GDP Should Be Corrected

January 23, 2018

GDP Should Be Corrected

by Urs

The hazards of relying solely on gross domestic product as a measure of overall economic activity have become obvious over time, especially as corporate profits have outpaced GDP growth in key economies. But none of the flaws in GDP are fatal, and policymakers should focus on fixing them, rather than seeking an entirely new framework.


ZURICH – Respected economists have long pointed out that gross domestic product is an inadequate measure of economic development and social well-being, and thus should not be policymakers’ sole fixation. Yet we have not gotten any closer to finding a feasible alternative to GDP.

One well-known shortcoming of GDP is that it disregards the value of housework, including care for children and elderly family members. More important, assigning a monetary value to such activities would not address a deeper flaw in GDP: its inability to reflect adequately the lived experience of individual members of society. Correcting for housework would inflate GDP, while making no real difference to living standards. And the women who make up a predominant share of people performing housework would continue to be treated as volunteers, rather than as genuine economic contributors.4

Another well-known flaw of GDP is that it does not account for value destruction, such as when countries mismanage their human capital by withholding education from certain demographic groups, or by depleting natural resources for immediate economic benefit. All told, GDP tends to measure assets imprecisely, and liabilities not at all.

Still, while no international consensus on an alternative to GDP has emerged, there has been encouraging progress toward a more considered way of thinking about economic activity. In 1972, Yale University economists William Nordhaus and James Tobin proposed a new framework, the “measure of economic welfare” (MEW), to account for sundry unpaid activities. And, more recently, China established a “green development” index, which considers economic performance alongside various environmental factors.

Moreover, public- and private-sector decision-makers now have far more tools for making sophisticated choices than they did in the past. On the investor side, demand for environmental, social, and governance data is rising steeply. And in the public sector, organizations such as the World Bank have adopted metrics other than GDP to assess quality of life, including life expectancy at birth and access to education.

At the same time, the debate around gross national income has been gaining steam. Though it shares fundamental elements with GDP, GNI is more relevant to our globalized age, because it adjusts for income generated by foreign-owned corporations and foreign residents. Accordingly, in a country where foreign corporations own a significant share of manufacturing and other assets, GDP will be inflated, whereas GNI shows only income the country actually retains (see chart).

Ireland is a prominent example of how GNI has been used to correct for distortions in GDP. In 2015, Ireland’s reported GDP increased by an eye-popping 26.3%. As an October 2016 OECD working paper noted, the episode raised serious questions about the “ability of the conceptual accounting framework used to define GDP to adequately reflect economic reality.”

The OECD paper went on to conclude that GDP is not a reliable indicator of a country’s material well-being. In Ireland’s case, its single year of astonishing GDP growth was due to multinational corporations “relocating” certain economic gains – namely, the returns on intellectual property – in their overall accounting. To address the growing disparity between actual economic development and reported GDP, the Irish Central Statistics Office introduced a modified version of GNI known as GNI*) for 2016.

The gap between GDP and GNI will likely close soon in other jurisdictions, too. In a recent working paper, Urooj Khan of Columbia Business School, Suresh Nallareddy of Duke University, and Ethan Rouen of Harvard Business School highlight a misalignment in “the growth in corporate profits and the overall US economy” between 1975 and 2013. They find that, during that period, average corporate-profit growth outpaced GDP growth whenever the domestic corporate-income-tax rate exceeded that of other OECD countries.

In late December, this disconnect was addressed with the passage of the 2017 Tax Cuts and Jobs Act. By lowering the corporate-tax rate to a globally competitive level and granting better terms for repatriating profits, the tax package is expected to shift corporate earnings back to the United States. As a result, the divergence between GDP and GNI will likely close in both the US and Ireland, where many major US corporations have been holding cash.

Looking ahead, I would suggest that policymakers focus on three points. First, as demonstrated above, the relevant stakeholders are already addressing several of the flaws in GDP, which is encouraging. Second, public- and private-sector decision-makers now have a multitude of instruments available for better assessing the social and environmental ramifications of their actions.

And, third, in business one must not let the perfect become the enemy of the good. We have not solved all of the problems associated with GDP, but we have come a long way in reducing many of its distortions. Instead of seeking a new, disruptive framework to replace current data and analytical techniques, we should focus on making thoughtful, incremental changes to the existing system.

Greetings from Kuala Lumpur and Phnom Penh for Xmas and 2018

December 23, 2017

Greetings from Kuala Lumpur and Phnom Penh for Xmas and 2018

Image result for merry christmas and happy new year
Dr. Kamsiah Haider in Kuala Lumpur and Din Merican in Phnom Penh wish all our friends and associates around the world a Merry Christmas 2017 and prosperous New Year, 2018. We are indeed grateful for your warm friendship and support we enjoyed during 2017. We forward to working with you in the coming year and together we can make our world a better place.
Image result for Din Merican and Kamsiah Haider
We have little time for politicians and ideologues as they are a crop of egoistic, misogynistic  and greedy people. All we have to do is to look at Syria, Yemen, Myanmar, Somalia, Libya, Afghanistan and other places to see for ourselves their handiwork. People are their victims, especially women, children and the elderly. They have lost the moral high ground and we must put our differences aside and work hard for peace.
On the occasion of Christmas and the New Year 2018, may we ask Michael Jackson to sing for us his famous song, Make The World a Better Place. –Dr. Kamsiah Haider and Din Merican.

Governing Singapore, beyond Lee Kuan Yew

December 3, 2017

Governing Singapore, beyond Lee Kuan Yew

by Cherian George

Image result for Lee Kuan Yew the icon


One of the late Lee Kuan Yew’s most admirable acts of foresight was to usher out Singapore’s first-generation leaders in order to hasten the rejuvenation of the People’s Action Party (PAP). Giants like Goh Keng Swee, S. Rajaratnam and E.W. Barker retired from the government in the 1980s, when they were still younger than Ronald Reagan and Donald Trump were upon entering the White House. In the short term, this represented a massive underutilisation of talent. But that’s how determined Lee was to make sure that the next generation—Goh Chok Tong, Ong Teng Cheong, Tony Tan, S. Dhanabalan and others—would emerge from the shadow of their seniors to secure the future of the ruling party.

PAP exit management under Lee had one major omission, though. Himself. Lee felt he needed to stick around. Since his designated successor Goh Chok Tong had no objections, Lee didn’t accompany his first-generation comrades to the early retirement he had so strenuously advocated. After 1991, when Singapore got a new premier for the first time in 32 years, various terms were used to describe Lee’s new position. Senior Minister. Minister Mentor. Goalkeeper. Whatever the title, for the next 20 years, the simple political reality was that LKY was still around. At The Straits Times where I used to work, word came from way above my pay grade that we were not to say he stepped down. He stepped aside.

A portrait of Lee Kuan Yew by Chinese painter Ren Zhenyu in an upmarket Singapore gallery. (Author photo)

It could have been much worse. He could have held on to the top job like Cuba’s Fidel Castro, who also won power in 1959 but would only concede it to death, 47 years later. Or like Zimbabwe’s Robert Mugabe, who before he was ousted by the military was saying he’d run for another five-year term in 2018, at the age 94. Or he could have done a Mahathir Mohamad, who never met a potential or actual successor he didn’t eventually consider an enemy to undermine or incarcerate.

If Lee didn’t join this club, it wasn’t because he lacked self-belief or the stomach for undemocratic methods. Perhaps his autocratic tendency was tempered by his hyper-rational, unsentimental view of life. He knew time changes everything, and that people grow old, get weak, and die. So, while convinced that Singapore needed an omnipotent executive branch to run the place, he also knew its personnel would have to be rotated before they succumbed to their mortality. He also differed from the typical dictator in that his family was clean. Corrupt strongmen avoid the exit door because they fear it will lead them and their kin straight to prison. The Lees didn’t have that problem.

Whatever the reasons, Lee Kuan Yew didn’t follow the jealous despot script. Instead, he institutionalised a system of leadership renewal. Therefore, while the PAP as a party is unapologetic about its desire to dominate politics indefinitely, PAP leaders as individuals accept they have to make way for younger replacements.

Things could have been worse; but they could have also been better. Political self-renewal must mean more than replacing older leaders with younger ones. It may require systemic change as well. This is where the PAP fell short. Lee and his junior colleagues failed to adapt their governance model to the post-LKY era. They underestimated how much the system had evolved around Lee’s style and philosophy. After three decades, the state had become like a corporate computer system patched together by a brilliant IT guy who refuses to adopt off-the-shelf solutions used by other firms, and insists on installing his own custom-built software upgrades year after year. He is conscientious enough to train apprentices and write a voluminous troubleshooting guide. But only he knows how to get optimum performance out of his system. Eventually, the company will find out the hard way that it should have adopted more resilient open-source solutions that wouldn’t depend on their champion IT guy being on call 24/7.

Image result for The Brilliant Lee Hsien Loong with Lee Kuan Yew


The globally respected operating system that Lee rejected while he was in office was the democratic template of checks and balances to avoid over-concentrated power. Robust institutions insure against the mortality and fallibility of human leaders. Lee placed his bets instead on a conveyor belt of able men unfettered by onerous constraints. This had been Lee’s unique contribution to the founding generation of PAP leaders. The master political strategist opened up space for brilliant policy entrepreneurs like Goh Keng Swee and Hon Sui Sen to work their wonders. He did this partly with his persuasive skills, but also by pushing aside legal, institutional and human obstacles in the way of an increasingly dominant administration.

Lee failed to acknowledge that this formula couldn’t last indefinitely. His miscalculation produced at least two policy innovations that proved costly for the PAP, and for which the party is still paying a price. These were the elected presidency and the ministerial pay formula. Both were the products of a mind obsessed, as it always had been, with the challenge of protecting Singapore governance from the vagaries of public opinion and the popular vote. They were hatched during that period from the late 1980s to the 1990s when Lee was handing over to the second-generation leadership, and anticipating what might go wrong. And both became Frankenstein’s monsters that made his successors’ jobs harder, not easier.

Related image

HE Halimah Yacob,  Singapore’s Eighth President

The elected presidency was Lee’s insurance policy against a so-called freak election that could bring the wrong party into power. The insurgents might only last a single parliamentary term, but they could cause permanent damage in that time, Lee feared. They could raid the country’s financial reserves and replace key public sector appointment holders with incompetent cronies. Lee decided that the office of the president had to be given the power to veto such plans. This new executive role would require the president to be directly elected by the people.

Related imageIn 2011, the PAP’s favoured candidate Tony Tan won the Presidential Election but with only 35% of the vote. Presidential elections have been more contentious than Lee Kuan Yew anticipated.

Lee’s constitutional fix, meant to make Singapore more stable, ironically created one of its main sources of political uncertainty. The freak election scenario remains a whimsical notion; but in the meantime, presidential elections have opened up a new front to challenge PAP dominance. This has forced the PAP to shift more attention away from governance and towards politics—the exact opposite of what Lee spent most of his career trying to do. To address the risk that presidential elections will deviate from the government’s preferences, it has had go through various contortions, including reducing the power of the president in relation to the unelected Council of Presidential Advisers, raising the pre-qualification bar for would-be candidates (including reserving this year’s election for Malay candidates), and lecturing Singaporeans that they must not politicise the presidency. The rancour surrounding presidential elections—and the attendant cost to the unifying purpose of the head of state—had been predicted by Singaporeans who submitted thoughtful feedback during the Select Committee hearings leading up to the 1991 constitutional amendments. Lee had brushed aside their concerns.

The pay formula for ministers and senior civil servants was another radical idea born of Lee’s frustration with an obtuse Singapore public. He was justifiably concerned that skyrocketing private sector pay would weaken the public sector’s ability to recruit top talent. He was correct to conclude that the government could not let its remuneration lag too far behind. Where he went wrong was to decide that, instead of arguing it out in parliament every time it needed to revise its pay structure, the government should create an automatic formula pegging public officials’ salaries to those of top earners such as lawyers, bankers and corporate chief executives.

Singaporeans could see the fundamental flaws in the idea. A league table of top salaries in fields like banking and corporate management would show very high figures year after year, but those salaries were not going to the same people every year. Firms and individuals would enter and leave the list; they were in risky, competitive markets. Like boy bands, they might be at the pinnacle for only a few years. In contrast, the government’s stars would continue to get top dollar for a couple of decades, their pay being pegged to the private sector’s equivalent of Westlife in the 1990s, the Jonas Brothers in the 2000s, and One Direction in the 2010s. This just didn’t smell right. Many Singaporeans also had deep concerns about so explicitly marketising the relationship between leaders and led.

Lee Kuan Yew would have none of it. He was determined to do what he had always done: use his political clout to create a structural fix that, he thought, would put an end to unproductive debates and let the government get on with the job. Concluding his marathon speech during the 1994 parliamentary debate on the formula, Lee declared, “I say I am prepared to put my experience and my judgement against all the arguments that doubters can muster. In five to ten years, when it works and Singapore has a good government, this formula will be accepted as conventional wisdom.”

In the realm of embarrassing 1990s predictions, this one vies with 3Com founder Robert Metcalfe’s statement the following year:I predict the internet will soon go spectacularly supernova and in 1996 catastrophically collapse.” For instead of depoliticising the question of public sector remuneration, Lee’s formula bequeathed to his successors possibly the era’s single most toxic policy move. Exactly as critics predicted, it infected government–people relations with cynicism and distrust.

The PAP had prided itself on its willingness to make unpopular decisions in the country’s long-term interest, but now when ministers resisted the popular will, their motivations would be questioned—of course they don’t care about the people, they only care about their high-paying jobs. The market-pegged formula also made people contemptuously unforgiving of inevitable mistakes—this is what million-dollar salaries get us? Another serious unintended but predictable consequence was to make the civil service resistant to change, by disincentivising risk-taking among officers earning salaries many know they can’t command elsewhere.

Lee Kuan Yew admitted to making mistakes, especially in pushing zero population growth too aggressively in the 1970s. But he couldn’t really be faulted for that one, since practically every government looking at similar demographic trends arrived at the same policy prescriptions. In contrast, Lee’s ideas to restructure of the presidency and public sector pay in the 1990s were idiosyncratically his own. And they were not cases of random error but systematic error, as scientists would put it. They resulted from his peculiar obsession with protecting the state from the unpredictability of democratic politics. He had more or less succeeded in doing so in earlier decades—like that special IT guy, constantly troubleshooting and tinkering. But he overestimated his ability to design plug-ins for Singapore’s operating system that would continue to function smoothly after he left.

Shamefully, he—jointly with Goh Chok Tong—was allowed to announce his resignation a week after the election, and before colleagues whose presence in cabinet Singaporeans had been querying for years. It was an undeservedly ignominious end to a government career that would be eulogised profusely four years later.

Lee and Goh said they were doing it to indicate “that the PM can and will revise and revamp his policies … to give PM and his team the room to break from the past, and … to make it clear that the PAP has never been averse to change”. When he accepted their resignations a few days later, Lee Hsien Loong allowed their rationale to stand—to “leave it to me and my team of younger ministers to take Singapore forward into the future”—thus throwing out of the window two decades of PAP assurances that Lee Kuan Yew’s presence in cabinet had never been an obstacle to progress, since ministers had minds of their own.

For more than a decade, Lee Kuan Yew had been codifying his beliefs in his memoirs and other books. This exercise was a symptom of the PAP’s understandable anxiety that its unique formula for good governance would not survive him. But it also contributed to the old pragmatism of the PAP giving way to dogmatism. After LKY’s final, emotional exit in February 2015, the depth of his influence became even more apparent. LKYism became a kind of quasi-theology, with members of the governing elite falling over one another to cite his words and acts, and thus show that they were the legitimate interpreters and inheritors of Singapore’s ultimate oracle. Being “against Mr Lee’s values” emerged as a damning label to stick on opponents within the establishment. Lee had long been called the founding father of the republic, but in 2017, Deputy Prime Minister Teo Chee Hean took the quantum leap of declaring that all of us—as individuals, not just collectively—are “sons and daughters” of Lee Kuan Yew. Of course, Teo did not actually possess the power to rewrite everyone’s birth certificate, but the remark revealed Lee’s place in the minds of the PAP’s senior leadership.

Teo’s declaration came during the parliamentary debate on the Lees’ feud over their family bungalow at 38 Oxley Road. This was a debate that engrossed the establishment and most ordinary Singaporeans. It centred on what to do with the building that was Lee Kuan Yew’s private residence during his adult life. The debate missed the point. The question we should be asking is how much room to give to the Lee Kuan Yew that will reside in the Singaporean mind long after his death.

This essay is extracted from Cherian George’s self-published anthology, Singapore, Incomplete: Reflections on a First World Nation’s Arrested Political Development. The book is his first for a general audience since his 2000 volume, Singapore: The Air-Conditioned Nation.

Trumpism and the Philosophy of History

August 22, 2017

Trumpism and the Philosophy of History

by Mark S. Weiner*

Mark S. Weiner is the author of The Rule of the Clan, winner of the Grawemeyer Award for Ideas Improving World Order. In 2015, he was a Fulbright Scholar in the Department of Legal Philosophy of the University of Salzburg.

Image result for Bannon and Trumpism

Bannon and the destruction of the liberal order


Stephen Bannon may be out, but don’t breathe a sigh of relief. His exit poses a new, more fundamental danger for liberals worldwide. With the departure of the Trump administration’s foremost court intellectual, liberals may be tempted to maintain the strategic tack they took during the presidential campaign, when they criticized Donald Trump mainly for his temperament, not his ideas, and by implication characterized his followers on the same basis.

Such criticism is understandable but ultimately self-defeating, because it subverts the very basis of the liberal, open society famously defined by Karl Popper: critical, scientific engagement at the level of ideas.

Image result for karl popper tolerance

What’s more, failing to recognize what Bannon called “the Trump Presidency that we fought for and won” as a philosophical movement means missing an opportunity to develop liberalism’s core values in the context of our own time. Forging a path between elite managerialism and authoritarian populism – the daunting task of liberalism for our age – requires knowing precisely where we are starting.

In this light, now is a crucial moment to reflect upon Bannon’s worldview – especially his philosophy of history. Trumpism, as a hostile takeover of the Republican Party, was built from the start on an elegiac slogan: “Make America Great Again.” Temporality was at the core of its campaign brand, guided by nostalgia for “the good old days.” Bannon has sought to develop this brand into a robust popular historical consciousness, and his exit from the administration will only liberate him from the constraints of actually existing institutions.

Abundant evidence of Bannon’s views about the nature of historical change are found in his documentary film Generation Zero (2010), which in retrospect looks like a playbook for the 2017 campaign.

The film argues that the 2008 financial crisis was caused by the liberalization of American moral values during the 1960s, when the Baby Boomers’ narcissism led to a culture of political graft and economic greed, underwritten by the marriage of government and business elites. These elites socialized the Baby Boomers’ debts and foisted them onto future generations and the forgotten middle class, leading to economic carnage and lost faith in public institutions. From this nadir, Bannon explains, America will be either destroyed or renewed.

The film’s narrative structure, particularly its driving movement toward cataclysm and rebirth, is provided by William Strauss and Neil Howe’s The Fourth Turning (1997), a best-selling work of sociology. Many commentators have noted with alarm the influence of the book’s apocalyptic tone on Bannon’s worldview. But more troubling is the book’s essentially Jungian argument about the mechanism of historical change.

More precisely, the book superimposes Jungian psychological archetypes onto the view, drawn from historians such as Arnold Toynbee, that history follows predictable, recurring patterns. According to Strauss and Howe, a finite set of mythic archetypes characterizes not only individuals but also the generations to which they belong. Their differing qualities provide the engine for inter-generational conflict and historical change.

Just as there are four stages of an individual human life, so there are four stages within a hundred-year era. A “Hero” generation, like that which fought World War II, is inevitably followed by an “Artist” generation, which necessarily gives rise to a moralistic “Prophet” generation that makes way for a “Nomad” generation – which in turn gives birth to a new generation of Heroes.

The balance and interaction between these generations over time leads a society to undergo a predictable set of “turnings,” from an optimistic “High” to a rebellious “Awakening,” and from there through a corrosive “Unraveling” leading to a fraught “Crisis,” which ends with a new “High.” The Crisis stage always hits American society particularly hard, because the United States has so profoundly embraced a linear understanding of time. Yet come it will, and when it does, America will either collapse or be made great again.

For Strauss and Howe, history is cyclical, its content is mythic, and its study leads to prophesy. This perspective, they argue, offers a number of concrete personal benefits, assuming that readers can unlearn the teachings of linear history (including, bracingly, “obsessive fear of death”). Most important, it offers readers “a more personal connection with the past and future,” and the feeling of being “active participants in a destiny that is both positive and plausible.” It offers readers a sense of control.

Image result for karl popper tolerance

Popper had a name for such predictive historical thinking, so contrary to the scientific method. He called it “historicism.” His foundational contribution to modern liberalism, The Open Society and its Enemies (1945), is an analysis of historicism’s roots and implications for liberal democracy. In other words, our use today of the very term “open society” derives from a withering critique of the philosophy of history Bannon embraces.

Popper viewed Hegel as the main source of historicism in the modern era. But he traces the historicist attitude back to Plato, whose anti-democratic ideologies of permanent social hierarchy he interprets as a reaction to the breakdown of Greek tribalism – an effort to recover lost certainties.

Indeed, Popper views all forms of contemporary historicism, even the “remarkable” work of Toynbee himself, as an effort to resuscitate tribalism’s “closed society.” For Popper, prophetic history represents a misguided philosophical reaction against freedom, change, and individualism.

In the midst of World War II and the fight against fascism, Popper offered an alternative to the neo-tribalism of historicism: science and rationalist philosophy, or “the tradition of challenging theories and myths and of critically discussing them.” And he provided a view of historical change that rejects inevitability. Only this humane response to tribalism’s breakdown, he asserted, could set the world free and maintain its liberty.

Popper’s analysis is as important today as it was in his own time. Following Bannon’s departure, the worst thing liberals could do is to ignore Trumpism’s animating principles – for by doing so, they will subvert their own.

Cambodia Update–Hun Sen maintains firm grip on power

August 3, 2017

Cambodia Update–Hun Sen maintains firm grip on power

by Dr. Sorpong Peou

Image result for Hun Sen


After 25 years of global peacebuilding efforts that began with the UN intervention early in the 1990s, Cambodia is still far from achieving a stable peace based on genuine democracy and respect for human rights. Government threats to, and sometimes violent crackdowns on, critics and power contenders continue unabated. After more than 30 years in power, Prime Minister Hun Sen still shows no signs of wanting to retire from his political struggles.


Before the 4 June 2017 commune elections, Hun Sen ramped up diatribes and displayed acts of intimidation against members of the opposition Cambodian National Rescue Party (CNRP). He rang alarm bells by saying that opposition victories would bring the country back to chaos and instability. He threatened to seize the personal property of CNRP President Sam Rainsy (who was still in exile for political reasons) and ‘burn down’ the houses of his opponents.

The threats Hun Sen issued against his opponents aimed at sending a clear message that they would not be allowed to win in future elections. Defence Minister General Tea Banh also warned that the military would ‘smash the teeth’ of those who protested a Cambodian People’s Party (CPP) win.

Even after the commune elections, in which his CPP won a majority, Hun Sen escalated the war of words, warning the opposition against taking any action that would undermine the election result. Most shocking was when he told his opponents to prepare their coffins and expressed his willingness to ‘eliminate’ between 100 and 200 of them.

There is no reason to think that Hun Sen, now 64, is beginning to mellow out and get tired of politics. Age is never a good determinant of leaders’ political lifespans in countries like Cambodia, and neither is political unpopularity or personal fatigue.

There are several reasons why Prime Minister Hun Sen will not call it quits any time soon. The first is that he cares about his political legacy, beginning with the overthrow of the murderous Khmer Rouge regime in 1979 and the progress he thinks his party has since brought to the country. After all, he has presided over one of the fastest-growing economies in Asia. High economic growth rates continue to provide him with a source of legitimacy.

The second reason is that Hun Sen thinks that he has enough bullets to keep his opponents at bay. Since the violent putsch he led in 1997 that resulted in the downfall of his then co-Prime Minister Prince Norodom Ranariddh (leader of the royalist party that won the UN-organised election in 1993), he has emerged as the country’s dominant political leader. The multiparty system has been turned into a hegemonic party system. State institutions, particularly the armed forces and the judiciary, have become more personalised and politicised than ever before. Opposition officials are correct when admitting that they have no means of violence to wage any war against the ruling party, and Hun Sen knows this to be true.

Image result for cambodia land of wonder


Still, what Hun Sen covets most is not absolute power — he is smart enough to know that seeking it would be self-destructive — but rather achieving enough security to remain in power comfortably. Speculation about the possibility of the CPP’s attempt to eliminate the opposition, for instance, is contradicted by the fact that the CNRP was allowed to compete in elections and win seats.

What Hun Sen fears most is the ultimate power of political democracy — the third reason why he will not retire from politics. His bellicose speeches and unstatesman-like manner reveal a great deal of truth about his insecurity rooted in hidden political weaknesses.

What makes the CPP elite feel less secure now is that their powerbase is much shakier than they want it to be. An election loss might result in greater factionalism within the party — and possibly intra-party violence. The armed forces are weakly held together at the top by Hun Sen, without whom the institution might even engage in factional warfare.

The ruling elite also think they cannot afford to lose power in a political environment where Hun Sen — and his family, as well as loyalists — feel that an election loss might subject them to prosecution, despite assurances from their foes to the contrary.

The trouble with countries like Cambodia — long afflicted by the persistence of weak state institutions, as well as a lingering history of betrayal, retribution and bloodshed — is that good intentions alone can never be a good enough foundation for trust-based peacebuilding.

The blood politics of survival is still evident in Cambodia and the hegemonic party system remains prone to tension and violent conflict. In this fragile environment, democracy is unlikely to survive or thrive unless the ruling elite’s insecurity is addressed and their powerbase begins to implode to the point where their weak domination ends.

Dr.Sorpong Peou is a Professor with the Department of Politics and Public Administration at Ryerson University, Toronto.


Japanese companies need to open up or shut down

May 21, 2017

Japanese companies need to open up or shut down

by  Alicia Ogawa, Columbia University


Image result for Open Up Japanese companies or perish

Corporate governance has long been a hot topic for investors worldwide, but it is still a new concept in Japan. The increasing number of Japanese corporate scandals points to the need for a new approach to management. Many once-prominent companies seem to be unable to adapt to the pace of global change. The domestic market no longer offers much growth potential, so Japanese firms need to actively engage with the world or perish.

There is strong global interest in Japanese corporate governance for two key reasons. First, from the point of view of investors, the fact that rates have been low or negative in virtually all major developed economies has encouraged a sharper focus on equity markets for real returns, and Japanese companies fall woefully behind their global competitors in terms of profitability.

Second, as the pace of global competition accelerates, management is under constant pressure to react quickly to changing opportunities, such as the development of new technologies or the consolidation of capacity in maturing industries. Dialogue with outsiders, from shareholders to independent directors, is a prerequisite to navigating this terrain safely.

Japanese companies are at a distinct disadvantage in this new world because of key features of their organisational structures that served them very well in the past, such as lifetime employment. Decision-making is slow and dominated by consensus-seeking groups of senior men who have never worked outside their own firms, who rarely have specialised expertise and whose loyalties are first and foremost to each other.

The first of the major traumas at Toshiba, which came to light in 2015, involved the 152 billion yen (US$1.33 billion) deliberate overstatement of earnings between 2008–2014. This scandal illuminated the unspoken trade-off inherent in a lifetime employment contract: staff must not question decisions made by top management.

Image result for Tiger

Japan is No Longer a Tiger Economy

An independent investigation into Toshiba’s overstatement of earnings revealed that no CEO during that period directly instructed anyone to falsify the accounts. Rather, there was a long-standing corporate culture which mandated that managers ‘couldn’t refuse’ the profit targets set by the CEOs, no matter how unrealistic. Nevertheless, after the first accounting scandal, Toshiba chose Shigenori Shiga as the new chairman after his predecessor resigned in disgrace. Not only was Shiga yet another lifetime company man, but a former head of Toshiba’s subsidiary Westinghouse — which is now in the process of Chapter 11 bankruptcy in the United States.

Many Japanese companies have raced to create better governance on paper — Toshiba was in fact a trailblazer in this respect, having chosen to replace a traditional Japanese system of governance with US-style executive committees, including independent directors on the board. But despite appearances, an inability to encourage and respect independent thinking has led to the collapse of the former world leader in high-tech products.

Failure by Japan’s corporations to embrace both the letter and the spirit of Prime Minster Abe’s new governance reforms will jeopardise Japan’s future prosperity. CEOs must encourage challenges by their subordinates and aggressive supervision by their independent directors.

Investors are the other key class of outsiders who need to be welcomed into the discussion. The traditional silence of friendly shareholders is yet another wall that insulates management from outside competition.

Much attention has been paid to the unwinding of friendly cross-shareholdings by banks. But most of these shares have been transferred from friendly banks to friendly corporations, who will likely never vote against management; to the Government Pension Investment Fund (GPIF), whose size makes it ill-equipped to exercise any positive influence; and to the Bank of Japan, who cannot be a force for better governance. The protection afforded by acquiescent shareholders does not seem to have changed very much.

A survey undertaken by GPIF indicated that 21 per cent of executives regarded investors’ increasing scrutiny of capital efficiency to be a positive development, while 32 per cent regarded this as a very negative trend. Clearly, Japanese managers are a long way away from being comfortable discussing fundamental strategies with investors who own shares in their firms, or with their junior staff. But they had better hurry up.

In the case of Toshiba, lawsuits have been brought by several foreign investors, the world’s largest public pension fund GPIF, and several of the largest domestic banks. Refusing dialogue with your outside stakeholders can carry a devastating price when mistakes are made. It’s better to choose an openness to new ideas and critiques from your independent board directors and your investors, and thereby reap the benefits of dynamism and sustainability.

Alicia Ogawa is Director of the Program on Corporate Governance and Stewardship at the Center on Japanese Economy and Business, Columbia Business School.