1MDB’s debt restructuring plan hits snags


December 26, 2016

1MDB’s debt restructuring plan hits snags

 

Image result for Second Finance Minister Datuk Johari
Dato’ Johari has downplayed tensions with Abu Dhabi over $9.4 billion in debt obligations, saying the two sides are “not in arbitration”.PHOTO: BLOOMBERG

A complex debt restructuring plan at scandal-torn 1Malaysia Development Berhad (1MDB) is stumbling over delays in the disposal of real estate assets and prickly differences with Abu Dhabi over a dispute involving more than US$6.5 billion (S$9.4 billion) in debt obligations.

1MDB’s prospective project partners and lawyers involved in the troubled sovereign fund’s debt work-outs said the proposed disposal of prime parcels of real estate in Kuala Lumpur and Penang for joint development has been bogged down by disagreements over valuations.

Separately, already tense relations with the Abu Dhabi government over a dispute involving billions of dollars in debt obligations have worsened in recent weeks, after a breakdown of an earlier deal where Malaysia would settle part of the disputed debt as a precondition for both governments resolving the matter through private negotiations, lawyers said.

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Malaysia’s Second Finance Minister Johari Abdul Ghani, who is overseeing the debt resolution at 1MDB, acknowledged some of the bumps facing the restructuring plan. But he insisted to The Straits Times that the problems would be ironed out. 1MDB declined to comment.

A special task force headed by Dato’ Johari, codenamed the Budiman Committee, was set up to handle the divestment restructuring of 1MDB. “We are pushing ahead (with the debt rationalisation plan). There are many issues, but key milestones, such as the sale of the power assets, have been completed,” he said in an interview.

 KEY MILESTONES COMPLETED

We are pushing ahead (with the debt rationalisation plan). There are many issues, but key milestones, such as the sale of the power assets, have been completed. Our next move is to kick-start the property development of Bandar Malaysia and TRX.

DATO’ JOHARI ABDUL GHANI, Malaysia’s Second Finance Minister, who heads a special task force handling the divestment restructuring of 1MDB.

“Our next move is to kick-start the property development of Bandar Malaysia and TRX.” He was referring to 1MDB’s massive real estate projects on the fringes of Kuala Lumpur. TRX, or Tun Razak Exchange, is an upcoming financial district.

The 1MDB-International Petro- leum Investment Company (Ipic) dispute is related to a deal last year in which the Abu Dhabi fund guaranteed US$3.5 billion of 1MDB bonds when they were issued in 2012. Last year, when 1MDB was short on cash, Ipic also agreed to give an emergency US$1 billion loan and make interest payment on the same bonds.

1MDB was to repay the loan through an Ipic subsidiary, but Ipic in April revealed for the first time that it never received the money.

Mr Johari conceded that Prime Minister Najib Razak’s administration and 1MDB were facing issues with Ipic, which is demanding the US$6.5 billion settlement that includes accumulated interest on the bonds and loan. “Abu Dhabi wants certain conditions but we need to look at the dispute in totality,” he said. He downplayed the tensions with Abu Dhabi. “We are not in arbitration. We are in the case management stage. So let us deal with this,” he said.

Executives involved in the debt work-outs at 1MDB said top government officials from Malaysia and Abu Dhabi have been in private talks since June to hammer out a settlement to avoid what could potentially turn into a messy arbitration battle. Both parties had reached a tentative agreement in recent weeks that Malaysia would settle roughly US$1.2 billion of the disputed amount, as a precondition for a government-to-government deal on the rest of the disputed monies.

“There was a deal but the Malaysian side is having a change of heart, so it looks like it will go to arbitration,” said a financial executive involved in the negotiations.

Dato’ Seri Najib, who set up 1MDB seven years ago to spur development at home and to pursue strategic investments abroad, has repeatedly rejected claims from his critics that the fund had morphed into a private political slush fund for him and his ruling Umno party.

Bloomberg, which interviewed Mr Johari, on Wednesday reported that 1MDB had paid the interest on its bonds due this quarter to the Abu Dhabi fund.

A version of this article appeared in the print edition of The Straits Times on December 23, 2016, with the headline ‘1MDB’s debt restructuring plan hits snags’. Print Edition

The World Bank: Right Part of the Time and Wrong On Occasion on Malaysia


October 18, 2016

The World Bank: Right Part of the Time and Wrong On Occasion on Malaysia

by Dr Lim Teck Ghee

The World Bank’s occasional economic reports on Malaysia can generally be relied upon to offer sound analysis on the country’s economic development that is different from those emanating from our national sources. They provide a more critical perspective on entrenched policies or proposed new ones by stake players who should be independent and should not be beholden to the Malaysian government or any interest or lobby group.

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Two recent reports should be of interest to our policy makers. The first which came out in June this year affirmed the importance of leveraging on trade agreements and partnerships for the nation’s continuing economic prosperity.

The Economic Monitor report noted that

  • Malaysia is one of the most open economies in the world, with a trade to GDP ratio of 148% (from 2010 to 2014) compared to 58% in developing countries in East Asia and Pacific.
  • About 40% of jobs in Malaysia are linked with export activities.

Most Malaysians are aware of the importance of trade. But we have also seen the rise of uninformed and often xenophobic sentiments targeting the Trans-Pacific Partnership when it was being negotiated by the government. The Bank’s opinion on this and other similar agreements needs to be reflected upon.

In essence the Bank argues that implementation of new regional trade agreements can help Malaysia carry out key economic reforms and accelerate the country’s transition to high-income status. It notes that the new generation of regional trade agreements – including the Regional Cooperation Economic Partnership, Trans-Pacific Partnership and European Union Free Trade Agreement – will shape trade and investment over the next decade.

It also calls for commitment to these agreements which goes beyond tariff reduction This is because not only will they have a significant impact on attracting investment, and further open up market access for the country’s exports of goods and services; they can also be used to push for deeper reform in competition policy, services trade and support to SMEs that would otherwise be difficult to initiate.

The Bank rightly warns that the transition will not be easy and proactive measures will be needed to ensure wider benefits under the new regional trade agreements.

Image result for The World  Bank on Malaysia

Notwithstanding the problems and difficulties, it is important for our policy and decision makers to get the Bank’s message and stay the course of this road of reform if we want our economy to grow and become more resilient.

Reducing Vulnerabilities the Wrong Way

The latest Bank report – a newly released East Asia and Pacific Economic Update entitled “Reducing Vulnerabilities” – focuses on current global economic uncertainties; the risks that come from external developments as well as touches in its country chapter on Malaysia on our own home grown financial crisis arising from 1MDB which “could impact investors’ sentiments and divert the Government’s focus from needed reform, while an unanticipated sharp adjustment among households to a higher cost of living or a more pronounced softening in labour market conditions could also affect private consumption”.

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To alleviate the impact on the bottom 40% population, the Bank is recommending targeted measures “to support the most vulnerable households”. This, in its view, could include the introduction of “unemployment benefits [which] could help to improve matching in the labour market and provide support as the labour market softens” (https://openknowledge.worldbank.org/bitstream/handle/10986/25088/9781464809910.pdf; p.128).

Bank guidance on this issue is clearly off the mark if not plain wrong. Firstly, the nation’s finances are in no position to support a social welfare system providing benefits to the section of the population that is registered as unemployed or do not currently have a job. For now and the foreseeable future, the nation needs to exercise financial prudence and discipline in spending. In fact, the Bank itself has noted in the same report that recent increases in the minimum wage and public sector salaries would be difficult to sustain as the necessary fiscal consolidation continues.

Any social welfare or social protection system that is being proposed needs to be sustainable, financially viable and well targeted. In Malaysia it is especially important to ensure that the new proposed system does not become a political football and/or is open to wide scale fraud and abuse. Both negative possibilities are very likely given the present state of politics and governance in the nation.

A stronger and more rigorous defence of the proposal for the introduction of unemployment benefits by the World Bank with empirical data proving its case is necessary if it wants this policy recommendation to be taken seriously. For now, the advocates of this policy in the Bank may be comforted by the fact that a de facto unemployment benefits system already exists in Malaysia through the use of the civil service to employ hundreds of thousands of otherwise unemployed and unemployable school leavers, graduates and others primarily from the  Bumiputra community.  Poor Indians have been left out leaving them marginalized from the mainstream.

Such a system has been ongoing for at least the last 20 years and makes Malaysia a role model for countries in this field of racially targeted labour market intervention.

 

Fiscal Deficit and Fiscal Reform in Japan


September 13, 2016

Asia Pacific Bulletin

Number 351 | September 13, 2016
ANALYSIS

Fiscal Deficit and Fiscal Reform in Japan

by Taro Ohno

Over the past few decades, Japan has experienced a number of changes in its social and economic circumstances as its population has been aging, its birth rate has been falling, and its economic growth rate has been declining. These changes all affect central government finances: they encourage increased expenditures (especially with regard to social insurance benefits) and decrease tax revenues, thereby increasing the fiscal deficit.

Image result for Shintaro Abe

The key turning point for central government finance came around 1990 when the economic bubble burst, and since that time Japan has been grappling with the issue of fiscal reform. The first attempt to deal with the fiscal deficit was a set of fiscal reforms introduced in 1997, the goal of which was to reduce the deficit by 2003. However, this effort proved ineffective because of the domestic financial crisis that started in 1997. The second attempt came in 2006, when the government set a policy target that sought to shift the primary budget balance to a surplus by 2011. However, this target was deferred in 2008 as a result of the recession. The most recent attempt was the setting of a new policy target in 2010 to eliminate the deficit and create a surplus by 2020. Currently, the Abe cabinet is continuing to pursue that target. It raised the consumption tax rate to 8 percent in 2014 and will raise it to 10 percent in 2019 to achieve this goal. However, these reforms alone are insufficient.

The major contributor to the current negative fiscal situation is the increasing cost of social insurance, and given the country’s aging population, that trend will continue. The current fiscal reform will not be able to achieve its target by relying only on restraining the costs of social insurance, and so a further tax hike is unavoidable.

What kind of tax policy, then, would be most effective? In Japan, current fiscal policy over emphasizes inter-generational redistribution, which places a heavy burden on the younger generation to fund the benefits of social insurance for the elderly generation. In addition, the burden on the younger generation is already heavy due to pension insurance premiums. Therefore, because an income tax has the disadvantage of the burden falling predominantly on those who are younger, an income tax hike is not a feasible approach. What is desired is that both young and old alike bear the burden. A consumption tax has the advantage that the burden falls on all age groups, making it a more feasible approach. However, it also poses a problem. Namely, the consumption tax burden on lower-income households is heavier than that for higher-income households on a point-in-time basis, as the ratio of tax burden to income is disproportionate. A consumption tax is “regressive,” meaning that some measures for low-income households would be necessary.

A lower consumption tax burden on higher-income households exists because of their high savings rate. As a household’s ratio of savings to income increases, its ratio of consumption to income decreases. This in turn lowers the ratio of consumption tax burden to income. However, a household will spend down its savings in the future, and thus will eventually bear the consumption tax burden on that spending. In other words, savings only has the effect of changing the timing of consumption; it does not relieve the tax burden entirely. Therefore, it is also necessary to evaluate the tax burden on a lifetime basis. Based on the author’s estimates (Ohno et al. 2014), the consumption tax burden of higher-income households is heavier than that for lower-income households. This implies that the consumption tax is in fact “progressive.” This would imply that any measures for low-income households might be adequate if applied only to the younger age brackets.

The current policy debate in Japan emphasizes the results on a point-in-time basis. This leads to the conclusion that some measures need to be taken to protect low-income households. Several such measures exist as options. First is a reduced consumption tax rate for necessities, such as food. Second is a benefit given only to low-income households — for example cash benefits or an earned income tax credit. In September 2015, Japan’s Ministry of Finance proposed a plan for low-income households that included a combination of the reduced tax rate on food and a tax refund. Each individual’s consumption information would be recorded through a unified electronic card called the “My Number Card,” which is similar to a social security card in the United States. Low-income households could apply for a tax refund equal to the amount of the tax cut for food expenditures at the end of the fiscal year. The public, however, reacted negatively and criticized the plan for the complexity of the system and voiced concerns about the security of the identity card. The public prefers a reduced rate for the consumption tax on food rather than the plan proposed by the Ministry of Finance because it is a simpler system and free from worry about the security of personal information in the unified electronic card. As a result, the government decided to raise the general consumption tax rate to 10 percent while at the same time adopting a reduced tax rate for food. However, the reduced tax rate for food is not an optimally effective policy because higher-income households are benefiting as well.

“Given the current situation in Japan, where a further tax hike is unavoidable, a consumption tax hike is a better option than an income tax hike.”

Barring any sudden drastic changes in the country’s birth rate or immigration policy, Japan will continue to face daunting fiscal challenges in the years ahead, and thus finding the most effective and equitable fiscal policy should be a top priority for the Japanese government. We can conclude that a further consumption tax hike is desirable. Given the current situation in Japan, where a further tax hike is unavoidable, a consumption tax hike is a better option than an income tax hike. However, the policy debates in Japan today seem to emphasize the results only on a point-in-time basis. In designing the optimal policy, it is important to evaluate the current tax system not only on a point-in-time basis but also on a lifetime basis. Finally, the reduced consumption tax rate for food needs to be reconsidered. While the public prefers the reduced tax rate, this policy is less effective in terms of being a measure for lower-income households.

About the Author

Taro Ohno is an Associate Professor in the Faculty of Economics and Law at Shinshu University, Japan. He can be reached at taro_ohno@shinshu-u.ac.jp.

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

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

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The Fourth Industrial Revolution– What It Means and How to Respond


August 25, 2015

Image result for klaus schwab fourth industrial revolution

…we must develop a comprehensive and globally shared view of how technology is affecting our lives and reshaping our economic, social, cultural, and human environments. There has never been a time of greater promise, or one of greater potential peril. Today’s decision-makers, however, are too often trapped in traditional, linear thinking, or too absorbed by the multiple crises demanding their attention, to think strategically about the forces of disruption and innovation shaping our future. –Professor Klaus Schwab, Chairperson, World Economic Forum

https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/

The Fourth Industrial Revolution– What It Means and How to Respond

By Klaus Schwab

We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before. We do not yet know just how it will unfold, but one thing is clear: the response to it must be integrated and comprehensive, involving all stakeholders of the global polity, from the public and private sectors to academia and civil society.

Image result for klaus schwab fourth industrial revolution

The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.

There are three reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope, and systems impact. The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.

The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.

Already, artificial intelligence is all around us, from self-driving cars and drones to virtual assistants and software that translate or invest. Impressive progress has been made in AI in recent years, driven by exponential increases in computing power and by the availability of vast amounts of data, from software used to discover new drugs to algorithms used to predict our cultural interests. Digital fabrication technologies, meanwhile, are interacting with the biological world on a daily basis. Engineers, designers, and architects are combining computational design, additive manufacturing, materials engineering, and synthetic biology to pioneer a symbiosis between microorganisms, our bodies, the products we consume, and even the buildings we inhabit.

Challenges and Opportunities

Like the revolutions that preceded it, the Fourth Industrial Revolution has the potential to raise global income levels and improve the quality of life for populations around the world. To date, those who have gained the most from it have been consumers able to afford and access the digital world; technology has made possible new products and services that increase the efficiency and pleasure of our personal lives. Ordering a cab, booking a flight, buying a product, making a payment, listening to music, watching a film, or playing a game—any of these can now be done remotely.

In the future, technological innovation will also lead to a supply side miracle, with long-term gains in efficiency and productivity. Transportation and communication costs will drop, logistics and global supply chains will become more effective, and the cost of trade will diminish, all of which will open new markets and drive economic growth.

HUBO, a multifunctional walking humanoid robot performs a demonstration of its capacities next to its developer Oh Jun-Ho, Professor at the Korea Advanced Institute of Science and Technology (KAIST) during the annual meeting of the World Economic Forum (W

At the same time, as the economists Erik Brynjolfsson and Andrew McAfee have pointed out, the revolution could yield greater inequality, particularly in its potential to disrupt labor markets. As automation substitutes for labor across the entire economy, the net displacement of workers by machines might exacerbate the gap between returns to capital and returns to labor. On the other hand, it is also possible that the displacement of workers by technology will, in aggregate, result in a net increase in safe and rewarding jobs.

We cannot foresee at this point which scenario is likely to emerge, and history suggests that the outcome is likely to be some combination of the two. However, I am convinced of one thing—that in the future, talent, more than capital, will represent the critical factor of production. This will give rise to a job market increasingly segregated into “low-skill/low-pay” and “high-skill/high-pay” segments, which in turn will lead to an increase in social tensions.

In addition to being a key economic concern, inequality represents the greatest societal concern associated with the Fourth Industrial Revolution. The largest beneficiaries of innovation tend to be the providers of intellectual and physical capital—the innovators, shareholders, and investors—which explains the rising gap in wealth between those dependent on capital versus labor. Technology is therefore one of the main reasons why incomes have stagnated, or even decreased, for a majority of the population in high-income countries: the demand for highly skilled workers has increased while the demand for workers with less education and lower skills has decreased. The result is a job market with a strong demand at the high and low ends, but a hollowing out of the middle.

Given the Fourth Industrial Revolution’s rapid pace of change and broad impacts, legislators and regulators are being challenged to an unprecedented degree and for the most part are proving unable to cope. This helps explain why so many workers are disillusioned and fearful that their own real incomes and those of their children will continue to stagnate. It also helps explain why middle classes around the world are increasingly experiencing a pervasive sense of dissatisfaction and unfairness. A winner-takes-all economy that offers only limited access to the middle class is a recipe for democratic malaise and dereliction.

Discontent can also be fueled by the pervasiveness of digital technologies and the dynamics of information sharing typified by social media. More than 30 percent of the global population now uses social media platforms to connect, learn, and share information. In an ideal world, these interactions would provide an opportunity for cross-cultural understanding and cohesion. However, they can also create and propagate unrealistic expectations as to what constitutes success for an individual or a group, as well as offer opportunities for extreme ideas and ideologies to spread.

The Impact on Business

An underlying theme in my conversations with global CEOs and senior business executives is that the acceleration of innovation and the velocity of disruption are hard to comprehend or anticipate and that these drivers constitute a source of constant surprise, even for the best connected and most well informed. Indeed, across all industries, there is clear evidence that the technologies that underpin the Fourth Industrial Revolution are having a major impact on businesses.

On the supply side, many industries are seeing the introduction of new technologies that create entirely new ways of serving existing needs and significantly disrupt existing industry value chains. Disruption is also flowing from agile, innovative competitors who, thanks to access to global digital platforms for research, development, marketing, sales, and distribution, can oust well-established incumbents faster than ever by improving the quality, speed, or price at which value is delivered.

Major shifts on the demand side are also occurring, as growing transparency, consumer engagement, and new patterns of consumer behavior (increasingly built upon access to mobile networks and data) force companies to adapt the way they design, market, and deliver products and services.

A key trend is the development of technology-enabled platforms that combine both demand and supply to disrupt existing industry structures, such as those we see within the “sharing” or “on demand” economy. These technology platforms, rendered easy to use by the smart phone, convene people, assets, and data—thus creating entirely new ways of consuming goods and services in the process. In addition, they lower the barriers for businesses and individuals to create wealth, altering the personal and professional environments of workers. These new platform businesses are rapidly multiplying into many new services, ranging from laundry to shopping, from chores to parking, from messages to travel.

On the whole, there are four main effects that the Fourth Industrial Revolution has on business—on customer expectations, on product enhancement, on collaborative innovation, and on organizational forms. Whether consumers or businesses, customers are increasingly at the epicenter of the economy, which is all about improving how customers are served. Physical products and services, moreover, can now be enhanced with digital capabilities that increase their value. New technologies make assets more durable and resilient, while data and analytics are transforming how they are maintained. A world of customer experiences, data-based services, and asset performance through analytics, meanwhile, requires new forms of collaboration, particularly given the speed at which innovation and disruption are taking place. And the emergence of global platforms and other new business models, finally, means that talent, culture, and organizational forms will have to be rethought.

Overall, the inexorable shift from simple digitization (the Third Industrial Revolution) to innovation based on combinations of technologies (the Fourth Industrial Revolution) is forcing companies to reexamine the way they do business. The bottom line, however, is the same: business leaders and senior executives need to understand their changing environment, challenge the assumptions of their operating teams, and relentlessly and continuously innovate.

The Impact on Government

As the physical, digital, and biological worlds continue to converge, new technologies and platforms will increasingly enable citizens to engage with governments, voice their opinions, coordinate their efforts, and even circumvent the supervision of public authorities. Simultaneously, governments will gain new technological powers to increase their control over populations, based on pervasive surveillance systems and the ability to control digital infrastructure. On the whole, however, governments will increasingly face pressure to change their current approach to public engagement and policy making, as their central role of conducting policy diminishes owing to new sources of competition and the redistribution and decentralization of power that new technologies make possible.

Ultimately, the ability of government systems and public authorities to adapt will determine their survival. If they prove capable of embracing a world of disruptive change, subjecting their structures to the levels of transparency and efficiency that will enable them to maintain their competitive edge, they will endure. If they cannot evolve, they will face increasing trouble.

This will be particularly true in the realm of regulation. Current systems of public policy and decision-making evolved alongside the Second Industrial Revolution, when decision-makers had time to study a specific issue and develop the necessary response or appropriate regulatory framework. The whole process was designed to be linear and mechanistic, following a strict “top down” approach.

But such an approach is no longer feasible. Given the Fourth Industrial Revolution’s rapid pace of change and broad impacts, legislators and regulators are being challenged to an unprecedented degree and for the most part are proving unable to cope.

How, then, can they preserve the interest of the consumers and the public at large while continuing to support innovation and technological development? By embracing “agile” governance, just as the private sector has increasingly adopted agile responses to software development and business operations more generally. This means regulators must continuously adapt to a new, fast-changing environment, reinventing themselves so they can truly understand what it is they are regulating. To do so, governments and regulatory agencies will need to collaborate closely with business and civil society.

A robotic arm by Mitsubishi Electric assembles a toy car at the System Control Fair SCF 2015 in Tokyo, Japan December 2, 2015.

The Fourth Industrial Revolution will also profoundly impact the nature of national and international security, affecting both the probability and the nature of conflict. The history of warfare and international security is the history of technological innovation, and today is no exception. Modern conflicts involving states are increasingly “hybrid” in nature, combining traditional battlefield techniques with elements previously associated with non-state actors. The distinction between war and peace, combatant and non combatant, and even violence and nonviolence (think cyber warfare) is becoming uncomfortably blurry.

As this process takes place and new technologies such as autonomous or biological weapons become easier to use, individuals and small groups will increasingly join states in being capable of causing mass harm. This new vulnerability will lead to new fears. But at the same time, advances in technology will create the potential to reduce the scale or impact of violence, through the development of new modes of protection, for example, or greater precision in targeting.

The Impact on People

The Fourth Industrial Revolution, finally, will change not only what we do but also who we are. It will affect our identity and all the issues associated with it: our sense of privacy, our notions of ownership, our consumption patterns, the time we devote to work and leisure, and how we develop our careers, cultivate our skills, meet people, and nurture relationships. It is already changing our health and leading to a “quantified” self, and sooner than we think it may lead to human augmentation. The list is endless because it is bound only by our imagination.

I am a great enthusiast and early adopter of technology, but sometimes I wonder whether the inexorable integration of technology in our lives could diminish some of our quintessential human capacities, such as compassion and cooperation. Our relationship with our smartphones is a case in point. Constant connection may deprive us of one of life’s most important assets: the time to pause, reflect, and engage in meaningful conversation.

One of the greatest individual challenges posed by new information technologies is privacy. We instinctively understand why it is so essential, yet the tracking and sharing of information about us is a crucial part of the new connectivity. Debates about fundamental issues such as the impact on our inner lives of the loss of control over our data will only intensify in the years ahead. Similarly, the revolutions occurring in biotechnology and AI, which are redefining what it means to be human by pushing back the current thresholds of life span, health, cognition, and capabilities, will compel us to redefine our moral and ethical boundaries.

Shaping the Future

Neither technology nor the disruption that comes with it is an exogenous force over which humans have no control. All of us are responsible for guiding its evolution, in the decisions we make on a daily basis as citizens, consumers, and investors.

We should thus grasp the opportunity and power we have to shape the Fourth Industrial Revolution and direct it toward a future that reflects our common objectives and values.

To do this, however, we must develop a comprehensive and globally shared view of how technology is affecting our lives and reshaping our economic, social, cultural, and human environments. There has never been a time of greater promise, or one of greater potential peril. Today’s decision-makers, however, are too often trapped in traditional, linear thinking, or too absorbed by the multiple crises demanding their attention, to think strategically about the forces of disruption and innovation shaping our future.

In the end, it all comes down to people and values. We need to shape a future that works for all of us by putting people first and empowering them. In its most pessimistic, dehumanized form, the Fourth Industrial Revolution may indeed have the potential to “robotize” humanity and thus to deprive us of our heart and soul. But as a complement to the best parts of human nature—creativity, empathy, stewardship—it can also lift humanity into a new collective and moral consciousness based on a shared sense of destiny. It is incumbent on us all to make sure the latter prevails.

In the end, it all comes down to people and values. We need to shape a future that works for all of us by putting people first and empowering them. In its most pessimistic, dehumanized form, the Fourth Industrial Revolution may indeed have the potential to “robotize” humanity and thus to deprive us of our heart and soul. But as a complement to the best parts of human nature—creativity, empathy, stewardship—it can also lift humanity into a new collective and moral consciousness based on a shared sense of destiny. It is incumbent on us all to make sure the latter prevails.

Political Transformation of Malaysia’s Najib Razak


Washington DC

July 3, 2016

Political Transformation of Malaysia’s Najib Razak

http://www.scmp.com/news/asia/southeast-asia/article/1982119/one-year-after-1mdb-scandal-najib-takes-malaysia-lurch

 

Giant video screens lining Malaysia’s ruling-party headquarters flash towering, 40-floor images of a smiling Prime Minister Najib Razak across a corner of the capital, a glaring reminder of who’s in charge.

One year after a financial scandal that would have toppled many leaders, Najib is standing taller than ever after smothering investigations, outmanoeuvring opponents, and bolstering his control with a pair of recent election wins.

“He called himself a reformist, but has changed into an aspiring dictator. What changed him, clearly, is 1MDB”. Ambiga Sreenevasan, reform advocate

But the political survival steps he has taken – which include assuming tough new powers and flirting with an Islamist party – are stoking fears for multi-ethnic Malaysia’s already fragile democracy and sectarian relations.

“He called himself a reformist, but has changed into an aspiring dictator,” said Ambiga Sreenevasan, a prominent lawyer and reform advocate. “What changed him, clearly, is 1MDB.”

Last July 2, The Wall Street Journal reported that Najib received a mysterious US$681 million payment, which capped months of allegations that billions were diverted from 1MDB (1Malaysia Development Berhad), an investment fund Najib founded.

Other revelations followed, including reports that Najib’s film-producer stepson used 1MDB-related funds to bankroll the Hollywood greedfest The Wolf of Wall Street, and for millions in luxury purchases.

Swiss authorities say more than US$4 billion may have been stolen. Najib and 1MDB deny wrongdoing. But Najib has purged ruling-party critics, curbed investigations, and cracked down on media reporting of the affair.

With former opposition leader Anwar Ibrahim jailed since February 2015 on politically-tinged sodomy charges, Najib now towers over the country.

“Najib’s critics failed to comprehend his resolve at staying in power and the lengths he is prepare to go to,” said Ibrahim Suffian, Head of Merdeka Centre, an independent polling firm.

The government recently pushed through a new law allowing a Najib-led council to suspend basic liberties if security is deemed threatened, which the opposition called a “lurch toward dictatorship”.

Other proposals would tighten internet controls and limit other legal protections.

“Any remnants of checks and balances are being dismantled by the PM” due to 1MDB, said Eric Paulsen, head of the legal-advocacy group Lawyers for Liberty.

Yet Najib’s electoral fortunes have never looked better as general elections loom by mid-2018, aided by disarray in the once-formidable opposition following Anwar’s jailing.

Najib’s United Malays National Organisation [UMNO] has governed since independence in 1957 on a platform of rapid economic growth and special rights for Muslim ethnic Malays, Malaysia’s majority group.

Aided by its deep pockets and loyal Malay support, UMNO’s Barisan Nasional [National Front] ruling coalition notched landslide wins in a May state election and two June parliamentary by-elections that exposed the limits of 1MDB outrage.

“Najib’s standing among Malaysians has gradually improved over the past six months as voter anger over 1MDB and [an unpopular consumption tax] dissipate,” said Suffian, adding that bread-and-butter economic issues matter more.

Najib denies abusing power and recently dismissed the graft allegations as “unprecedented politically-motivated slander” by 90-year-old former premier Mahathir Mohamad, who has led calls for Najib’s removal.

Najib’s office did not respond to a request for comment. But Barisan Nasional’s strategy director Abdul Rahman Dahlan dismissed the allegations of 1MDB-spurred repression as “absolute rubbish.”

“The opposition’s problem is they are unable to convince voters they are a viable alternative,” he said.

“When [voters] go to the polls, it is not just about 1MDB.”

In the scandal’s wake, UMNO also has intensified a dalliance with the country’s conservative Muslim party, refusing to denounce its proposal for harsh sharia law in a northern state.

The sharia bid has scant hope of succeeding, and analysts said UMNO is merely playing politics to solidify Muslim support and distract from 1MDB. But the Islamist tilt has unsettled many who view Malaysia’s treasured religious moderation as under threat.

“I’m very worried,” said Bob Broadfoot, Head of Hong Kong-based Political and Economic Risk Consultancy. “[Najib] is changing UMNO in ways that I fear could make it more Islamic and weaken the government’s support among non-Malays. This is going to strain racial relations much more.”

“Najib’s standing among Malaysians has gradually improved over the past six months as voter anger over 1MDB and [an unpopular consumption tax] dissipate”.–Ibrahim Suffian, Head of Merdeka Centre

Fringe Muslim elements disgusted by 1MDB may also abandon political parties and turn to extremism, he said.

A half-dozen countries including the United States have launched 1MDB-related probes, but few believe big fish will be caught, citing the carefully constructed complexity of 1MDB fund flows.

Najib “will get away with it,” said Broadfoot. But he said the allegations of fraud and embezzlement involving state-linked entities may make foreign investors think twice, at a time when Malaysia needs investment to buffer global economic headwinds.

“That’s going to cost Malaysia,” Broadfoot said.

Malaysian Prime Minister consolidates power


Washington DC

July 2, 2016

Malaysian Prime Minister consolidates power with Cabinet reshuffle

by John Berthelsen

http://www.asiasentinel.com

Najib is bullet-proof as Premier.

Malaysian Prime Minister Najib Razak on June 27 reshuffled 10 portfolios in his cabinet, rewarding a handful of United Malays National Organization stalwarts including Noh Omar, the Selangor UMNO chief, as Urban Well Being, Housing and Local Government Minister. The only notable departure is Ahmad Husni Hanadzlah, who resigned as Second Finance Minister.

Ahmad Husni Hanadzlah–The Next Malaysian Ambassador to the USA?

What didn’t happen is probably more important. Hishamuddin Hussein, 54, Najib’s cousin and the current defense minister, and Khairy Jamaluddin, 40, the federal Minister for Youth and Sports and the son-in-law of former Prime Minister Abdullah Ahmad Badawi, whose career seemed to be in eclipse when Badawi was driven from office in 2009, appear to be consolidating their own power under Najib despite not moving.

“At present Hisham and Khairy remain in their current positions but UMNO is theirs,” said a political observer. “They are the future of the party assuming UMNO wins the next election.”

Hisham has been regarded as a bit of a dim bulb. A wooden speaker, he was roundly criticized for bumbling over the investigation into the mysterious loss of MH370, the Boeing passenger jetliner that disappeared without a trace on March 8, 2014, with 239 passengers and crew. Although occasional fragments have been found that are believed to be part of the craft, the mystery of its disappearance has never been solved.

Khairy was considered a major reason for the fall of Badawi over allegations of undue influence over public service contracts.

What it all means for Ahmad Zahid Hamidi, 63, the Deputy Prime Minister and Najib’s chief spear-carrier, is unclear. He retains his position but in the past he has been regarded with distrust by many. He was a one-time ally of the now-imprisoned opposition chief Anwar Ibrahim but returned to UMNO after Anwar, then Finance Minister, fell from power.  He is looked on as a loose cannon but he has risen rapidly in power.

It is the third reshuffle in the seven years, some of it stormy, since Najib took power in 2009. The other major development happened on June 24 when Najib engineered the sacking of former Deputy Prime Muhyiddin Yassin from his position as vice president of the United Malays National Organization, along with Mukhriz Mahathir, the son of former Prime Minister Mahathir Mohamad, on a unanimous vote.

The ousting of Muhyiddin, who was axed nearly a year ago as Najib’s Deputy Prime Minister, and Mukhriz, who had been removed as chief minister of the state of Kedah, had long been expected. UMNO’s rousing victory in two by-elections earlier this year and a convincing win in Sarawak state polls earlier are an indication that despite being enmeshed in a huge scandal that has drawn money-laundering investigations in seven other countries, Najib is bullet-proof as premier.

They are aligned with the 91-year-old Mahathir in his attempt to drive Najib from power. They have joined him in an opposition attempt to gather more than a million signatures asking Najib to leave. The attempt so far has been inconclusive. It appears that the prime minister feels secure enough to call a snap election, more than two years before the current five-year term expires in August of 2018, according to the drums in Kuala Lumpur.

Although the firing of Muhyiddin last year kicked off an uproar that rank and file UMNO members, with the help of the Mahathir wing of the party and particularly in Muhyiddin’s Johor base, would rebel and drive the Najib faction from power, it didn’t happen.  It seems quite likely that Najib has calculated correctly that there will be little today.

It is likely that the only shadow on Najib’s career today is the investigations going on in the United States, Switzerland, Singapore, Hong Kong and other jurisdictions. Swiss authorities have charged that as much as US$4 billion has been laundered from the state-backed 1Malaysia Development Bhd., an investment vehicle set up in 2009 with Najib as its principal financial adviser. Literally dozens of news stories have traced the money out of 1MDB into a variety of accounts in the Cayman and British Virgin Islands, Switzerland and Singapore. Najib himself appears to have been the recipient of as much as US$681 million that was mysteriously deposited in his personal account in 2013 before the general election, and was equally mysteriously withdrawn and transmitted to another account in Singapore before it disappeared outright.

In May, the Monetary Authority of Singapore forced the closure of BSI Bank Ltd – the first merchant bank to be closed in Singapore in 32 years – for its role in moving money in and out of Singapore for individuals connected to 1MDB and fined the bank S$13.3 million for 41 cases of breaches of money laundering and other laws. MAS Managing Director Ravi Menon called BSI Bank “the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector.”

The monetary authority also said at the time that it was investigating “several other financial institutions and bank accounts through which suspicious and unusual transactions have taken place.”

None of this has had any effect on Najib’s standing within his party and, if the three recent elections are any gauge, with the voters. By sacking government officials, neutralizing investigations, threatening critics with sedition charges, closing important press outlets and banning external news sources including Asia Sentinel and the influential Sarawak Report, he has managed to largely contain criticism.

He has also been helped by social attitudes among ethnic Malays that regard all attempts to expose what is manifestly widespread corruption, both on Najib’s part and within UMO itself as a plot on the part of the minority ethnic Chinese community to take political power away from them to match economic power, which has resided in the Chinese community for decades.