings from countries with a lower standard of living to those higher so they stay there. As these poorer countries need and want rich country currency – particularly the dollar – for their economic life in their global liberal order, the rich not only get the savings from the poor to sustain their economic life in that global liberal order. They also are able to print money for the extras they might want.

They would be risking their own interest if they began to start talking to under served workers in their domestic economy about income levels that can be sustained by actual production – which is what developing countries have to live by, global liberal order or not.

Now the most important main benefit poorer countries obtain from that order is being threatened – their ability and success in producing goods and services which can reach any consumer in open global competition.

Donald Trump is breaking the rules for America because the US cannot otherwise compete. So he wants to protect the American market against better able, more efficient and cheaper producers – the developing countries.

While enjoyment – and denial – of these goods and services is one thing, and while undoubtedly there will in the immediate-term be a rebound of the US economy, who in the medium and long-term is going to hold Western debt so that the high standard of living in rich countries can continue? They do not save to finance the economy. They do not efficiently produce many of the goods and services they enjoy. They need also to take advantage, through trade and investment, of the real growth in developing regions such as in East and South-East Asia.

Therefore on this score alone – the need for an open and competitive global trading system – there is true convergence of interest in the world. The poorer countries will have to take it, warts and all. And the rich Western nations, with their proponents of the global liberal order, will certainly want to keep it all.

The skewered balance in the global liberal order is sustained by an intellectual convention which is Euro-centric but commanding across the globe. Leaders in politics and thought in non-Western countries only have themselves to blame for this.

They accept almost carte blanche what Western liberals submit. Don’t get me wrong. There are so many good things about western liberals and the liberal order.

I don’t think there has ever been in history such a constituency of liberals as there are in the West who would fight for the rights of the victimized and the downtrodden, like refugees, non-whites and Muslims, as there is in the western world today. Even as extreme and violent Muslims blow them up. The adherence to the value of love against hate, and of tolerance against incitement, is of the highest human order.

The other thing developing countries could imbibe from the Western liberal order is the rule of law. This is the strongest defence and guarantee of individual rights there has ever been in human history.

Image result for Lee Kuan YewSuccessful leader: Lee Kuan Yew made Singapore economically successful as a result of the purely utilitarian benefit of the rule of the law

When the laws are applied and enforced without fear or favour, there is faith in the social contract that underlies the polity. This is the main failing of most developing countries, which they would do well to learn from the West, beyond the purely utilitarian benefit of the rule of law that drove Lee Kuan Yew to make Singapore economically successful.

But, despite all this truly profound contribution of liberals and the liberal order of the West, it does not mean we must accept everything from them hook, line and sinker, especially every bit of the analysis of what has gone or is going wrong with the world.

Or the selling of expertise on how to get things right. Their record on that score is poor. We have too many such offerings, in Malaysia for instance, of how to develop our financial system and to train our financial practitioners. We must not be stupid to give money for old rope.

As we go into the new year, we should not be overwhelmed by analyses of what happened in 2016 and why. We must have a clarity and sense of perspective of the causes leading to it. And we must look forward to 2017 without the colonial mentality which makes us slaves to Western thought.