What is new in Gulf Area: We in ASEAN have seen it all


June 21, 2017

What is new in Gulf Area: We in ASEAN have seen it all, so learn from us about building Win-Win Strategic Partnerships to secure Peace, Stability and Development

by James M. Dorsey

Two competing visions of ensuring regime survival are battling it out in the Gulf.

To Saudi Arabia and the United Arab Emirates, the 2011 Arab popular revolts that toppled autocratic leaders in four countries and sparked the rise of Islamist forces posed a mortal threat. In response, the two countries launched a counterrevolution that six years later continues to leave a trail of brutal repression at home and spilt blood elsewhere in the Middle East and North Africa.

Virtually alone in adopting a different tack based on former emir Sheikh Hamad bin Khalifa Al Thani’s principle of “riding the tide of history,” Qatar, a monarchical autocracy like its detractors, Saudi Arabia and the UAE, embraced the revolts and wholeheartedly supported the Islamists. The result is an epic battle for the future of the region that in the short-term has escalated the violence, deepened the region’s fissures, and put the tiny Gulf state at odds with its larger brethren.</span

Ironically, an analysis of political transition in Southeast Asia during the last three decades would likely prove instructive for leaders in the Gulf. At the core of people power and change were militaries or factions of militaries in the Philippines, Indonesia and Myanmar that saw political change as their best guarantee of holding on to significant powers and protecting their vested interests.

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The Young People of ASEAN

In the Philippines and Indonesia, factions of the military partnered with civil society to show the door to the country’s autocrat (Suharto). In Myanmar, internationally isolated, the military as such opted to ensure its survival as a powerful player by initiating the process of change.

Sheikh Hamad, and his son and successor, Sheikh Tamim bin Hamad Al Thani, have adopted the principle set forward by Southeast Asian militaries and their civil society partners with one self-defeating difference: a belief that by supporting political change everywhere else they can retain their absolute grip on power at home.

In fact, if there is one fundamental message in the two-week-old Saudi-UAE-led diplomatic and economic boycott of Qatar, it is the recognition of the two countries’ ruling elites that they either thwart change at whatever cost or go with the flow. There are no half-measures.

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There is however another lesson of history to be learned from the Southeast Asian experience: change is inevitable. Equally inevitable, is the fact that unavoidable economic change and upgrading rather than reform of autocracy like Saudi Arabia is attempting with Deputy Crown Prince Mohammed bin Salman in the driver’s seat has a limited shelf life without political change.

Gulf autocrats marvel at China’s ability to achieve phenomenal economic growth while tightening the political reigns. It’s a model that is proving increasingly difficult to sustain as China witnesses an economic downturn, a failure to economically squash popular aspirations, and question marks about massive infrastructure investment across Eurasia that has yet to deliver sustainable results and has sparked debt traps and protest across the region.

The Southeast Asian lesson is that political change does not by definition disempower political elites. In fact, those elites have retained significant power in the Philippines, Indonesia and Myanmar despite radical reform of political systems. That is true even with the rise for the first time of leaders in Indonesia and the Philippines who do not hail from the ruling class or with the ascendancy to power in Myanmar of Aung San Suu Kyi, a long-persecuted daughter of the ruling elite, who has refrained from challenging the elite since winning an election.

The bottom line is that ruling elites are more likely to ensure a continued grip on power by going with the flow and embracing political change than by adopting the Saudi-UAE approach of imposing one’s will by hook or by crook or the Qatari model of playing ostrich with its head in the sand.

The Qatari model risks the ruling Al Thani family being taken by surprise when an inevitably reinvigorated wave of change comes knocking on Doha’s door. More ominous are the risks involved in the Saudi-UAE approach.

That approach has already put the two states in a bind as they struggle in the third week of their boycott of Qatar to formulate demands that stand a chance of garnering international support. Even more dangerous is the risk that the hard line adopted by Saudi Arabia and the UAE will fuel extremism and political violence in an environment starved of any opportunity to voice dissent.

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The ASEAN Way–Building Win-Win Strategic Partnerships to secure Peace, Stability and Development

The lessons of Southeast Asia are relevant for many more than only the sheikhdoms that are battling it out in the Gulf. International support for political transition in Southeast Asia produced a relatively stable region of 600 million people despite its jihadist elements in the southern Philippines and Indonesia, jihadist appeal to some elsewhere in the region, religious and ethnic tensions in southern Thailand and Myanmar, and deep-seated differences over how to respond to Chinese territorial ambitions in the South China Sea.

That support also ensured that the process of change in Southeast Asia proved to be relatively smooth and ultimately sustainable unlike the Middle East where it is tearing countries apart, dislocating millions, and causing wounds that will take generations to heal.

To be sure, Southeast Asia benefited from the fact that no country in the region has neither the ambition nor the ruthlessness of either Saudi Arabia or the UAE.

Southeast Asia also had the benefit of an international community that saw virtue in change rather than in attempting to maintain stability by supporting autocratic regimes whose policies are increasingly difficult to justify and potentially constitute a driver of radicalization irrespective of whether they support extremist groups.

Former US President George W. Bush adopted that lesson in the wake of 9/11 only to squander his opportunity with ill-fated military interventions in Afghanistan and Iraq, a flawed war on terrorism, and a poorly executed democracy initiative. The lesson has since been lost with the rise of populism and narrow-minded nationalism and isolationism.

Dr. James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and the author of The Turbulent World of Middle East Soccer blog, a book with the same title, Comparative Political Transitions between Southeast Asia and the Middle East and North Africa, co-authored with Dr. Teresita Cruz-Del Rosario and three forthcoming books, Shifting Sands, Essays on Sports and Politics in the Middle East and North Africa as well as Creating Frankenstein: The Saudi Export of Ultra-conservatism and China and the Middle East: Venturing into the Maelstrom.Image result for Learn from ASEAN embracing political change.

Abenomics: A Success?


May 2, 2017

Abenomics: A Success?

by The Financial Times

https://www.ft.com/content/62cc7d40-2e65-11e7-9555-23ef563ecf9a

When a policy is applied for more than four years, and consistently fails to produce the intended result, it is tempting to declare it a failure. Critics of Japan’s economic stimulus declare exactly that. They are wrong. So-called Abenomics has not failed, and it should be sustained, not abandoned.

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Critics of Prime Minister Shinzo Abe’s economic policy, which aims to combine monetary and fiscal stimulus with structural economic reforms, make a simple case. Abenomics began in the spring of 2013. It was supposed to revive growth and end two decades of on-and-off deflation. Four years later, the Bank of Japan’s preferred measure of inflation is up by 0.1 per cent on a year ago. It follows, the critics say, that the medicine has not worked.

It has indeed proved hard to ignite inflation in Japan. Since the financial crisis, low inflation has been a problem everywhere, from the US to the eurozone to the UK. But the simple diagnosis of failure ignores how much Abenomics has achieved, the difficult backdrop to these achievements, and the reality that the stimulus was much smaller than its critics imagine. Growth, running at an annualised 1.2 per cent, has been well above Japan’s underlying rate every year save 2014. The unemployment level is at a 22-year low of 2.8 per cent — and that figure understates how tight Japan’s jobs market has become. Every shop and restaurant in Tokyo seems to have a “positions vacant” sign, and many are scrapping 24-hour opening to save labour. Yamato Transport, the country’s largest logistics company, is raising prices for the first time in 27 years in a deliberate attempt to cut volumes to a level its network can handle. Rather than cutting costs, chief executives spend their time working out how to hire and retain staff.

After more than two decades when labour was cheap and abundant, Japanese companies are finding ways to cut back, reducing their lavish service standards rather than raising prices. But this can only go so far. Japan is primed for inflation. The struggles of the stimulus must also be weighed against the global economic backdrop. The plunge in 2014 in commodity prices, followed by the 2015 slowdown in emerging markets, leading to a sharp appreciation of the yen, were a terrible environment in which to generate inflation. Only with the election of Donald Trump as US president, and the subsequent rally in the yen above ¥110 to the dollar, is the global economy once again a support. Of all the obstacles to success, the worst was self-inflicted: a 2014 rise in consumption tax from 5 to 8 per cent. In theory, Abenomics involved a fiscal stimulus. In reality, this only ever happened for a brief time, in 2013. Over the past four years, Japan has significantly tightened fiscal policy. The predictable result was to halt momentum towards higher prices.

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Recently, the Abe government has realised its mistake and loosened the purse strings a little. It should continue to do so, ignoring foolish and arbitrary fiscal targets, until inflation finally does pick up. There have been policy failures over the past four years, but they all involved too little Abenomics, not too much. To break Japan’s deflationary mindset for good may take several more years. Workers are slow to demand higher pay and employers are reluctant to offer it. But that does not mean the effort to restore inflation has failed. Rather, it has made significant progress, in a difficult environment, where the policy’s champions often failed to act when needed. The prize is a revived Japanese economy.

 

ADB Identifies the Keys to Economic Progress


April 9, 2017

ADB Identifies the Keys to Economic Progress

by Philip Bowing

http://www.asiasentinel.com/econ-business/adb-identifies-keys-economic-progress/

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Get your investment priorities right. That is the message which emerges from a detailed study by the Asian Development Bank of the ways for countries to transform themselves from low to lower-middle, upper middle and finally high income. Those priorities change over time but none in itself is self-sufficient.

The good news is that most of Asia has already moved out of the low-income bracket – much though that may surprise hundreds of millions in India, Bangladesh and Pakistan for example. The main reason is that the ADB, like other such institutions, using a fixed Purchasing Power Parity measure of income which is absolute, not relative. Thus we are told that the Netherlands reached lower-middle income status in 1829 while Argentina get there in the late 19th century.

Yet at the time those were among the top two or three most prosperous societies in the world. So it is a measure of Asian progress that almost all countries are now at least at the level of the richest 150 years ago. But it may be scant comfort to Mumbai slum dwellers or Bangladeshi farmers to know that they have now reached the income levels of Argentinians more than a century ago.

Categorization is also at times problematic. Thus by some measures Malaysia, Kazakhstan and Turkmenistan are high-income (manly thanks to oil and gas) but are treated as Middle Income by the World Bank.

So what are the most important factors that lead countries up through the income rungs, absolute and relative? For those in the low- and lower-middle brackets, by far the most crucial issue is standard of education. Thus of major Asian countries today, India has most to gain from raising the number of school years. Raising educational scores (as judged by maths and science tests) could double Indian income levels over 30 years.  Philippines and Thailand would also benefit exceptionally from raising their educational sights.

However, for those with already high levels of education such as Kazakhstan, they need to find other avenues to progress further.

For the lower income countries, human capital is first priority, but it also needs to be accompanied by physical capital – the roads, transport and communications systems needed to spur output and trade. These physical investments become even more important as countries climb the middle-income ranks, as China has shown with infrastructure and housing spending making possible a boom in car and consumer durables production and bringing outlying areas to play a larger role in the national economy.

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Phnom Penh, 2017

In recent years, Cambodia has moved closer to lower-middle-income status through resounding economic growth. This has been driven by solid performances in garment manufacture, tourism, paddy and milled rice, and construction.–Asian Development Bank

Clearly, the inference from the ADB is that in Southeast Asia the Philippines and Indonesia stand out as in need of both human and physical capital investment to speed income gains while Thailand needs to focus on education. Bizarrely, however, as noted elsewhere in the ADB report, much of the region, including the Philippines, Cambodia, and Thailand, (but not India and Indonesia) exports capital even though returns to domestic investment should be higher. The problem seems to lie in the longer term nature of investment in human capital and infrastructure.

For those already at the top of the middle-income range and moving into the high bracket, the biggest gains need to come not from a greater quantity of investment but in raising Total Factor Productivity – the output per unit of invested capital. The conclusion here is very clear. Those such as South Korea which made the most difficult transition – to the highest level – showed TFP contributing 1.2 percentage points to income growth compared with just 0.4 percent for those stuck in the upper middle range.

The report identified several factors contributing to TFP growth: research and development spending; access to foreign investment bringing new skills and increasing the complexity of production skills; scope for entrepreneurship, and allowing creative destruction of older industries. Infrastructure investment also needed to keep up with technological change. The report noted that income convergence in the European Union had primarily been the result of TFP growth rather than high investment.

China scored highly on R&D. human capital, patent applications and industrial complexity though by implication the size and power of its public sector and aversion to closing factories could hold it back.

For China, as for some other countries such as Korea, Taiwan, Japan and Thailand, rapidly aging populations increase the importance of TFP in maintaining growth in the face of static or declining work forces. Meanwhile the country in Asia nearest to high income seems unlikely to make that jump while entrepreneurship, competition and access to capital are hobbled by race-based politics and commercial structures.

Hire Good People and Let them do the Job


March 14, 2017

Retired Admiral Thad Allen Opens the Leadership Forum Series That Carries His Name

The expert on managing crises talks to Trachtenberg School of Public Policy and Public Administration about governing in a complex technological age.

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Ret. Adm. Thad Allen addresses the Trachtenberg School of Public Policy and Public Administration in the inaugural public leadership forum that carries his name. (Logan Werlinger/GW Today)
The secret to good public leadership, Mr. Allen said, is lifelong learning, an insatiable curiosity that drives you to understand changes that are going on. The other essential element for navigating “choppy seas,” he said, is emotional intelligence.–Admiral (rtd) Thad Allen

By B. L. Wilson

https://gwtoday.gwu.edu/retired-admiral-thad-allen-opens-leadership-forum-series-carries-his-name

As the U.S. Coast Guard commandant who headed the government’s response to Hurricanes Katrina and Rita, as well as the clean up of Deepwater Horizon oil spill in the Gulf of Mexico, retired Adm. Thad Allen, M.P.A. ’86, said he would offer the following advice to President Donald Trump about managing a disaster.

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“Be the President. You can’t do everything yourself,” Mr. Allen said he’d tell Mr. Trump. “Hire a competent person to [focus on the problem] to the exclusion of everything else without the intrusion of policy, politics and partisanship.”

He added that it was also important for that person to be allowed to speak directly to the American people. It doesn’t matter who is President, Mr. Allen said, the government would face challenges from rapid technological advances, increased globalization and human impact on the environment.

In the first annual Trachtenberg School of Public Policy and Public Administration Public Leadership Forum that will carry his name, Mr. Allen shared insights with graduate students and alumni Tuesday night. Throughout this series, Mr. Allen and other senior government executives from across the political spectrum will conduct interactive conversations on the value and challenges of government service.

“There’s plenty to do regardless of who is leading the nation,” he said. “It is a question of how leaders and policymakers have to carve out an area that they’re responsible for, protect their subordinates and explain what’s going on.”

The side benefit of having been involved in crises that included the Haitian earthquake and serving as the Atlantic commander of the New York Harbor and Potomac during the 9/11 terrorism attack, he said, was the opportunity it gave him to take notes about what else was happening and how public policy and administration was handled.

 His talk at Jack Morton Auditorium was billed as a non-partisan conversation, “Public Service Leaders: Navigating Choppy Seas.” Mr. Allen, who is a partner with the Booz Allen Hamilton Inc. consulting firm, characterized himself as an “agnostic to science,” comparing taking a position on climate change and global warming to touching a deadly third rail.

“There’s water where none used to be, and I’m responsible for it,” he said. “You can argue about why it happened and the source, but there’s a perception and expectation that somehow government is going to do their job and attack the problem.”

He described a U.S. government that was having trouble keeping up with issues around the use of computers, involving encryption and privacy, data analytics and machine learning. Companies like Apple, he pointed out, are not waiting for the government or an international organization to come up with cell phone standards for a global navigation satellite system and are adapting to different systems in different regions and countries.

“It’s now become a stern chase where we’re falling further and further behind,” he said. “That also involves how we actually regulate and deal with safety issues.”

As an example, he noted that companies in Detroit are equipping cars with technology faster than the National Highway Transportation and Safety Administration can come up with rules to regulate their safety. He said it is unlikely the process will get overhauled anytime soon unless there is more collaboration between the government and the private sector. If that doesn’t make your head hurt, he said, natural disasters continue  even as the country is hit by outbreaks of diseases such as the Zika virus.

The problems in dealing with such events,  Mr. Allen explained, are made harder because there may be no clear channel for seeking emergency authorization and appropriation of resources and funding due to overlapping jurisdictions and the involvement of multiple federal agencies.

“This is the issue going forward—increased complexity, scope and scale,” Mr. Allen said.  “When you get things this complex, the complexity becomes a risk aggregator because it starts to defeat statutory responsibilities, standard operating procedures and doctrine.”

The secret to good public leadership, Mr. Allen said, is lifelong learning, an insatiable curiosity that drives you to understand changes that are going on. The other essential element for navigating “choppy seas,” he said, is emotional intelligence.

“Especially when you’re working across boundaries on complex problems, you have to have empathy and listen to the other stakeholders and understand what they are trying to say to you,” the retired admiral said.

 

 

A blinkered Fiscal Vision-There is no such thing as a free lunch, Mr. Trump


Match 7, 2017

Donald Trump may have veered from self-inflicted crisis to self-inflicted crisis over the course of his young presidency, but he has kept one policy goal steadily before him: tax cuts for the wealthy. A case in point is his recent proposal to find $54 billion more for military spending by slashing Head Start, food aid for low-income pregnant women, environmental protection and other programs. Those trade-offs are bad enough in themselves. But they also reveal a ruinous worldview in which nondefense spending is always excessive and tax cuts are necessary for growth. This sort of thinking will only weaken the economy and betray the people who put their hopes in Mr. Trump.

Spending on the nonmilitary discretionary programs that have been targeted by Mr. Trump comes to 3.2 percent of the economy — well below the average of 3.8 percent going back to 1962. By calling for cuts that would average about 15 percent in almost every category other than defense and “mandatory” programs like Social Security and Medicare, Mr. Trump would undermine his promises to make sure “every child in America has access to a good education,” to help the “poorest and most vulnerable” and to rebuild infrastructure. Other categories at risk of being cut include scientific and medical research, job training, national parks, air traffic control and maintenance of dams.

Worse yet, some Republicans may call for limiting Mr. Trump’s proposed reductions by cutting instead from Social Security and Medicare, which Mr. Trump has pledged to protect. That would be needlessly tightfisted. A rich nation with a resilient economy can afford to care for both the poor and the elderly. Besides, support for the elderly is already becoming stingier as a result of changes instituted years ago, including an increase in the Social Security retirement age from 65 in 2002 to 67 by 2027.

That is not to imply that all spending cuts are off limits. But it’s sensible to mix them with tax increases. The approach of Mr. Trump and congressional Republicans would deeply cut taxes even as spending is slashed.

Mr. Trump has essentially called for three tax cuts: a personal income tax cut, a corporate income tax cut and a cut achieved by repealing the Affordable Care Act. Specifics are scant, but one thing is clear: All three would overwhelmingly benefit the wealthiest Americans. A campaign draft of the income tax plan indicated that at least half of the proposed multitrillion-dollar tax cut would flow to the top 1 percent of earners in 2025, according to the nonpartisan Tax Policy Center. Repealing the A.C.A. would end the additional 0.9 percent Medicare Hospital Tax on incomes above $200,000 ($250,000 for married couples).

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Donald Trump is a bold conservative. But he’s not just a conservative on fiscal issues… He is a foreign policy conservative, too! That’s why  on MSNBC’s Morning Joe, Donald Trump explained his plan to do what President Barack Obama is unable to do: Destroy the Islamic State (ISIS). But make sure that these mentally deranged Islamic fanatics don’t screw  you first like they did to George W. Bush on September 9, 2011

Mr. Trump and Republican lawmakers say tax cuts spread prosperity by generating economic growth and thus increasing federal revenue — a thoroughly debunked claim. Experience shows that large tax cuts either deepen the nation’s debt or necessitate spending cuts. Forecasts from the Congressional Budget Office indicate that if tax revenue is not increased in the coming decade, spending cuts of $3 trillion — or about 25 percent outside of Social Security and Medicare — will be required to keep the debt at its current level of 77.5 percent of the economy. Clearly, if defense spending rises in the coming decade, as Mr. Trump has called for, while tax revenue declines, either the debt will rise or spending cuts will need to be even deeper.

Both outcomes can be avoided by abandoning deep tax cuts. It would be wise to take on new debt for stimulus during economic downturns or for infrastructure investments, but not to finance tax cuts during a military buildup. Economic activity could be encouraged by bolstering wages, including federal overtime protections. Tax revenue could be raised in constructive ways, including a carbon tax.

Giving the wealthy never-ending tax cuts while gutting programs for the middle class would create more of the resentment and inequality Mr. Trump has promised to address.