Martin Khor on TPPA

October 13, 2015

Martin Khor on TPPA

FINALLY, the negotiations on the Trans-Pacific Partnership Agreement have concluded. But that’s not the end of the story. It will be many more days before the text is made public. Until then, there will still be so many questions unanswered.

Martin KhorEnough is known, from media reports and some leaked texts and analyses, to make some preliminary comments. First, trade is only one part of the TPPA. As important, or more important, are other issues including investment, intellectual property, government procurement, state-owned enterprises, labour and environment.

These other issues are at the heart of the country’s socio-economic structures and policies.On these issues, the TPPA may have problematic elements for Malaysia. The Malaysian negotiating team has been fighting to lessen the adverse impacts of the main proposals.

It says it won concessions. But what these are, whether they are enough, and the effects are still not clear. What is clear is that “policy space” (a country’s freedom to formulate its own policies) would be very significantly narrowed as a result of the TPPA.

On intellectual property, the blow is perhaps the most obvious. Most patents filed in Malaysia are owned by foreigners. So when patent laws are made stronger, it will benefit foreigners who are the patent holders.

The enhanced monopoly given to patent holders will have adverse effects on Malaysian consumers who will have to pay higher prices and Malaysian companies which cannot make or import generic versions during the patent term.

Mustapa-Mohamed-TPPA-300x202The renowned medical group, Doctors Without Borders (MSF), condemned the TPPA as the “worst trade agreement for access to medicines”. Patients and treatment providers in developing countries will be the TPPA’s big losers as it will raise the prices of medicines by extending the monopolies enjoyed by the big drug companies and further delaying price-reducing generic competition, according to MSF.

The term of the patent may be lengthened (by adding time taken to register the medicine or approve the patent). Data exclusivity is to be granted for five years (or possibly for more than that, for the new drugs known as biologics), during which the generic companies are not allowed to rely on the test data of the originator firm.

On investment, the TPPA opens the road for foreign companies to be treated as well or better than locals, thus giving them rights of entry and ownership, and free transfer of funds, while prohibiting the host state from imposing performance requirements such as local content, technology transfer and joint ventures.

The TPPA also contains the investor-state dispute settlement system (ISDS), which enables foreign investors to sue the Government in an international tribunal.

Changes in government policies can lead to claims that this is unfair treatment and the foreign investor can ask for compensation for loss of expected future profits.

According to press reports, the TPPA has some safeguards such as diluting the ability of companies to make frivolous claims. Exactly what these are, is not known. The ISDS in any case remains intact as a powerful tool for foreign investors and puts Malaysia in a defensive position.

On government procurement, the space that Malaysia has had to make policies on how the Government does its procurement will be curbed. The preferences given to locals will now give way to national treatment for foreign companies.

Malaysia has been negotiating for more exceptions in terms of the “threshold” of level of expenditure or project value where preferences for locals can still be given, and an exception for bumiputra policy. Details of the final agreement are still not known.

On state-owned enterprises (SOEs), the TPPA will impose disciplines and rules on how these SOEs operate, the subsidies they can or cannot get, and their need to be non-discriminatory when purchasing materials (they cannot give preference to local companies).

The advocates of the SOE chapter seem to want to curb the advantages that SOEs may have, and enable the foreign companies to more effectively compete and take some of their market share. Malaysia has also been fighting for exceptions for some of its SOEs. The final outcome of this is not yet known.

Investment policy, government procurement, SOEs and access to medicines are right at the heart of Malaysia’s political economy and socio-economic structures.Policies that have been at the centre of the country’s economic and political development have now to be defended as exceptions and flexibilities, and there is a limit to what the other TPPA partners will accept.

The chapters on these issues are bitter pills to swallow and the debate will continue on whether they are worth swallowing. The direct trade aspects of the TPPA should have such enormous benefit that they more than offset the disadvantages of the other issues. Otherwise, why join the TPPA? However, Malaysia’s tariffs are on average higher than those of the United States, the main country with whom we do not yet have a Free Trade Agreement.

If tariffs go to zero through the TPPA, Malaysia will thus have to cut its tariffs by more than the US. Whilst we may gain extra exports through the TPPA, we will also have to import more. There is no guarantee that the TPPA will lead to a better trade balance, and there could be an opposite result.

The debate on the TPPA will intensify now that the negotiations have ended. The text should be made available as soon as possible, so that the discussions can be based on the agreement itself. After the TPPA, it will take another two years for the agreement to be ratified and come into force.<

Thus, the TPPA is not a “done deal” and the real debate may only be beginning now. It is unfortunate that till now the text is not available.

Martin Khor ( is executive director of the South Centre. The views expressed here are entirely his own.

ASEAN : Going Somewhere is not good enough

October 10, 2015

ASEAN : Going “Somewhere” is not good enough

by Dr Munir Majid

“…as a community, ASEAN cannot continue to hold out that its sheer existence reflects its success. This has been the rather complacent rendition on ASEAN by most officials and so-called regional thought leaders. This is not good enough. ASEAN must move up more than a notch from how it has operated thus far, if it is to be taken seriously as a community.–Munir Majid


AT a recent international forum in Bali, I was asked where I thought ASEAN would be in 10 years’ time. I had replied “somewhere” I guess, but I don’t know quite where.

I was not being flippant. Neither do the ASEAN leaders and officials know where ASEAN will be. They may have their big and small plans, but unless they truly implement them ASEAN will always be sub-optimal. In the rhetoric, there is the sing-song repetition that, if ASEAN was one economy, it would already be the seventh largest in the world and the fourth largest by some forecasts in 2030, behind only the EU, China and the US. The truly big league, with the third largest labour force, of whom 60% are under 35 years of age. A demographic dividend and a consumer boom.

Najib Asean Chair 2015ASEAN Chair 2015–Losing Focus

All this if ASEAN was one economy. If it did not operate effectively as one, the projected trade and investment and growth will not follow.

The post-2015 agenda will be launched on November 22 even as the ASEAN community is inaugurated, indicating the rolling way in which ASEAN operates without serious check. As we know it is difficult to roll upwards, unless the gradient is gentle, and this is the way ASEAN has chosen to progress (since 1967).

Even so, the progress is not what it is made up to be. When the ASEAN economic community blueprint was released in 2007, for instance, its main objective was the removal of non-tariff barriers (NTBs) in the ASEAN Free Trade Area (AFTA) whose tariffs are, or are close to, zero. Serious non-tariff barriers remain but the ASEAN Economic Community (AEC) will be pronounced all the same.

Where really is ASEAN when it says it is somewhere but it is not quite there? So I was not being facetious. ASEAN has the intention but not quite the will. This way ASEAN will progress bit by bit, but how much it cannot be really said.

Like with motherhood, nobody can disagree with the four pillars of the AEC: a single market and production base; a competitive Asean; an Asean open to the world; and an equitable Asean.

Let’s just take the single market and production base which requires the free movement of goods and services, let’s just say of skilled labour, capital and investment. How much has really been achieved? We have observed about the AFTA  and non-tariff barriers, but it is also hampered by severe limitation to trade in services.

Just think about financial services whose ASEAN footprint is limited by national policy and regulation which additionally constrain the free movement of skilled labour and information. There is the ASEAN Framework Agreement on Services (AFAS) and various packages on which officials work to roll out, but with these dampeners where exactly are we? How does the ASEAN scorecard measure the achievement level of trade in services? One hundred per cent because the AFAS has been signed?

When something is signed or ratified but not implemented, ASEAN does not do anything about it. The largely average secretariat staff accept national reporting of accession without monitoring enabling domestic action.

Thus we have a situation of a flawed community whose benefits are not even or consistent. Indonesia can decide on something today and reverse it tomorrow. Any ASEAN member state can. There is thus no law and order, a community where there is a certain level of clear expectation.

While ASEAN is an inter-governmental association of states and there is no surrender of sovereignty to a supranational authority, it is accepted international practice that when a state enters into an agreement it is legally bound to it.

International law

ASEAN must not take whatever little good there is of international law backwards: that a state is not legally bound by an agreement it has entered into.

In the post-2015 plan, ASEAN must show greater ambition than this situation of gay abandon – complete political and legal laissez fair. It must on a number of specific areas hold its member states to their commitments. Let’s say, in respect of mutual recognition arrangements (MRAs), if it is committed, all ASEAN qualified engineers can work in any member state, it has to be worked all the way through to every relevant domestic policy, law, rule and regulation that would allow such free movement.

Everyone knows that this is not the case now. Yet there is another tick on the scorecard which says the free movement of engineers has been achieved. Who are we kidding?

The ASEAN model of progression by stealth and being rather economical with the truth has to be re-examined. It can concentrate on some areas where real progress will be vigorously measured and undertakings must be fully delivered, rather than continue across a very broad front which gives only the appearance of success, or makes very patchy advances.

In respect of NTBs, the ASEAN Economic Ministers (AEMs) decided at its last meeting in August to concentrate on four sectors for the removal of identified NTBs in 2016, as a serious step to address this problem. This must absolutely be followed through. It also approved the setting up of an ASEAN secretariat portal where particular NTB experiences will be reported and advertised, a welcome name and shame mode – although the company making the report would be worried it might be victimised going forward.

Before the portal is operational, the AEMs must decide on some form of protection for the company making the report.

The global realities, meanwhile, are dynamic and changing. Even within ASEAN, there are sub-regional economic forces which draw continental South-East Asia, minus Malaysia and Myanmar (for different reasons) towards Yunnan rather than Jakarta. There has always been talk of a two-speed ASEAN, but we should add to that, a multi-layered one that could be peeled off.

Of course so many other economic condominiums are being formed. They will all have a pulling away from ASEAN force, whether the RCEP or the TPP. We should never be complacent about so-called ASEAN centrality. ASEAN is only central because it organises all these spectacular meetings and because others allow it to be.

ASEAN should also be mindful about the development in US-China relations. Not only its destabilising aspects but also a fully hard-wired relationship. Just think what happens to claimant states in the South China Sea disputes if the US accepts the Chinese imposed status quo in return for express Chinese declaration recognising freedom of navigation and overflight rights – and there are already intimations of this from the statement at the end of President Xi Jinping’s visit to the US last month.

Who in ASEAN monitors these kinds of developments and presents to the leaders of the “community” a position paper on what the future might hold?

My message at another conference this past week, this time in Singapore, is that as a community, ASEAN cannot continue to hold out that its sheer existence reflects its success. This has been the rather complacent rendition on ASEAN by most officials and so-called regional thought leaders.

This is not good enough. ASEAN must move up more than a notch from how it has operated thus far, if it is to be taken seriously as a community.

Tan Sri Munir Majid, Visiting Senior Fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB ASEAN Research Institute.

Samdech Techo Hun Sen@ The United Nations

October 8, 2015

Remarks by Samdech Akka Moha Sena Padei Hun Sen, Prime Minister, Kingdom of Cambodia @United Nations Summit on Post 2015 Development Agenda

Over the past two decades, Cambodia has made remarkable transformation, especially in securing full peace, strong political stability, and improved public security with high growth averaging 7.7 per cent in real terms annually. The poverty rate has declined from 53 per cent in 2004 to 16 per cent, enabling Cambodia to reach the MDG targets on poverty reduction and other social sectors ahead of 2015.–Samdech Techo Hun Sen

Hun Sen at UNGA

Today, I have great honour to attend this United Nations Summit on Post-2015 Development Agenda. On the 70th Anniversary of the creation of the United Nations (UN), we now open a new chapter in the humanity’s history book, which is marked by stronger cooperation in global development.

The theme of our summit today highlights our globally shared undertakings and responsibility to achieve the Sustainable Development Goals (SDGs) in the next 15 years, advancing on the achievements of the Millennium Goals (MDGs) which had jointly adopted 15 years ago.

Over the past two decades, Cambodia has made remarkable transformation, especially in securing full peace, strong political stability, and improved public security with high growth averaging 7.7 per cent in real terms annually. The poverty rate has declined from 53 per cent in 2004 to 16 per cent, enabling Cambodia to reach the MDGs targets on poverty reduction and other social sectors ahead of 2015.

Cambodia is now in transition towards the next stage of development, of becoming a lower middle income country by 2016. In this regard, the Royal Government of Cambodia considers that all the 17 SDGs, which were built on the MDGs, are very relevant in the Cambodian context, especially for strengthening its achievements of the past 15 years. But they are even more important to support Cambodia’s transition into a middle-income country, especially in its early stage. Cambodia will incorporate the “clearance of land mine and unexploded ordinance” as an additional goal to the SDGs to fully reflect the actual situation and the need on the ground

As for the financing of the SDGs, the Royal Government of Cambodia fully endorses the Addis Ababa Accord and Action Agenda for financing for development that focuses on domestic resource mobilisation to meet the needs of development. However, Cambodia would like to request an extension of support to those least developed countries which are successfully graduating to the next stage of development until they can well stand on their own feet and can compete internationally by providing official development assistance (ODA) grants and/or concessional loans to address their basic needs such as infrastructure gaps and human resource development and institutional capacity building.

Forging consensus on the Post-2015 Development Agenda is a major achievement by our global leaders. However, ensuring success of this agenda as we had planned for remains a big challenge for all of us. For this reason, I believe we all should resolve to jointly address:

1. Ensuring the fulfillment of donor commitment to achieve the target of 0.7 per cent if ODA/GNI to developing countries and 0.15-0.2 per cent of ODA/GNI to least developed countries;

2. Further enhancing trade policies and trade facilitation, including the provision of preferential treatment to developing countries, according to the spirit of equitably and efficiently sharing benefits of globalization;

3. Further strengthening stability and promoting diversification of the financial sector, encouraging innovation and tapping the role and dynamism of the private sector to meet the financing needs for realizing the SDGs;

4. Further strengthening country ownership through building partnerships among all development, including bilateral, and multilateral development partners, the private sector and other development actors; and

5. Ensuring policy coherence with transparency and accountability, aligning those policies of bilateral and multilateral development partners with national priorities and SDGs.

I believe that the Post-2015 Development Agenda will become an important instrument to help all countries to adhere to a right development path and ensure that the next generation will live in a harmonious and prosperous society.

In this spirit, while being ready to work with all development partners in a constructive way, Cambodia would like to appeal to all countries and relevant stakeholders to show their political will and commitment by taking required measures to achieve the SDGs. Certainly, the United Nations will have to continue playing an even more crucial role to support member states in implementing this agenda.

TPPA: A Done Deal in Atlanta–Good Luck Malaysia

October 6, 2015

TPPA: A Done Deal–Good Luck Malaysia

by Bloomberg

A dozen Pacific-rim nations agreed to an historic trade pact that would cut trade barriers on items ranging from cars to rice, setting up a potentially contentious ratification vote before a sceptical US Congress.

After a week of final talks in Atlanta, an agreement has been reached on completion of the Trans-Pacific Partnership, a pact more than five years in the making designed to boost commerce among nations that produce 40% of global economic output, said Akira Amari, a Japanese economics minister who is in charge negotiations for his nation.

US President Barack Obama, who sees the pact as a key element in his “pivot to Asia” foreign policy, made the accord a top priority of his remaining years in office. China was left out of the agreement, which supporters promoted as a counterweight to its growing influence.

If implemented, it would be the largest trade deal the US has negotiated since the North American Free Trade Agreement took effect in 1994. The three signatories to that agreement, the US, Canada and Mexico, are included in this one, as is Japan.

MITI's Mustapha MohamedMITI Minister–What’s the Real Deal–Details Please

The agreement will provide duty-free trade on most goods, and reduced tariffs on others. It will also provide mutual recognition of many regulations, including an exclusivity period for biologic drugs, which are derived from living organisms, and patent protection for pharmaceuticals. That was one of the final topics that was settled in marathon talks this week, as developing nations sought to have quicker access to generic medications.

Canadian dairy

Negotiators also haggled over issues, including Canada’s supply management system for dairy and other agricultural products, Australia’s demand for additional access to the US sugar market and regional value rules for automobiles and auto parts.

Obama persuaded Congress to consider the measure under “fast-track authority” – meaning it will be submitted for an up-or-down vote without amendments. Obama will have to notify Congress 90 days before he signs the agreement, and publish the text 60 before.

The 12 TPP countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the US.

“TPP is a comprehensive agreement that will open markets, set high-standard trade rules, and address 21st-century issues in the global economy,” the US Trade Representative’s office said in background documents.

TPP will promote jobs and growth in the U.S. and across the Asia-Pacific region, and “share American values and commitment to improve labour practices and elevate environmental standards around the world”, it said.

Supporters of the pact, including the US Chamber of Commerce, argue that the TPP will make it easier to sell made-in-America goods and services overseas and support US jobs and economic growth.

Opponents, such as the AFL-CIO labour organisation, argue that it will lead to additional outsourcing of US jobs. They are expected to pressure Congress to reject that pact.

Beyond Economics– First Fix the Political Elephant in the Room

October 5, 2015

Beyond Economics:  First Fix The Politics

by Dato’Seri Nazir Razak

Nazir Razak at Khazanah Megatrends

The theme of Khazanah Megatrends this year is around “innovation” and “creative disruption.”

In the next 30 minutes I would like to share with you some personal stories and anecdotes, and perspectives about why Malaysia remains frustrated in its quest for greater creativity and innovation, risk and adventure taking, ethics and integrity in our economy, and how thinking about this problem leads me to the same conclusion as when I think of many other pressing national issues – we must address the “elephant in the room”.


As a 25-year banking veteran, I would be the first to admit that banks have been poor at supporting not just innovation, but many creative ideas.

Some who survived to tell the tale include two young Malaysians who some years ago came to see me about buying an airline for RM1 to build a regional low-cost carrier. I showed them the door very quickly and quite rudely, and was only nice to them when AirAsia was successful and going for its IPO.

Similarly, our experiments at banking start-ups and technology companies did not go well. Banks are by definition conservative, highly regulated and staffed with bankers.

In the mid-1990s, in response to the perceived lack of access to capital for technology start-ups, I was asked to chair the “Industry Action Committee” to set up Mesdaq, the Malaysian Nasdaq.

Even before we had venture capital and proven technology companies, we decided to set up a stock exchange. And lots of money was spent on the new exchange when really it should have just been another board at Bursa; it would have been a far cheaper failed experiment. Till today, I regret not saying no to this project, but it was a good early lesson for me and probably why I do find it hard to keep my mouth shut.

As banks and the capital markets fell short, the government availed lots of money for technology and start-ups in general. Funds like MTDC and several venture companies were seeded by the government. Money itself has never been the problem. The problem was that we never had the institutional capabilities to allocate the money effectively, bias as we were to local intermediaries who lacked experience and networks, and prone as we were to proliferating agencies rather than building large institutions with economies of scale and partnerships with international experience and networks.

Today however, I do think that from a capital standpoint, there is much less frustration on the part of budding entrepreneurs and creative disrupters. Equinas, for instance, has scale and leverages professional fund managers well.

GLICs have evolved to apply best international standards in investing and now hire – and pay – a much better cadre of professionals for themselves and at investee companies. There has also been a proliferation of private equity and venture capitalists to supplant banks and offer more effective risk and reward structures.

There is room for improvement, of course. I would like to see more funds made available to smaller companies and more focus on how to encourage large GLICs to better support small companies or small deals.

I would also urge that we look at how to make it less punitive for banks to become investors in PE funds given the difference in the needs of our emerging economy versus the more developed markets where these new rules are being written.

Mentoring and international perspectives

Innovation is about three things – insight, idea and implementation. Beyond capital, entrepreneurs need guidance to help them build their ventures. Malaysia has had Technology Park Malaysia and others, and lately MaGIC, with varying degrees of success.

I feel that one thing lacking has been the international element to mentoring. It is unrealistic to think of building sustainable businesses based purely on domestic dynamics in this era of Asean economic integration and an increasingly borderless world.

This is why a few other individuals and I set up the not-for-profit organisation Endeavour Malaysia in 2013. In partnership with Endeavour Worldwide we search for entrepreneurs via a rigorous selection and interview process by first the local management, then the local board and finally the international Endeavour board.

Successful entrepreneurs are badged “Endeavour”, allocated local and international mentors, and are given access an international network of businesses – about 1,100 Endeavour companies worldwide.

Endeavour Worldwide is all about successful business people eager to give back by supporting new entrepreneurs. It does take an entrepreneur to know one and it takes knowledge from all over the world to assess the prospects of the best ideas.

Local mentors for Malaysian Endeavour companies include my co-founders Afzal Rahim, Mark Chang, Brahmal Vasudevan and Tony Fernandes.

Endeavour’s “mentor capitalist” model has worked extremely well in Latin America, where its biggest success story is MercadoLibre, the eBay equivalent. Marcos Galperin started the company in 1999 and was selected by Endeavour that year itself.

He expanded the business across the continent and the company is now listed on the Nasdaq with a market cap of about US$4 billion. Marcos is the perfect example of how a high-impact entrepreneur can have an outsized impact on the ecosystem around him or her. He subsequently became a founder and board member of Endeavour as well role model, mentor or direct investor in a whole string of emerging companies.

I hope that we can rapidly add to the six Endeavour companies that we have so far, but overall Malaysian entrepreneurs now have reasonable choice of ecosystems to help them.

Beyond economics

If we define access to capital and ecosystems as economics, then I would say we have over the years largely addressed the economic issues, but there is still no real breakthrough.

Recent data shows national productivity growth slowing down from 2.7% between 2006 and 2010 to 2.1% between 2011 and 2014. And other worrying data points include the story of two recent big Malaysian innovation success stories – GrabTaxi and HappyFresh – they started in KL but have effectively moved to Singapore and Indonesia for various reasons.

When I asked several entrepreneurs whether if given the choice they would choose to be based in Malaysia, most said no, and those who said yes tended to strongly espouse their nationalistic sentiment. Even though it is just my crude dipstick survey, it is worrying because we are at risk of losing the best companies that we nurture.

So I asked those who said they would move away what their concerns are, without fail, they go beyond economics to the big picture, and relate not just their own concerns but perception of their potential international financiers and partners.

Role of the government

The heavy presence of government in the economy is one issue they highlight. We have spoken and agreed ad nauseam in various other platforms about reducing government involvement in business, yet the data from the past few years show quite the opposite.

Even more important is the role of government in overseeing business competition – the rules of the game in each sector. Much of this has been covered in the New Economic Model, and we are making progress with the Government Transformation Programme (GTP) and Aviation Commission, for instance. But much, much more needs to be done.

The more sensitive area of concern is the perception that people or businesses are not equal before the government and even when one can accept preferential treatment based on our affirmative action policy, the rules are often not clear. Added to that is a culture of top down decision-making, even in the sphere of innovation.

Let me share with you one personal anecdote. In 2004, I was appointed to the board of the infamous InventQjaya, set up by a self-described genius innovator, generously funded by the government with cash and a super smart building in Cyberjaya.

I joined two other independent directors, Tan Sri Shahril Shamsuddin and Datuk Sidek Ahmad. From early on, we sensed things were not right and when we conducted our own technical due diligence there were a lot of question marks around the intellectual property the company had expensively acquired from the genius innovator’s own company back in the US.

The turning point for me was when he showed us his “killer invention” – a glass window which would turn opaque at the touch of a button. Well, massage parlours in Korea had had them for years – so I was told!

Shahril and Sidek, who were both more literate in science than me, also found other dubious inventions. So finally, together with MoF official Datuk Rahim Mokti, we decided that enough was enough, we had to do the right thing.

Truth be told, if we knew how painful blowing the whistle was going to be, I’m not sure if we would have done it!

Etched in my memory is the day Shahril and I went to report the case at the A-G’s chamber. After spending a couple of hours showing all the evidence, the officer calmly asked “Did you bring your toothbrush?”

He said, based on his experience, people who make accusations are often the real crooks so perhaps he should detain us! So then we spent another couple of hours explaining that it wasn’t us –thankfully, we were convincing enough.

After triggering the institutional processes, we were advised that we had to see and explain ourselves to Tun (Dr) Mahathir who had firmly backed the project. After the A-G Chamber experience, we were too afraid so we ran to the master salesman Tan Sri Nor Yakcop and begged him to carry the news for us. I was told Tan Sri Nor did a splendid job, Tun agreed that we were doing the right thing and we were safe.

The authorities never managed to build the legal case against the inventor. A lot of money was wasted, but a great deal more would have been lost had we, the directors appointed by the government, not done our fiduciary duty and been willing to tell truth to power.

I have never fully traced the history of how and why InventQjaya started, but I was told it was by navigating the corridors of power and convincing the PM. Tun’s idea of a government-backed R&D centre was good, the problem was how it was implemented.

There could have been a tender open to scientists across the globe, for instance, as opposed to one man’s full trust in another who went on to liberally use the threat of his access to power to get his way.

I am sure there are other similar stories. So we need to recalibrate how the corridors of power work, re-establish processes and reaffirm institutional checks and balances. Over the years, power has become too concentrated and system checks and balances are not functioning as they should.

Human capital and education

Another issue that the entrepreneurs highlighted was human capital.I will not delve into education reform as many of our finest, Tan Sri Azman, Tan Sri Zarinah Anwar, Tan Sri Jeffrey Cheah and Tony were part of the National Education System Evaluation Panel set up in 2011, and from what I gather, the issues are well-understood.

There is of course plenty of research that show correlation between national propensity to innovate and the right educational policies. It’s the political realities of education reform that seem to have held us back. On the wider issue of talent retention or drain itself, again much has been discussed via TalentCorp, etc, but then when I speak to the brightest overseas Malaysians, the most often cited reasons for not coming home are socio-political.

Politics–The Elephant in the Room

The elephant in the room is politics and the socio-economic structures that have evolved in tandem over the years. As we have seen over the last two general elections, the dominant political party system that we have had since independence is at risk.

While we can point to many other countries where the transition to a multi-party system happens peacefully, Malaysia has a unique and complex with a potentially toxic mix of race and religion deeply embedded in the political system, so we can’t take that for granted.

Meanwhile, crucial reform proposals by many of our cleverest people like the NEAC which presented the NEM that proposed major structural reforms, have been frozen by politics.

I won’t try to predict the consequences of continuing with the current trajectory of Malaysian politics. But I will predict that if we don’t undertake major structural reform of our socio-economy soon, we may well lose the international economics game.

Way forward

I propose that we go back in history. Not to the early, joyous, optimistic days of the initial post-Merdeka years.

Instead, let’s travel back to the devastating blow we suffered on May 13, 1969 – a day of infamy in our short history as a nation. A day that punctured our innocent idealism and introduced us to the Hobbesian nature of reality.

In the wake of that tragic and horrific blood-letting, the government declared emergency rule and set up a National Operations Council led by Tun Razak to run the country after Parliament was suspended indefinitely.

Eight months later in January 1970, Tun Razak chaired the first National Consultative Council, or NCC, meeting to examine the ethnic, political, economic and cultural sparks that provoked the May 13 episode and undermined national unity.

The NCC’s members consisted of just three ministers – Tun Dr Ismail, Tun Tan Siew Sin and Tun Sambanthan – as well as representatives from state governments, members of religious establishments, professional bodies, unions, teachers associations and political parties – a balanced representation of the population.

The NCC’s deliberations over a few months produced two extremely significant documents that guided our nation in the post-May 13 years: the New Economic Policy or NEP, and the Rukunegara.

Parliament was subsequently reinstated while the NEP spurred the growth of the government’s involvement in business with the establishment of many agencies to facilitate the rebalancing of wealth among ethnic groups and poverty eradication initiatives, with considerable success. The NEP epitomised what this conference is all about – innovation, creative disruption and inclusivity.

So, here we are today.  The NEP that was set to be a 20-year programme remains 44 years on, albeit in a much mutated form. In the meantime, the world and our place in it have changed, not least with the advent of the knowledge economy and the shift in economic power from large corporates and institutions to individual talent and entrepreneurship. The near future looks even scarier as articulated this morning by Charles Leadbeater.

Supply chains have shifted dramatically and creative disruptors flourish in economies where vested interests are not protected by governments and politics. Is our economic system substantially designed in the 1970s able to cope with the demands of today?

We all seem to know major reforms are needed – there is already much good literature on reforms from the government itself – but implementation has been trapped by realpolitik. Recent events are surely symptoms of systemic strain.

I believe that just as in the post-May 13 era, we are now facing a national challenge. Back then, the fundamental issue was national unity. Today, in the 21st century, the parameters have widened. National unity and the forging of a Malaysian identity are still very much works in progress. But added to them are a plethora of problems ranging from the ethical to the practical, and even our quest to spur innovation and creative destruction leads us to this fundamental national challenge.

We urgently need a new social and economic re-engineering programme to suit today’s challenges and for today’s Malaysians. My humble suggestion is this: the time is ripe for the setting up of a council similar to the NCC. Let’s call it the National Consultative Council 2 or NCC2.

To borrow a leaf from history, let us once again bring together the best and brightest among us Malaysians to huddle and deliberate our options. Let the NCC2 be no different from the first NCC in terms of participation from all members of our Malaysian society.

Its membership should be inclusive, its deliberations wide-ranging, and its reports succinct and practical to implement. And it should be led by someone or some people with the moral authority to bring the good and the great to the table for the sake of the nation’s new future.

My own ideas on how the NCC2 would function are still evolving. Offhand, I would suggest the setting up of six panels to deliberate on the following critical issues, namely:

1) Constitutional reforms;

2) Electoral reforms;

3) Economic reforms-affirmative action, role of government;

4) National unity and the social contract;

5) Preserving and strengthening the integrity of the federation; and

6) Institutional integrity – checks and balances between various branches of government and within government itself.

I make no apologies for adopting NCC from my late father. As I have written earlier, he was a Malaysian to the core, a public servant to the extreme definition of that. I believe his legacy of an inclusive, deliberative, and Malaysian vision and identity, is even more relevant today than it was in the dark days after May 13.


As I said at the start of my speech, there are adults who consider my views on current affairs as unsuitable. And they will look for 1,001 motives behind my suggestion of NCC2 instead of what I have just articulated. That is their prerogative.

Just as it is my prerogative to say we can and must opt for national – politics, economics and social – recalibration. We have to address the elephant in the room. Malaysia needs innovative and creative disruption of a national scale to spur innovation and creative disruption in our economy. Malaysia also needs innovative and creative disruption of a national scale to secure our future and realise the true potential of our great nation. We have done it before, we must do it again.

* Datuk Seri Nazir Razak is chairman of CIMB Group. This is his speech at the Khazanah Megatrends Forum in Kuala Lumpur today.

TPP (Trans-Pacific Partnership) is not about “Free Trade”

October 4, 2015

TPP (Trans-Pacific Partnership)–Message for Najib Razak

by Joseph E. Stiglitz

If Najib truly believes in putting the Malaysian people first, he will instruct his negotiators in Atlanta to ensure (a) that Malaysia at least gains economically from the trade agreement; (b) that its citizens continue to have access to generic medicines at affordable prices; and (c) that the TPP leaves Malaysia’s economic future its own hands, not those of multinational investors.–J.E. Stiglitz

Prime Minister Datuk Seri Najib Razak is facing his last best chance to reverse the course of the Trans-Pacific Partnership, or TPP, a new international economic agreement that would lock in unequal trading relationships between advanced economy countries, such as the United States, Japan, Canada, and Australia, and developing economies like Malaysia.

J StiglitzTPP negotiators are now in what they hope is the final round to conclude this agreement. Political leaders will boast of negotiating for the best interests of their people and country.

But the reality is that special corporate interests – in the United States as elsewhere – have been given far too much influence on the negotiations. The agreement will go far beyond just cutting tariffs and quotas to mandate fundamental changes in each country’s legal, judicial, and regulatory institutions – a sop to the moneyed lobbies who have had more access to the process than concerned citizens or even lawmakers.

Given past experience with US-led trade agreements, and what we glean from documents leaked from the confidential negotiations, it is clear that Malaysia’s negotiators are giving away much to advanced country business interests.

It is less clear why they would, given the economic loss Malaysia is expected to get in return for such a deal.

Typically, one thinks of negotiation as one side giving something in order to get something else in return. But with the TPP, it is not clear what Malaysia would be getting.

Economists at the United Nations Conference on Trade and Development, UNCTAD, forecast that Malaysia would actually be a net trade loser as a result of joining TPP, with difference between the value Malaysia produces for export and the value it imports, the trade balance, declining by US$17 billion (RM75 billion) per year as a result of the agreement. In other words, the TPP would make Malaysia worse off by the most straightforward of economic measures.

These trade agreements are not free-trade agreements, but managed trade agreements, and typically managed for the interests of corporate interests.

And while the name Trans-Pacific Partnership suggests a “partnership”, it is a special kind of partnership, where one country, the US, calls most of the shots, giving into other “partners” the bare minimum necessary to secure compliance from their corporate and other special interests.

Not surprisingly, the big winners are corporate interests in the US, the big losers are ordinary citizens, both in the US and elsewhere.

But Malaysia stands out as one of the countries where as it now stands even the country’s economic interests stand to lose, with iron and steel, aluminium, mineral fuels, plastics, and rubber are among the sectors that will be hurt.

The shock to this industrial employment and investment will occur at the same time that Malaysian agricultural producers face greater import competition.But the harm the TPP would do to Malaysian industry is just the tip of the iceberg. Other features make it an even more dramatically bad deal.

First, TPP would restrict member countries’ governments – including Malaysia’s – from passing regulations to protect public health, safety, and the environment, or any other aspect of the public good.

That’s because the TPP would create investor-state dispute settlement (ISDS) mechanisms that would allow foreigners to sue the government when they think a regulation will harm their profits. The arbitration would be private and binding, even if the outcome contradicts domestic laws.

And the company could be compensated for the loss of its expected profits, not just for its past investments, even if its profits are generated by selling products that kill people and if there is no discrimination involved in the regulation.

International corporate interests tout ISDS mechanisms as investment-protecting, but that is sheer nonsense: they are demanding similar provisions of European countries whose legal system provides every bit as good protection for property rights as the US.

In reality they are a backhanded way of undermining countries’ ability to protect the health and safety of their citizens, the environment, or even the economy. Cigarette companies, for instance, can sue a government for requiring particular packaging for tobacco products –simply by claiming it hurts their profits.

These are not hypothetical threats – similar investment agreements already exist and have led to such suits.

Malaysia’s TPP partner Peru is currently facing a US$800 million claim by US investor Renco over whether Renco can continue to operate a lead smelter – ranked among the world’s 10 most polluted sites – and whether it can avoid paying compensation for the victims and to remediate the site.

In another case, Australia is currently facing a suit over public health warning labels on cigarette packages intended to curb tobacco smoking, as is Uruguay (which is not a TPP partner).

Canada, under threat of suit, backed down from similar proposed regulations. And Mexico has been forced to pay US$15 million after arbitrators found error with a state government decision shut down an unpermitted toxic waste dump found to be leaking into the groundwater.

Existing ISDS mechanisms are bad enough. Their radical expansion under TPP would be disastrous.

Second, the TPP would effectively outlaw countries’ efforts to protect themselves from international financial speculators, who inject money into local economies when they’re hot and take money out as soon as they cool.

Such unchecked short-term capital flows cause instability and promote crises, as Malaysia knows full well from the 1997-98 Asian financial crisis. Malaysia used capital controls to protect its people from the worst effects of that crisis.

The result was a shorter and shallower downturn than elsewhere, with a smaller legacy of debt burdening future growth. Mainstream economists now widely recognise that capital controls are an essential tool for financial regulation – even the International Monetary Fund, which once campaigned against them, has finally admitted their importance.

Since the crisis, Malaysia, has discarded its capital controls, but would be well advised to reinstate them were it to face another episode of financial turbulence like the last.

The TPP would effectively prevent it from even having the choice of reinstating them in the future – throwing it into the hands of the IMF, with the consequence surrender of its economic sovereignty, or forcing it to face even worse choices.

Malaysians need to reflect: what would have happened back then if there had been an agreement like TPP in place? Most likely, Malaysia would still be suffering the economic and political consequences.

A third way TPP locks in the unequal advantages of advanced economy countries is by raising intellectual property (IP) protection in ways that raise profits for intellectual property owners at the expense of everyone else.

The impact of more stringent IP can be seen most clearly when it comes to life-saving medicines. Driven by “Big Pharma” lobbyists, American negotiators are pressing TPP countries to accept protections that will boost their profits, not from innovating new medicines but by keeping potential competitors out of the market and charging consumers higher prices.

It accomplishes this through a variety of seemingly arcane rule changes – buried in jargon about “patent linkage” and “biologics” – which collectively would allow pharmaceutical companies to extend their monopolies for many more years than they currently can.

Mylan, a leading generic medicine manufacturer, has warned that TPP may in effect shut their business out of participating countries – meaning not only will Malaysians pay more for medicines, but that some medicines may cease to be readily available in Malaysia.

Rightly done, greater trade and investment integration with the world promises a lot for Malaysia, but the TPP is not the way to accomplish it.

There is no evidence that such kinds of provisions are contained in the TPP. What they will do is ensure that more of the wages of hardworking Malaysians end up in the pockets of global corporations.

If Najib truly believes in putting the Malaysian people first, he will instruct his negotiators in Atlanta to ensure (a) that Malaysia at least gains economically from the trade agreement; (b) that its citizens continue to have access to generic medicines at affordable prices; and (c) that the TPP leaves Malaysia’s economic future its own hands, not those of multinational investors.

The bottom line must be that TPP make space for Malaysia’s development needs. His negotiators have a hard task ahead, for as it now stands, TPP is designed to set the economy back and to take away some of the critical tools that it needs to promote the health of its people and its economy.

* Joseph Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University and chief economist at the Roosevelt Institute.

TPP (Trans-Pacific Partnership) is not about “Free Trade”

by Joseph E. Stiglitz and Adam S. Hersh


As negotiators and ministers from the United States and 11other Pacific Rim countries meet in Atlanta in an effort to finalize the details of the sweeping new Trans-Pacific Partnership (TPP), some sober analysis is warranted. The biggest regional trade and investment agreement in history is not what it seems.

You will hear much about the importance of the TPP for “free trade.” The reality is that this is an agreement to manage its members’ trade and investment relations – and to do so on behalf of each country’s most powerful business lobbies. Make no mistake: It is evident from the main outstanding issues, over which negotiators are still haggling, that the TPP is not about “free” trade.

New Zealand has threatened to walk away from the agreement over the way Canada and the US manage trade in dairy products. Australia is not happy with how the US and Mexico manage trade in sugar. And the US is not happy with how Japan manages trade in rice. These industries are backed by significant voting blocs in their respective countries. And they represent just the tip of the iceberg in terms of how the TPP would advance an agenda that actually runs counter to free trade.

For starters, consider what the agreement would do to expand intellectual property rights for big pharmaceutical companies, as we learned from leaked versions of the negotiating text. Economic research clearly shows the argument that such intellectual property rights promote research to be weak at best. In fact, there is evidence to the contrary: When the Supreme Court invalidated Myriad’s patent on the BRCA gene, it led to a burst of innovation that resulted in better tests at lower costs. Indeed, provisions in the TPP would restrain open competition and raise prices for consumers in the US and around the world – anathema to free trade.

Adam HershThe TPP would manage trade in pharmaceuticals through a variety of seemingly arcane rule changes on issues such as “patent linkage,” “data exclusivity,” and “biologics.” The upshot is that pharmaceutical companies would effectively be allowed to extend – sometimes almost indefinitely – their monopolies on patented medicines, keep cheaper generics off the market, and block “biosimilar” competitors from introducing new medicines for years. That is how the TPP will manage trade for the pharmaceutical industry if the US gets its way.

Similarly, consider how the US hopes to use the TPP to manage trade for the tobacco industry. For decades, US-based tobacco companies have used foreign investor adjudication mechanisms created by agreements like the TPP to fight regulations intended to curb the public-health scourge of smoking. Under these investor-state dispute settlement (ISDS) systems, foreign investors gain new rights to sue national governments in binding private arbitration for regulations they see as diminishing the expected profitability of their investments.

International corporate interests tout ISDS as necessary to protect property rights where the rule of law and credible courts are lacking. But that argument is nonsense. The US is seeking the same mechanism in a similar mega-deal with the European Union, the Transatlantic Trade and Investment Partnership, even though there is little question about the quality of Europe’s legal and judicial systems.

To be sure, investors – wherever they call home – deserve protection from expropriation or discriminatory regulations. But ISDS goes much further: The obligation to compensate investors for losses of expected profits can and has been applied even where rules are nondiscriminatory and profits are made from causing public harm.

Philip Morris International is currently prosecuting such cases against Australia and Uruguay (not a TPP partner) for requiring cigarettes to carry warning labels. Canada, under threat of a similar suit, backed down from introducing a similarly effective warning label a few years back.

Given the veil of secrecy surrounding the TPP negotiations, it is not clear whether tobacco will be excluded from some aspects of ISDS. Either way, the broader issue remains: Such provisions make it hard for governments to conduct their basic functions – protecting their citizens’ health and safety, ensuring economic stability, and safeguarding the environment.

Imagine what would have happened if these provisions had been in place when the lethal effects of asbestos were discovered. Rather than shutting down manufacturers and forcing them to compensate those who had been harmed, under ISDS, governments would have had to pay the manufacturers not to kill their citizens. Taxpayers would have been hit twice – first to pay for the health damage caused by asbestos, and then to compensate manufacturers for their lost profits when the government stepped in to regulate a dangerous product.

It should surprise no one that America’s international agreements produce managed rather than free trade. That is what happens when the policymaking process is closed to non-business stakeholders – not to mention the people’s elected representatives in Congress.–stiglitz-and-adam-s–hersh-2015-10