Gearing Up for the next Financial Crisis


October 22,2018

Gearing Up for the next Financial Crisis

by Andrew Sheng

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http://www.eastasiaforum,org

In July 2018, the Bank for International Settlements (BIS) asked whether the world was heading towards a perfect financial storm, with the US stock market heading for record highs even as emerging markets like Argentina and Turkey were running into foreign exchange problems. Twenty years after the Asian financial crisis of 1997–98 and the global financial crisis of 2007–08, storm clouds are gathering once again.

Conventional economic models failed to predict the last two crises because the technical definition of financial risk is measured volatility. The global financial crises proved that current models of financial risk, largely used by banks and financial regulators, are totally blind to Black Swan or Grey Rhino events of unmeasurable uncertainty.

This time round, the consensus is that the Grey Rhino (an event with high probability and high impact, but where the trigger is uncertain) is the looming rise in US interest rates in response to a domestic economy that is running at nearly full capacity, with low unemployment levels and signs of creeping inflation. As the BIS has warned, non-financial borrowers outside the United States owe US$11.5 trillion dollars, of which US$3.7 trillion is owed by emerging markets.

Turkey’s recent currency woes are symptoms of domestic policies badly managed, aggravated by the US threat of economic sanctions. Turkey alone has US$467 billion of foreign debt. As global risks rise, capital is flowing back to the booming US stock market and potentially higher interest rate yields. Emerging markets have no alternative but either to allow exchange rate depreciation or defend themselves with higher interest rates that depress their own growth potential. Recently both Indonesia and Hong Kong had to defend their exchange rates through higher interest rates and intervention, respectively.

The tricky thing about US interest rates is that economies with high domestic and foreign debt are vulnerable to tighter liquidity and financial fragility, because their interest rates and credit-risk spreads rise non-linearly. Doomsayers of East Asia’s financial collapse argue that China’s debt of 250 per cent of GDP is the tipping point.

Financial risks are rising not just in China, but globally. Dun and Bradstreet’s Global Risk Matrix, published in May 2018, suggested that US interest rate rises could trigger a fresh debt crisis, sending the global economy into contraction. Echoing this sentiment, the International Monetary Fund’s July 2018 World Economic Outlook argued that rising trade tensions are threatening growth recovery in Europe, Japan and Britain more than predicted. Any overheating in the United States would trigger currency crises for some emerging markets.

In short, we cannot separate financial risks from geopolitical risks. Any unforeseen event arising from a geopolitical miscalculation, climate change disaster, war or cyber-induced disruption could trigger another round of financial crises.

Global financial fragility comes from two structural imbalances. First, the United States is the leading deficit country in terms of trade and debt, owing the world a net US$7.7 trillion, or 39.8 per cent of GDP. This amount is growing because of rising fiscal debt and the low level of national savings. Second, below-par global growth since 2008 has been underwritten almost completely by central bank unconventional monetary policies, which have brought interest rates to an unsustainably low level.

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Market fears that the large central banks will withdraw quantitative easing — QExit — threaten to jeopardise the current frail recovery, which is why US President Donald Trump is also against the Federal Reserve raising interest rates.

If geopolitical risks trump financial risks, what could go wrong in the coming months?

Western analysts think that the trigger will be a Chinese debt meltdown. But Chinese debt is internal debt, as China has foreign exchange reserves equivalent to 188 per cent of its foreign debt and still runs a current account surplus. China’s debt problem is an internal debt issue, very much like that of Japan. While Japanese debt is owed largely to Japanese households, Chinese debt is largely owed by state-owned enterprises and local governments to state-owned banks. In such a situation, China is well positioned to rewrite its national balance sheet, a privilege not possible for more privately dominated markets.

A possible Black Swan (a low probability but high impact event) is an unexpected sharp increase in the yen–dollar exchange rate. Japan is the third largest economy after the United States and China and has been increasing its overseas assets since the 1990s. Between 2007 and July 2018, the Bank of Japan has grown its assets the most among the major central banks (to US$4.9 trillion, or just over 100 per cent of GDP). By the end of 2017, Japan’s gross foreign and net assets grew to US$9 trillion and US$2.9 trillion respectively, equivalent to nearly one quarter of US growth in gross foreign liabilities during the same period.

US trade deficits have been sustained by foreign inflows (which had central bank origins) in which Japan is a major player. During the Asian financial crisis, sharp volatility in the yen–dollar exchange rate caused a dramatic withdrawal of Japanese bank loans from Asia, aggravating a regional liquidity crisis that was already spurred by speculative currency attacks.

What complicates today’s financial fragility is Trump’s attempt to control the US trade deficits. He assumes that bilateral negotiations can reverse the unsustainable growth of national debt, which tripled in the last decade and may grow to 100 per cent of GDP in another decade. But tariffs only increase inflation for the consumer, which would trigger higher interest rates and jeopardise the fragile financial stability achieved through unsustainable monetary policies.

The next global crisis will most likely be triggered by geo-political mistakes. In an age when politicians are proving fickle in their decisions, central bankers are perhaps the only professionals who appear able to do something about financial risks. But since Trump does not care much about professional advice, Asian markets worry less about measurable financial volatility than unmeasurable personality risks.

Andrew Sheng is Distinguished Fellow at the Asia Global Institute, University of Hong Kong. 

This article appeared in the most recent edition of East Asia Forum Quarterly, ‘Asian crisis, ready or not ’.

How to win the Cold War with China–Dr. Fareed Zakaria


October 15, 2018

How to win the cold war with China–Dr. Fareed Zakaria

https://www.washingtonpost.com

The Trump administration’s most significant and lasting decisions will be about U.S. policy toward China. Far more consequential than even the Supreme Court’s composition or immigration policy is whether the 21st century will be marked by conflict or cooperation between the two most prosperous and powerful countries on the planet. The last time there was such a question — when Britain confronted a rising Germany 150 years ago — it did not work out so well.

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Since the end of the Cold War, we have lived in an era of almost no genuine great-power competition, which has led to the emergence of a dynamic global economy and a huge expansion of international trade, travel, culture and contact. All this happened under the United States’ uncontested supremacy — military, political, economic and cultural.

That age is over. Twenty-five years ago, China made up less than 2 percent of the global gross domestic product. Today that figure is 15 percent, second only to the United States’ 24 percent. In the next decade or so, the Chinese economy will surpass the size of America’s. Already, nine of the 20 most valuable technology companies in the world are based in China. Beijing has also become far more active on the global stage, ramping up its defense spending, foreign aid and international cultural missions. Its Belt and Road Initiative, infrastructure investment in dozens of countries, will ultimately be at least seven times larger than the Marshall Plan, if not far more, in inflation-adjusted terms.

The Trump administration has many of the right instincts on China. Beijing has taken advantage of free trade and the United States’ desire to integrate China into the global system. The administration is right to push back and try to get a fundamentally different attitude from China on trade. But instincts do not make for a grand strategy.

Were Washington to be more strategic, it would have allied with Europe, Japan and Canada on trade and presented China with a united front, almost guaranteeing that Beijing would have to acquiesce. It would have embraced the Trans-Pacific Partnership as a way to provide Pacific countries an alternative to the Chinese economic system. But in place of a China strategy, we have a series of contradictory initiatives and rhetoric.

President Trump’s Trade Gangster–Peter Navarro

If there is one person in the White House whose ‘to do’ list you want to avoid, it’s Peter Navarro. They call him the ‘most dangerous’ man for the global economic order. He is radical, determined and wields enormous influence on US President Donald Trump– source–https://blogs.economictimes.indiatimes.com/letterfromwashington/peter-navarro-most-dangerous-man-for-the-global-economic-order/

In fact, the administration seems divided on the broader issue of U.S.-China relations. On one side are people such as Treasury Secretary Steven Mnuchin, who want to use tough talk and tariffs to extract a better deal from China, while staying within the basic framework of the international system. Others, such as trade adviser Peter Navarro, would prefer that the United States and China were far less intertwined. This would undoubtedly mean a more mercantilist world economy and a more tense international order. There is a similar split among geo-politicians, with the Pentagon being more hawkish (not least because it ensures huge budgets) and the State Department more conciliatory.

Vice President Pence recently gave a fiery speech that came close to declaring that we are in a new Cold War with China. An outright labeling of China as the enemy would be a seismic shift in U.S. strategy and would certainly trigger a Chinese response. It could lead us to a divided, unstable and less prosperous world. Here’s hoping the Trump administration has thought through the dangers of such a confrontational approach.

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History tells us that if China is indeed now the United States’ main rival for superpower status, the best way to handle such a challenge lies less in tariffs and military threats and more in revitalization at home. The United States prevailed over the Soviet Union not because it waged war in Vietnam or funded the contras in Nicaragua, but because it had a fundamentally more vibrant and productive political-economic model. The Soviet threat pushed the United States to build the interstate highway system, put a man on the moon, and lavishly fund science and technology.

The former head of Google China, Kai-Fu Lee, has written an important book arguing that China is likely to win the race for artificial intelligence — the crucial technology of the 21st century. He points out that China’s companies are highly innovative, its government is willing to make big bets for the long term, and its entrepreneurs are driven and determined.

Tariffs and military maneuvers might be fine at a tactical level, but they don’t address the core challenge. The United States desperately needs to rebuild its infrastructure, fix its educational system, spend money on basic scientific research and solve the political dysfunction that has made its model less appealing around the world. If China is a threat, that’s the best response.

Michael Lewis Makes a Story About Government Infrastructure Exciting


If someone had asked you a few weeks ago whether former New Jersey Gov. Chris Christie would ever be depicted as a beleaguered hero in a Michael Lewis book, it would have been reasonable to say the chances were low — lower, even, than Christie’s abysmal approval ratings when he left office earlier this year. Christie, after all, hasn’t done much to endear himself to the American public; early in 2016, his surprise endorsement of Donald J. Trump (who once called Christie a “little boy”) looked like the desperate move of a politician whose office was still smoldering from a payback scandal.

But it’s 2018 in America, where anything can happen and everything is relative, and the opening pages of Lewis’s new book, “The Fifth Risk,” have Christie acting like an upright statesman during the run-up to the 2016 election, hoping to convince a chaotic Trump campaign to devise an orderly transition plan in case of victory. Lewis says this was like trying to persaude Trump that he needed to study for a test he might never take. Christie was soon dismissed from Trump’s team, and the transition proceeded accordingly — which is to say, shambolically. Two years later, out of more than 700 key government positions requiring Senate confirmation, only 361 have been confirmed, and a full 152 have no nominee at all.

“Many of the problems our government grapples with aren’t particularly ideological,” Lewis writes, by way of moseying into what his book is about. He identifies these problems as the “enduring technical” variety, like stopping a virus or taking a census. Lewis is a supple and seductive storyteller, so you’ll be turning the pages as he recounts the (often surprising) experiences of amiable civil servants and enumerating risks one through four (an attack by North Korea, war with Iran, etc.) before you learn that the scary-sounding “fifth risk” of the title is — brace yourself — “project management.”

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CreditPatricia Wall/The New York Times

Lewis has a reputation for taking fairly arcane subjects — high finance, sovereign debt, baseball statistics, behavioral economics — and making them not just accessible but entertaining. He does the same here with government bureaucracy, though “The Fifth Risk” feels a little underdone compared to some of his previous books. Two of its three parts appeared as articles in Vanity Fair; the other as an audiobook original. Those pieces might have been written under deadline, but even with extra time to smooth things out, Lewis has elected to preserve some clunkers: Silence is still “deafening,” poverty still comes “in many flavors” and Lewis still decides “to kill two birds with one stone.”

 

For the most part, though, he keeps the narrative moving, rendering even the most abstruse details of government risk assessment in the clearest (and therefore most terrifying) terms. He asks a handful of former public servants, now living as private civilians, what they fear might happen if Trump continues his haphazard approach to staffing the federal government. Their answers include an accidental nuclear catastrophe and the privatization of public goods, like government loans and drinking water.

One danger to the proper functi


oning of federal agencies is a combination of incompetence and neglect. Lewis reports how the Trump team filled jobs at the Department of Agriculture with a number of decidedly nonagricultural nonexperts, including a country-club cabana attendant and the owner of a scented-candle company.

But this kind of bumbling patronage, according to Lewis, is only one part of the Trump method. The other involves bringing in what looks suspiciously like a wrecking crew. Trump has repeatedly placed essential agencies under the leadership of individuals who have previously called for the elimination of the same agency, or else a radical limit to its authority.

Take, for example, Barry Myers, Trump’s nominee for the head of the National Oceanic and Atmospheric Administration. Myers also happens to be chief executive of AccuWeather, his family’s company. As a private citizen, Myers lobbied to prevent NOAA’s National Weather Service from having direct contact with the public, saying that “the government should get out of the forecasting business” — despite the fact that AccuWeather repackaged free government weather data and sold it for a profit.

 

With Myers in charge, Lewis says “the dystopic endgame is not difficult to predict: the day you get only the weather forecast you pay for.”

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Michael LewisCreditTabitha Soren

Lewis leavens all the doomsaying with some (darkly) funny bits. A woman astronaut recalls that male NASA technicians were so flummoxed by the prospect of menstruation in space that they offered her a kit of a hundred tampons for a short journey. The wrappers had been removed and the tampons sealed in little red cases, strung together in an “endless unfurling” that she likened to a “bad stage act.”

What Lewis doesn’t do is delve too deeply into politics, preferring instead to focus our attention on technical functions of government that everyone takes for granted. This tack will undoubtedly make the book more appealing to some of the government skeptics (i.e. conservatives) who are traditionally part of his enormous audience, but it also leaves the book with an analytical weakness. As Lewis’s narrow depiction of Christie inadvertently shows, technical know-how isn’t nearly enough. You can have a detailed understanding of the technocratic workings of government and still be, politically speaking, extremely unhelpful to the public you’re supposed to serve.

Lewis undoubtedly knows this, and as a storyteller he had to put limits somewhere. Besides, when the polar ice caps melt and the world is in flames, Democrat, Republican — none of that will matter anymore. Lewis himself seems to swing from civic optimism to abject nihilism, sometimes within the same perfect sentence. As he says about the imposing, brutalist building that houses the Department of Energy: “It will make an excellent ruin.”

Follow Jennifer Szalai on Twitter: @jenszalai.

The Fifth Risk
By Michael Lewis
221 pages. W.W. Norton & Company. $26.95.

Follow New York Times Books on Facebook, Twitter and Instagram, sign up for our newsletter or our literary calendar. And listen to us on the Book Review podcast.

 

A version of this article appears in print on , on Page C1 of the New York edition with the headline: Dangers Nestled in Arcana. Order Reprints | Today’s Paper |

A Victory for America: Narrow Self-Interest?


A Victory for America: Narrow Self-Interest?

by Dr. Fareed Zakaria

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Americanism– Trump’s Victory ?

President Trump’s speech on Tuesday (September 25, 2018) at the United Nations was an intelligent — at times eloquent — presentation of his “America First” worldview. He laid out an approach of pursuing narrow self-interest over broader global ones and privileging unilateral action over multilateral cooperation. But Trump might not recognize that as he withdraws America from these global arenas, the rest of the world is moving on without Washington. Wittingly or not, Trump seems to be hastening the arrival of a post-American world.

Take one of his first major actions, pulling out of the Trans-Pacific Partnership, the sweeping trade deal conceived during the George W. Bush administration and negotiated by Barack Obama’s administration. It was an attempt to open long-closed markets such as Japan and also to create a grouping that could stand up to China’s growing muscle in trade matters.

The other 11 TPP countries decided to keep the deal minus Washington, which simply means the United States will not gain access to those markets. Japanese Prime Minister Shinzo Abe, while sweet-talking Trump, also quickly struck a free-trade agreement with the European Union, creating one of the largest economic markets in the world and giving opportunities to Europe that might otherwise have gone to the United States.

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As Ivo H. Daalder and James M. Lindsay point out in a forthcoming book, “The Empty Throne,” if you are not at the table, you are on the menu. When Washington steps away, the global agenda is shaped without U.S. input. So withdrawing from the U.N. Human Rights Council simply means that American diplomats will watch the group’s routine condemnations of Israel from the sidelines while having less ability to bring moral pressure to bear on despots everywhere.

The Trump administration’s constant attacks on the World Trade Organization, an American idea, have left the field wide open and China is eagerly jumping in to shape the rules and conventions that will govern global trade. When Trump cuts funding for various international agencies, he is playing right into the hands of Beijing, which has long sought greater influence in these bodies. China will happily pick up the tab and accept new posts, along with the status and clout they bring. Similarly, the bizarre and continued absence of key American diplomats — no assistant secretaries of state for East Asia and South Asia; no ambassadors to Saudi Arabia, Turkey, Egypt and South Africa, among others — means that American interests are not represented.

Perhaps the most remarkable new effort to sidestep America has come from the Europeans, in reaction to Trump’s decision to pull out of the Iran nuclear pact and re-impose financial sanctions on Iran and anyone who does business with it. Because of the immense global strength of the dollar, few major companies are willing to engage commercially with Iran — since dollars are the most commonly used currency for international transactions. This has infuriated the Europeans, who believe they should have the ability to do business with anyone they want.

They are therefore trying to create an economic mechanism that can bypass the dollar. As E.U. foreign policy chief Federica Mogherini told me this week, “We cannot accept, as Europeans, that others — even our closest allies and friends — determine and decide with whom we can make business with or trade.” She indicated that others — presumably the Russians and Chinese — might join this effort. Were the European Union efforts to come to fruition, they would put a dent in the most significant element of American financial power — the unrivaled role of the dollar in the global economy.

The truth is, the European effort is unlikely to succeed. The dollar’s clout has actually increased in recent years as a globalized international system has needed a common currency. The euro’s future remains in doubt, China’s yuan isn’t even convertible, Japan’s yen represents a country in deep demographic decline. And yet, it seems foolish for the United States to pursue policies that produce the desire to curtail American power, bypass Washington and create new arrangements — especially among America’s closest allies. It’s one thing for Vladimir Putin and Xi Jinping to try to usher in a post-American world. It’s another for Europe to take the lead in doing so.

The result of America’s abdication will not be European or Chinese dominance. It will be — in the long run — greater disorder, the erosion of global rules and norms, and a more unpredictable, unstable world with fewer opportunities for people to buy, sell and invest around the globe.

In other words, it means a less peaceful and prosperous world — one in which American influence will be greatly diminished. How does this make America great?

https://fareedzakaria.com/columns/2018/9/27/how-is-this-a-victory-for-america

(c) 2018, Washington Post Writers Group

Dr. M’s UNGA Address should hit right home


September 30, 2018

Dr. M’s UNGA Address should hit right home

Prime Minister Dr. Mahathir Mohamad’s Address to the United Nations General Assembly was poised, articulate and to the point.

He did not mince his words when he spoke about global political, economic, social and environmental conditions since his last address 15 years ago, in 2003.

The gist? That the world has not changed much in terms of reform; that the developing world is still being bullied by powerful nations; that the trade war between the US and China continues to impoverish poorer and smaller countries; that there is a growing ambiguity of social values, and that the notion of freedom has become skewed, at best.

Intellectually-sharp and laudable, Dr. Mahathir delivered his poignant message, that the “new Malaysia” is not naive. He told the UN General Assembly that Malaysia will continue to soldier on with other countries, through the United Nations, to make the world a better place, economically, politically, socially and environmentally.

In foreign policy jargon, Mahathir delivered a warning against the acts of dangerous, threatening Hitlers and the misconceptions of peaceful, law-abiding allies.

Overall, his Address championed the aspirations of the developing world and smaller non-aligned nations. However, there is more that we should take away from his Address, in order to render his thoughts more relevant in the domestic Malaysian context.

There are three key areas the new Malaysia should focus on. Mahathir spoke of global terrorism. Although he did not specify the actual definition of the term (or of the word “terrorist”), one can read between the lines. He lamented that there is “something wrong with our way of thinking, with our value system. Kill one man, it is murder, kill a million and you become a hero”.

What he actually means is that the powerful have the capacity to define concepts in order to justify certain acts. Terrorism, as coined by the powerful, is a notion applied to non-state actors, jihadists and transnational communities of oppressed people who react violently to achieve justice.

Powerful states have the sole purpose of pushing their economic and political agendas and so a global understanding of the concept of terrorism was born after 9/11.

Yes, about 3,000 died mercilessly at the World Trade Center in 2001. But almost 130,000 (mostly civilians) perished in one day, in Hiroshima and Nagasaki, in 1945. This is more than 43 times the death toll at the hands of the so-called Islamic terrorists.

Yet, throughout the decades after World War Two, the acceptable narrative describing US geo-political advances (and those of her allies) was never termed “terrorist” or “terrorism”.

I am not condoning such acts as no mass killing of civilians can be considered civilised behaviour. However, we must consider here the socio-political manipulation of labels.

In the Malaysian context it is happening all around us to the detriment of the common people. For instance, the notion of “the rights of Malays” and “the welfare of the Malays”. What rights are we focusing on? The right to get a job based on race or the right that all qualified and capable Malays should be appropriately awarded?

For me, it is the latter. Yet, certain politicians still choose to speak about the unfair treatment of the Malays and that the new Pakatan Harapan government should be tasked to help bring them up to greatness and to be protected.

The label of “rights” is bandied around but its meaning is deliberately couched in ambiguity for an ulterior political motive.

Using Mahathir’s example of the plight of the Rohingyas, his message was an appeal for “caring”; that just because a nation is independent it does not mean the world should close an eye to domestic suffering and injustice.

He reiterated that nations need to solve the problems of global conflict, racism and bigotry by going back to the root causes.

Similarly, the state of Malaysia’s education system needs care and we need to identify the root causes of the inequality that exists in our schools and universities.

Agreed, our teachers and professors are not being massacred, and neither are our students. But mentally, the massacre began 61 years ago.

The public university leadership has failed to produce thinking professional graduates and to my mind, this is humanity’s greatest form of oppression.

We are all aware that our public university leadership is more concerned with national and international rankings, administrative positions of the academic staff, titles and research funding.

But are the research funds, for instance, channeled into meaningful projects to help society overcome real problems of poverty and discrimination?

Are the researchers and academics “caring” enough to plan such research even though they may not be awarded a future government contract or a datukship?

This brings me to my next point: values. Mahathir commented that there is something wrong with our way of thinking.  To my mind, the sole purpose of an education is to instil good values. These include moderation, dignity, integrity, hard work, perseverance and honour. No matter what religion or creed one belongs to, these are universal values.

In post-election Malaysia, this topic has surfaced many times. But I fear it is just a narrative with no substance.

There are many issues that have surfaced since PH took over. From the appointment of key ministerial positions, to presidents of universities, to the PD move, to child marriage, the list goes on.

Nepotism, cronyism and corruption still loom over us but it is not too late for values reform. What better way to start than to realise that, while it is important for us to preach values to the international community, we should apply this to our own society.

There is a need for all Malaysians to delve deeper into Mahathir’s UNGA Address because he was not only sending a message to the superpowers and their allies.We should also see his message as a warning to tackle our own domestic crises; problems that have arisen as a result of past mistakes, on-going stubbornness to address those mistakes and a lack of foresight.

Dr.Sharifah Munirah Alatas is an FMT reader.

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

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Malaysia’s Prime Minister at UNGA, 2018


September 29, 2018

Malaysia’s Prime Minister at UNGA, 2018

Friday, September 28, 2018: Malaysian Prime Minister Mahathir bin Mohamad speaks to 73rd United Nations General Assembly in New York (9/28/18) on September 28, 2018. PM Mahathir Mohamad speaks about Rohingya issue, United Nations Development goal at the UNGA 2018.

President of Malaysia Mahathir bin Mohamad gave his speech at The United Nations General Assembly on Tuesday at 11:45 am, (28-9-18) on September 28, 2018 — and it could be one of his most important speeches yet.

Live streaming of Prime Minister Mahathir bin Mohamad Speech to the UN General Assembly 9/28/2018.

#MahathirMohamad #Speech #UnitedNations

The following is Prime Minister Tun Dr Mahathir Mohamad’s speech at the general debate of the 73rd session of the United Nations General Assembly in New York

Madam President,

1. I would like to join others in congratulating you on your election as the President of the Seventy-Third (73rd) Session of the United Nations General Assembly (UNGA).

2. I am confident with your wisdom and vast experience; this session will achieve the objectives of the theme for this session. I assure you of Malaysia’s fullest support and cooperation towards achieving these noble goals.

3. Allow me to also pay tribute to your predecessor, His Excellency Miroslav Lajcak, for his dedication and stewardship in successfully completing the work of the 72nd Session of the General Assembly.

4. I commend the Secretary-General and the United Nations staff for their tireless efforts in steering and managing UN activities globally.

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5. In particular, I pay tribute to the late Kofi Annan, the seventh Secretary-General of the UN from 1997 – 2006, who sadly passed away in August this year. Malaysia had a positively strong and active engagement with the UN during his tenure.

Madam President,

6. The theme of this 73rd Session of General Assembly, “Making the United Nations Relevant to All People: Global Leadership and Shared Responsibilities for Peaceful, Equitable and Sustainable Societies” remains true to the aspiration of our founding fathers. The theme is most relevant and timely. It is especially pertinent in the context of the new Malaysia. The new Government of Malaysia, recently empowered with a strong mandate from its people, is committed to ensure that every Malaysian has an equitable share in the prosperity and wealth of the nation.

7. A new Malaysia emerged after the 14th General Election in May this year. Malaysians decided to change their government, which had been in power for 61 years, i.e., since independence. We did this because the immediate past Government indulged in the politics of hatred, of racial and religious bigotry, as well as widespread corruption. The process of change was achieved democratically, without violence or loss of lives.

8. Malaysians want a new Malaysia that upholds the principles of fairness, good governance, integrity and the rule of law. They want a Malaysia that is a friend to all and enemy of none. A Malaysia that remains neutral and non-aligned. A Malaysia that detests and abhors wars and violence. They also want a Malaysia that will speak its mind on what is right and wrong, without fear or favour. A new Malaysia that believes in co-operation based on mutual respect, for mutual gain. The new Malaysia that offers a partnership based on our philosophy of ‘prosper-thy-neighbour’. We believe in the goodness of cooperation, that a prosperous and stable neighbour would contribute to our own prosperity and stability.

9. The new Malaysia will firmly espouse the principles promoted by the UN in our international engagements. These include the principles of truth, human rights, the rule of law, justice, fairness, responsibility and accountability, as well as sustainability. It is within this context that the new government of Malaysia has pledged to ratify all remaining core UN instruments related to the protection of human rights. It will not be easy for us because Malaysia is multi-ethnic, multireligious, multicultural and multilingual. We will accord space and time for all to deliberate and to decide freely based on democracy.

Malaysia’s Prime Minister Tun Dr Mahathir Mohamad speak during the General Debate of the 73rd session of the General Assembly at the United Nations in New York. NSTP/Video Grab UNWeb TV

 

Madam President,

10. When I last spoke here in 2003, I lamented how the world had lost its way. I bemoaned the fact that small countries continued to be at the mercy of the powerful. I argued the need for the developing world to push for reform, to enhance capacity building and diversify the economy. We need to maintain control of our destiny.

 

11. But today, 15 years later the world has not changed much. If at all the world is far worse than 15 years ago. Today the world is in a state of turmoil economically, socially and politically.

12. There is a trade war going on between the two most powerful economies. And the rest of the world feel the pain.

13. Socially new values undermine the stability of nations and their people. Freedom has led to the negation of the concept of marriage and families, of moral codes, of respect etc.

14. But the worse turmoil is in the political arena. We are seeing acts of terror everywhere. People are tying bombs to their bodies and blowing themselves up in crowded places. Trucks are driven into holiday crowds. Wars are fought and people beheaded with short knives. Acts of brutality are broadcast to the world live. Masses of people risk their lives to migrate only to be denied asylum, sleeping in the open and freezing to death. Thousands starve and tens of thousands die in epidemics of cholera.

15. No one, no country is safe. Security checks inconvenience travelers. No liquids on planes. The slightest suspicion leads to detention and unpleasant questioning.

16. To fight the “terrorists” all kinds of security measures, all kinds of gadgets and equipment are deployed. Big brother is watching. But the acts of terror continues.

17. Malaysia fought the bandits and terrorists at independence and defeated them. We did use the military. But alongside and more importantly we campaigned to win the hearts of minds of these people.

18. This present war against the terrorist will not end until the root causes are found and removed and hearts and minds are won.

19. What are the root causes? In 1948, Palestinian land was seized to form the state of Israel. The Palestinians were massacred and forced to leave their land. Their houses and farms were seized.

20. They tried to fight a conventional war with help from sympathetic neighbours. The friends of Israel ensured this attempt failed. More Palestinian land was seized. And Israeli settlements were built on more and more Palestinian land and the Palestinians are denied access to these settlements built on their land.

21. The Palestinians initially tried to fight with catapults and stones. They were shot with live bullets and arrested. Thousands are incarcerated.

22. Frustrated and angry, unable to fight a conventional war, the Palestinians resort to what we call terrorism.

23. The world does not care even when Israel breaks international laws, seizing ships carrying medicine, food and building materials in international waters. The Palestinians fired ineffective rockets which hurt no one. Massive retaliations were mounted by Israel, rocketing and bombing hospitals, schools and other buildings, killing innocent civilians including school children and hospital patients. And more.

24. The world rewards Israel, deliberately provoking Palestine by recognising Jerusalem as the capital of Israel.

25. It is the anger and frustration of the Palestinians and their sympathisers that cause them to resort to what we call terrorism. But it is important to acknowledge that any act which terrify people also constitute terrorism. And states dropping bombs or launching rockets which maim and kill innocent people also terrify people. These are also acts of terrorism.

26. Malaysia hates terrorism. We will fight them. But we believe that the only way to fight terrorism is to remove the cause. Let the Palestinians return to reclaim their land. Let there be a state of Palestine. Let there be justice and the rule of law. Warring against them will not stop terrorism. Nor will out-terrorising them succeed.

27. We need to remind ourselves that the United Nations Organisation, like the League of Nations before, was conceived for the noble purpose of ending wars between nations.

28. Wars are about killing people. Modern wars are about mass killings and total destruction countrywide. Civilised nations claim they abhor killing for any reason. When a man kills, he commits the crime of murder. And the punishment for murder may be death.

29. But wars, we all know encourage and legitimise killing. Indeed the killings are regarded as noble, and the killers are hailed as heroes. They get medals stuck to their chest and statues erected in their honour, have their names mentioned in history books.

30. There is something wrong with our way of thinking, with our value system. Kill one man, it is murder, kill a million and you become a hero. And so we still believe that conflict between nations can be resolved with war.

31. And because we still do, we must prepare for war. The old adage says “to have peace, prepare for war”. And we are forever preparing for war, inventing more and more destructive weapons. We now have nuclear bombs, capable of destroying whole cities. But now we know that the radiation emanating from the explosion will affect even the country using the bomb. A nuclear war would destroy the world.

32. This fear has caused the countries of Europe and North America to maintain peace for over 70 years. But that is not for other countries. Wars in these other countries can help live test the new weapons being invented.

33. And so they sell them to warring countries. We see their arms in wars fought between smaller countries. These are not world wars but they are no less destructive. Hundreds of thousands of people have been killed, whole countries devastated and nations bankrupted because of these fantastic new weapons.

34. But these wars give handsome dividends to the arms manufacturers and traders. The arms business is now the biggest business in the world. They profit shamelessly from the deaths and destruction they cause. Indeed, so-called peace-loving countries often promote this shameful business.

35. Today’s weapons cost millions. Fighter jets cost about 100 million dollars. And maintaining them cost tens of millions. But the poor countries are persuaded to buy them even if they cannot afford. They are told their neighbours or their enemies have them. It is imperative that they too have them.

36. So, while their people starve and suffer from all kinds of deprivations, a huge percentage of their budget is allocated to the purchase of arms. That their buyers may never have to use them bothers the purveyors not at all.

Madam President,

Image result for rohingya crisis

37. In Myanmar, Muslims in Rakhine state are being murdered, their homes torched and a million refugees had been forced to flee, to drown in the high seas, to live in makeshift huts, without water or food, without the most primitive sanitation. Yet the authorities of Myanmar including a Nobel Peace Laureate deny that this is happening. I believe in non-interference in the internal affairs of nations. But does the world watch massacres being carried out and do nothing? Nations are independent. But does this mean they have a right to massacre their own people, because they are independent?

Madam President,

38. On the other hand, in terms of trade, nations are no longer independent. Free trade means no protection by small countries of their infant industries. They must abandon tariff restrictions and open their countries to invasion by products of the rich and the powerful. Yet the simple products of the poor are subjected to clever barriers so that they cannot penetrate the market of the rich. Malaysian palm oil is labelled as dangerous to health and the estates are destroying the habitat of animals. Food products of the rich declare that they are palm oil free. Now palm diesel are condemned because they are decimating virgin jungles. These caring people forget that their boycott is depriving hundreds of thousands of people from jobs and a decent life.

39. We in Malaysia care for the environment. Some 48% of our country remains virgin jungle. Can our detractors claim the same for their own countries?

Madam President,

40. Malaysia is committed to sustainable development. We have taken steps, for example in improving production methods to ensure that our palm oil production is sustainable. By December 2019, the Malaysian Sustainable Palm Oil (MSPO) standard will become mandatory. This will ensure that every drop of palm oil produced in Malaysia will be certified sustainable by 2020.

Madam President,

41. All around the world, we observe a dangerous trend to inward-looking nationalism, of governments pandering to populism, retreating from international collaborations and shutting their borders to free movements of people, goods and services even as they talk of a borderless world, of free trade. While globalisation has indeed brought us some benefits, the impacts have proven to be threatening to the independence of small nations. We cannot even talk or move around without having our voices and movement recorded and often used against us. Data on everyone is captured and traded by powerful nations and their corporations.

42. Malaysia lauds the UN in its endeavours to end poverty, protect our planet and try to ensure everyone enjoys peace and prosperity. But I would like to refer to the need for reform in the organisation. Five countries on the basis of their victories 70 over years ago cannot claim to have a right to hold the world to ransom forever. They cannot take the moral high ground, preaching democracy and regime change in the countries of the world when they deny democracy in this organisation.

43. I had suggested that the veto should not be by just one permanent member but by at least two powers backed by three non-permanent members of the Security Council. The General Assembly should then back the decision with a simple majority. I will not say more.

44. I must admit that the world without the UN would be disastrous. We need the UN, we need to sustain it with sufficient funds. No one should threaten it with financial deprivation.

Madam President,

45. After 15 years and at 93, I return to this podium with the heavy task of bringing the voice and hope of the new Malaysia to the world stage. The people of Malaysia, proud of their recent democratic achievement, have high hopes that around the world – we will see peace, progress and prosperity. In this we look toward the UN to hear our pleas.

I thank you, Madam President.

 

Israel’s Prime Minister at  UNGA,  2018

 

Iran’s President Addresses UNGA, 2018