Singapore Thinks Ahead


August 20, 2017

Singapore Thinks Ahead–Former Prime Minister Goh calls Stronger and More Inclusive G4 Leadership

by channelnewsasia.com

http://www.channelnewsasia.com/news/singapore/esm-goh-calls-for-stronger-more-inclusive-leadership-team-9138468

Image result for singapore skyline panorama hd

 

With Prime Minister Lee Hsien Loong stating that he will step down by 70, the new generation of leaders will have to quickly establish themselves as a cohesive team, the Emeritus Senior Minister says.

 Singapore’s new generation of leaders will have to build a “stronger and more inclusive millennial generation team”, said Emeritus Senior Minister Goh Chok Tong on Saturday (Aug 19).

Speaking at a National Day Dinner for his constituency, Marine Parade, Mr Goh said the robustness of the country’s leadership pipeline is one of the determinants of how a “small boat like Singapore” will fare in a turbulent climate of internal and external challenges. Other factors, he said, include the resilience of its politics as well as the cohesiveness of its multi-racialism and social equity.

Mr Goh noted that 65-year-old Prime Minister Lee Hsien Loong has said he will step down by the age of 70.

Image result for Singapore Cabinet 2017

Prime Minister Lee Hsien Loong and his Cabinet Colleagues

“The fourth generation (4G) leaders will have to quickly establish themselves as a cohesive team and identify the captain amongst them,” he said in the speech.

“They must try their utmost to bring in potential office-holders from outside the Singapore Armed Forces and public sector to avoid group-think. Highly competent Singaporeans outside the Government must also be prepared to step up and serve,” he said.

Beyond technical competence, Mr Goh also said Singaporeans will want to know what “the leaders stand for, what kind of Singapore they want to build and what they will pass on to the fifth generation later”.

Singapore Politics must be “Bold, Resilient, Forward Looking and Inclusive”

At the dinner, Mr Goh also said Singapore politics must be “bold, forward looking and inclusive of all races and different political opinions”. It also has to be resilient, he added.

Mr Goh credited the country’s stability to Singaporeans having successively elected a strong government. “This enables the government to plan for the long term and prepare for contingencies … a strength which most other elected governments lack,” he said.

Elaborating on how Singapore has adapted the Westminster system of parliamentary democracy to local conditions, he said that Singapore’s provision of Non-Constituency Members of Parliament (NCMPs) and Nominated Members of Parliament (NMPs) prevents a dominant party from shutting down opposition as at least one in five Members of Parliament (MPs) is not a member of the ruling People’s Action Party.

Furthermore, the Group Representation Constituency system “guarantees” a fair number of minority MPs in Parliament, he said, adding that this “prevents the ‘tyranny of the majority’ in free elections and gives every community a stake in our shared destiny”.

The Elected Presidency is likewise “a check against a populist and profligate government”, Mr Goh said. He called the recent decision to set aside reserved presidential elections for minorities a “stabiliser to ensure our multi-racial society stays afloat”.

“If these stabilisers are not introduced to our political system, our democratic state risks being capsized when buffeted by internal differences and divisions, let alone external storms,” he added.

Meritocracy safeguards Singapore against Nepotism and Cronyism

Image result for Goh Chok Tong

Mr Goh Chok Tong and his political mentor the Late Mr. Lee Kuan Yew

Mr Goh stressed that meritocracy must remain a key pillar of Singapore’s “fair and equal society”, as it protects the country from the “greater dangers of nepotism and cronyism”.

Underlining the importance of maintaining social equity, Mr Goh said: “For a new country, the first round of meritocracy has produced the desired results. The brightest, ablest and most hard working have risen to the top. But for subsequent rounds, meritocracy entrenches the successful, widens the income gap and creates a sense of social inequity,” he said.

The Emeritus Senior Minister said children of well-to-do families inherit the gift of good family backgrounds and networks from the day they are born. The state, however, must intervene to ensure the meritocratic process serves it purpose, he argued, so that every citizen has equal opportunities at the starting line and a fair chance to succeed throughout life.

“We must guard against social inequity as a new fault line in our society,” he said.

Some Government policies that have gone some way to narrow the income divide are subsidies in housing, healthcare and education, as well as recent measures which soften the focus on academic grades and re-skill Singaporeans to take on higher value jobs, he said.

“The 4G leaders must find their own robust language, political values and programmes to lift the lives of lower-income Singaporeans,” he added.

These new leaders will have their “work cut out for them” – they will have to build their own social compact with the people and must be able to grow the economy, create jobs, resolve everyday livelihood issues, check divisive trends in society, give hope and improve the lives of all Singaporeans, Mr Goh said.

“But they will inherit a political system in good working order. In time, they will have to bequeath a fair and multi-racial society to the generation after them.”

The Quiet Demise of Austerity


July 21, 2017

The Quiet Demise of Austerity

by James McCormack

James McCormack is Managing Director and Global Head of the Sovereign and Supranational Group at Fitch Ratings.

https://www.project-syndicate.org

Image result for End of the Economics of Austerity

It has been several years since policymakers seriously discussed the merits of fiscal austerity. Debates about the potential advantages of using stimulus to boost short-term economic growth, or about the threat of government debt reaching such a level as to inhibit medium-term growth, have gone silent.

There is no mistaking which side won, and why. Austerity is dead. And as conventional politicians continue to take rearguard action against populist upstarts, they will likely embrace more fiscal-policy easing – or at least avoid tightening – to reap near-certain short-term economic gains. At the same time, they are not likely to heed warnings of the medium-term consequences of higher debt levels, given widespread talk of interest rates remaining “lower for longer.”

One way to confirm that an international fiscal-policy consensus has emerged is to review policymakers’ joint statements. The last time the G7 issued a communiqué noting the importance of fiscal consolidation was at the Lough Erne Summit in 2013, when it was still the G8.

Since then, joint statements have contained amorphous proposals to implement “fiscal strategies flexibly to support growth” and ensure that debt-to-GDP ratios are sustainable. Putting debt on a sustainable path presumably means that it will not increase without interruption. But in the absence of a definite timeframe, debt levels can undergo lengthy deviations, the sustainability of which is open to interpretation.

Objections to austerity were understandable in the period following the 2008 financial crisis. Fiscal policy was being tightened when growth was languishing below 2% (after bouncing back in 2010), and sizeable negative output gaps suggested that overall employment would be slow to recover.

In late 2012, at the peak of the post-crisis austerity debate, advanced economies were in the midst of a multi-year tightening equivalent to more than one percentage point of GDP annually, according to cyclically-adjusted primary balance data from the International Monetary Fund.

Image result for Austerity

But just as fiscal policy was being tightened when cyclical economic conditions seemed to call for easing, it is now being eased when conditions seem to call for tightening. The output gap in advanced economies has all but disappeared, inflation is picking up, and world economic growth is forecast to be its strongest since 2010.

In 2013, Japan was the only advanced economy to loosen fiscal policy. But this year, the United Kingdom appears to be the only one preparing to tighten its policy – and that is assuming recent political ruptures haven’t altered its fiscal orientation, which will be reflected in the Chancellor of the Exchequer’s Autumn Statement.

Most observers would agree that government debt levels are uncomfortably high in many advanced economies, so it would be prudent for policymakers to discuss strategies for bringing them down. Moreover, there are several options for doing this, some of which are easier or more effective than others.

In the end, government deleveraging is about the relationship between economic growth and interest rates. The higher the growth rate relative to interest rates, the lower the level of fiscal consolidation needed to stabilize or reduce debt as a share of GDP.

As economic growth continues to pick up while interest rates lag, at least outside the US, fiscal authorities will have further opportunities to reduce debt, and create fiscal space for stimulus measures when the next cyclical downturn inevitably arrives. But policymakers are not doing this, which suggests that they have prioritized largely political considerations over fiscal prudence.

After the recent elections in the Netherlands and France, a growing chorus is now proclaiming that “peak populism” has passed. But one could argue just as easily that populist ideals are being absorbed into more mainstream political and economic agendas. As a result, politicians, particularly in Europe, have no choice but to favor inclusive growth policies and scrutinize the potential impact that a given policy could have on the income distribution.

This political environment is hardly conducive to fiscal consolidation. Any tax increases or spending cuts will have to be designed exceptionally well – perhaps impossibly so – for leaders to avoid a populist backlash. Some people will always lose more than others from fiscal consolidation, and deciding who those people are is never a pleasant exercise.

So far, those decisions are being delayed on political grounds. But the economic implications of high government debt cannot be ignored forever. Monetary policy is already starting to change in the US, and it could be on the verge of changing globally. One way or another, fiscal authorities will have to confront challenging tradeoffs in the years ahead.

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.

Image result for Learn from ASEAN

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.

Image result for Learn from ASEAN embracing political change

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.

Image result for Keeping PEACE In ASEAN

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.

Image result for shinzo abe's Abenomics

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.

Image result for shinzo abe's Abenomics

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/

Image result for ABD reports On Asia

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.

Image result for phnom penh

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.