David Cameron talks to Najib on Democracy, Civil Rights and Corruption


July 31, 2015

Bilateral Relations

David Cameron challenges Malaysian PM Najib Razak on Corruption

The Prime Minister urged Mr Razak to clean up his government and challenged the treatment of Anwar Ibrahim, the country’s opposition leader in jail

Najib-Razak-david-_3392712bDavid Cameron and Najib

Allegations that $700 million (£450 million) in state development funds ended up in Mr Najib’s personal bank accounts overshadowed a visit by the Prime Minister designed to build trade ties.

During a long, one-to-one meeting, Mr Cameron on Thursday urged Mr Najib to clean up his government.

In a pointed move, he then met with civil society leaders, including journalists, the G25 group of campaigners and lawyers, who are campaigning for greater democracy and a free press.Mr Cameron also challenged Mr Najib over the treatment of Anwar Ibrahim, the opposition leader in jail on sodomy charges.

Sir Kim Darroch, Mr Cameron’s national security adviser, met with Mr Anwar’s daughter who is playing a leading role in the opposition movement.They discussed building a free press and her father’s treatment.

The encounters followed demands from some opposition figures that Mr Cameron cancel the visit, during which he courted investors to fund the so-called Northern Powerhouse infrastructure projects in Britain.

The Prime Minister said: “It is right to go ahead with the visit, but nothing should be off the table. We should talk about these issues including the specific ones now,” he said.

“We always have discussions with civil society figures, anti-corruption campaigners, opposition leaders and all the rest and that will happen on this visit too.

“I don’t think it helps not traveling to a country and turning away. It is better to go and talk about these things.”

UK officials stressed the visit was to build relationships between “peoples”, not leaders.

After the one-to-one meeting, Mr Cameron is understood to have repeated the message to a wider gathering of Malaysian government figures in front of Mr Najib.

In an address in Singapore on Tuesday, Mr Cameron denounced corruption as the “enemy of progress” that held back growth and fuelled al-Qaeda and migration.

“We have a strong relationship and that enables us to talk difficult issues. I want to raise some of the issues I raised in my speech earlier in the week, such as ethics in business and fighting corruption,” he is understood to have said.

“We should be working together for an open society and open economy.”

Mr Najib is facing growing calls to resign over the allegations, which he denies. He this week fired attorney-general Abdul Gani Patail, who was investigating the scandal, and Muhyiddin Yassin, who had criticised him over the affair.

David Cameron under Fire for Talks with Scandal Ridden Premier Najib Razak


July 29, 2015

Foreign Affairs: David Cameron under Fire for Talks with Scandal Ridden Premier Najib Razak

by Beh Lih Yi in Jakarta

http://www.theguardian.com/world/2015/jul/28/david-cameron-talks-scandal-malaysian-leader-najib-razak

David Cameron

David Cameron under fire ahead of talks with scandal-hit Malaysian leader

Malaysian Prime Minister Najib Razak sacks Deputy and country’s top attorney after questions over claims he took millions from government investment fund.

British Prime Minister David Cameron is facing criticism for pushing ahead with a visit to Malaysia this week at a time when the south-east Asian nation’s leader is embroiled in an escalating corruption scandal and has stepped up a crackdown on dissent.

Malaysian Premier Najib Razak has been urged to resign after media reports alleged some US$700m linked to a troubled state investment fund (1MDB) had ended up in his personal bank accounts.

Razak has denied taking any public funds for personal use, and his government has lashed out at criticism by mounting a crackdown on dissent that has seen two newspapers suspended and a British-based whistleblowing website blocked.

MuhyiddinFormer Deputy Prime Minister of Malaysia

On Tuesday, the Malaysian Premier removed his deputy Muhyiddin Yassin, who has openly criticised him over the scandal, just hours after the government sacked the country’s top attorney, who had been leading an official investigation into the corruption allegations against Najib.

Politicians and activists who have criticised the government have also been hit with travel restrictions, with one prominent opposition MP barred from leaving the country.

“There could have been a better time for the visit,” Wan Azizah Wan Ismail, Malaysia’s opposition leader, told the Guardian ahead of Cameron’s arrival in Kuala Lumpur on Thursday, the final stop of a four-nation tour of south-east Asia.

The MP, who is also the wife of jailed opposition politician Anwar Ibrahim, called on Cameron to raise the scandal and human rights issues when he holds talks with Najib, and said he should also meet opposition parties to get “a better idea” about the political turmoil engulfing the former British colony.

“He must not only meet with the government but the opposition as well,” she said. “He should talk about freedom, the suspension of the newspapers and the use of the sedition law – something that is so repressive – and the welfare of the former opposition leader [Anwar].”

Liew Chin Tong, a lawmaker from the opposition Democratic Action party, said Cameron must tell Najib categorically to “respect the rule of law as well as human rights”.

Cameron is hoping to boost trade ties between the UK and the region during his visit that also includes stops in Indonesia, Singapore and Vietnam. Efforts to fight jihadist group Isis are also on the agenda during his stops in Muslim-majority Indonesia and Malaysia.

Michael Buehler, a south-east Asian expert at London’s School of Oriental and African Studies, said Cameron would not be “entirely honest” if he ignores the corruption claims during his visit, as business and politics remain closely linked in the region.

“One cannot talk about business without also mentioning the political conditions in these countries. Cameron’s visit is indeed untimely, given the escalation of the corruption scandal in the country,” Buehler said.

Writing in the Daily Mail last week about the trip, Cameron himself vowed to put the fight against graft top of his agenda after claiming critics were “wrong” to say the UK should avoid doing business with countries with barriers to trade, including corruption.

“Many in South East Asia have led the battle against corruption, which costs the global economy billions of pounds a year. Britain is joining them in that fight – I’ve put the issue at the top of the global agenda,” he wrote.

Najib’s move against the deputy premier came in an unexpected cabinet reshuffle just two days after Muhyiddin broke ranks and openly urged Najib to tell “real facts” over the scandal and answer questions over whether he received the money.

Announcing the decision, Najib said “differences of opinions shouldn’t be expressed openly” among his cabinet members, according to the Malay Mail Online website.

The cabinet reshuffle was seen as an attempt to shore up support for the beleaguered Najib in the cabinet, as an internal tussle within the ruling party in the coming days could put pressure on the Malaysian leader to resign.

Singapore: Understand History and Lee Kuan Yew


July 5, 2015

Singapore: Understand History and Lee Kuan Yew

SingaporeLee Kuan Yew’s Legacy

Given what is happening in Malaysia, it is refreshing to learn that not far from our shores is an island state called Singapore. It will be constant reminder for  all  of what it would take to build a modern nation state with first class infrastructure and a united nation. It took  leadership, true grit,  a talented team, and honest government. That leader was the late Mr. Lee  Kuan Yew who had a team of loyal and dedicated lieutenants and their successors. So let history be the judge of their achievements.–Din Merican

The Malaysian Ringgit’s Slide


June 11, 2015

The Malaysian Ringgit’s Slide tells the story of Malaysia’s Political Mess

Story by G. Sharmila

ringgit-slide

The weakening ringgit appears to have investors scared, with the currency hitting a 9-year low of 3.77 against the US dollar on Monday. But are investor concerns warranted, or simply overdone? Tiger examines the matter in greater detail.

On Monday, the ringgit hit a 9-year low, the lowest level since January 2006, according to a Bloomberg report on the same day. Yesterday, the ringgit closed at 3.7525 against the US dollar, with some analysts reportedly saying this was merely a technical correction. Additionally, data from Bloomberg showed that the ringgit had fallen to as low as 3.76 to the US dollar.

READ THIS:

http://www.kinibiz.com/story/markets/171739/ringgit-slumps-to-a-9-year-low.html?utm_source=newsletter1&utm_medium=email&utm_campaign=kinibiz-newsletter

Market talk says that the ringgit would break the 3.8 level today. At the time of writing, this hasn’t happened yet and Tiger doesn’t think it will last even if it does. Even if it does, it is not a disaster unless there are fundamental reasons for the ringgit weakness. In the long-term, the currency performance is tied to economic fundamentals, and the fundamentals are still strong.

In fact soon after the Bloomberg report, there was another one from the same agency which said that the ringgit was the best performing currency in the immediately preceding two weeks! That simply indicates how volatile conditions are in the currency market now.

US Federal Reserve

An economist Tiger spoke to said that increased volatility and downward pressure on the ringgit is expected preceding the meeting by the US Federal Reserve next week. Other economists have noted in previous media reports that investors have been selling the ringgit in anticipation of an increase in interest rates by the Fed, which could very well be true as interest rates do tend to influence currency movements.

It is also worth remembering that the ringgit is a managed float currency, which means that its exchange rate is allowed to appreciate and conversely, depreciate against other currencies according to market conditions. With a managed float currency, the central bank intervenes when necessary to stabilise the currency. As the economist pointed out to Tiger, it is not unusual for the current weak condition of the ringgit as the greenback has also been strengthening against other currencies of late.

There are also other short-term concerns such as uncertainty over 1Malaysia Development Bhd or 1MDB but this would have already been pretty much discounted and is probably already in the equation unless there are unexpected developments here. Also, the issue has taken a political dimension with pressure on the prime minister to step down which adds to uncertainty.

Meantime, there is the overhang of a possible downgrade on Malaysia’s sovereign rating by international rating agency Fitch which has said that there is even chance of it downgrading Malaysia. Again this has been in the market for a while and is possibly discounted.

But back to economic fundamentals. Economists have pointed out that the country’s 2015 gross domestic product forecast of 5.5% is healthy and that investor reactions towards falling crude oil prices have already been priced in. In fact the subsequent recovery from the earlier huge fall in oil prices was said to be positive for the ringgit as it will reduce pressures on the trade account. They have said that the investor selldown of the ringgit has been sentiment-driven as opposed to motivated by a drastic change in fundamentals.

According to a forex strategist from AmBank, the ringgit is falling due to positive economic data from the US and timing over the hiking of interest rates there following the easing of liquidity injection there. He also said that “increasing political noise over the sensational development in 1MDB, risk of fiscal slippage and threat of a sovereign rating downgrade by Fitch Ratings have caused the sell-off of the ringgit as well.”

To illustrate the strength of the fundamentals, let’s take a look at Bank Negara Malaysia (BNM)’s foreign exchange reserves. When forex reserves decrease, it signifies an outflow of funds. If you look at the graph below, the country’s forex reserves have been on the rise from 1997 to 2013, except for dips during the 1997/1998 Asian financial crisis and the 2007-2009 period, which coincides with the global financial crisis.

International-reserves-at-BNM

In fact, data from the BNM website show that the forex reserves as of May 29th this year are RM394.3 billion, unchanged from the RM393.4 billion in the fourth quarter of 2014. As economists have noted in the past, the amount of forex reserves is sufficient to absorb foreign outflows in the short-term and since the country’s current account remains in surplus, there’s every chance that the experts are right about the ringgit selldown being sentiment-driven.

The current account is the balance of trade between a country and its trading partners, including all payments between countries for goods, services, interest and dividends. A current account surplus is a positive thing for the long-term outlook for the ringgit because it implies that a country is a large exporter and has a positive balance from inflows and outflows of trade and service.

The balance of payment includes the current account plus outflows of capital, both long-term and short-term. What is happening right now is that short-term portfolio outflows have been high in recent weeks. These outflows tend to weaken the ringgit because ringgit funds are converted,  into other currencies, mainly the US dollar. But unless the outflows are sustained, the pressure on the ringgit eases off after some time.

BNM data show that the current account balance was RM9.968 billion for the first quarter of this year, versus RM5.666 billion for the immediately preceding quarter – the last quarter of 2014. That indicates that the trade and services account has actually done better during the period, recording a surplus which is substantially higher.

What’s happening with the ringgit now is essentially volatility, due to the factors mentioned above and this too, shall pass. Experts have said that the volatility is short-term due to portfolio outflows, hence once sentiment improves and outflows normalise, the fundamentals shall prevail.

But until the interest rate position in the US becomes clearer, one should expect volatility of not only the ringgit but all other currencies as well in the coming months. That does not necessarily indicate a fundamental change in the economic position.

11th Malaysia Plan: Quick Impressions


June 2, 2015

11th Malaysia Plan: Quick Impressions

http://econsmalaysia.blogspot.com/2015/06/11th-malaysia-plan-quick-impressions.html#more

 by HishamH
 11th Malaysia Plan2

This was supposed to have come out a couple of weeks ago, but I ran out of time before leaving on a holiday. Just some quick thoughts on the 11MP:

  • Overall, the 11MP underscores the shift in the government’s strategy. There’s been a gradual but noticeable shift from boosting growth to labour and social issues in the last few years. This means potentially accepting a lower rate of growth to making sure that what growth we do get is more equitably shared.
  • A common thread in the commentary, and in my conversations with people on the 11MP, is the lack of detail on projects/programs in the 11MP. Thinking about it later that night, I remembered why. There’s a concurrent complaint that the annual government budgets are lacking in strategic direction, but full of projects and programs. See where I’m heading with this? The Malaysia Plans establish strategy and budget priorities; the details are contained in the annual budgets. The two should always be referenced together.
  • Another complaint is that the 11MP isn’t really revolutionary. I don’t think it needs to be. The basic ideas haven’t really changed for a generation, only the emphasis. But I’m encouraged by the larger focus given to issues of inequality.
  • The overall macro targets aren’t a stretch, but some of the individual policy targets are. I still don’t understand the mechanisms underlying international differences in the wage to GDP ratio, for example. Putting in a target without defining the intervention space makes achieving the target that much harder. Again, the (understandable) lack of detail on specific programs is a drawback.
  • Like the 10MP but unlike all the previous Malaysia Plans, there is a stronger emphasis on outcomes and achievements. One of the issues I’ve always had with previous Malaysia Plans is the consistent lack of mention of what targets were actually met in the previous plan period. Both the 10MP and 11MP fill this transparency gap, which makes for greater accountability.

Apart from the above, this 5 year plan hits all the right notes – productivity, inclusivity, environmental sensitivity, and even a chapter on beyond 2020. But the devil’s in the details – policy/program formulation and implementation will be key (as they always have been).

Lee Kuan Yew and the Asian Model


March 31, 2015

Lee Kuan Yew and the Asian Model

by Martin Khor@www.thestar.com.my

Lee-Kuan-YewAn important legacy of Lee Kuan Yew was the formulation of one of the Asian models that have been driving successful Asian economies forward.

HUNDREDS of obituaries and articles have been written about Lee Kuan Yew, who was laid to rest last weekend.

The articles were overwhelmingly in tribute of the vision, leadership qualities and achievements of Singapore’s founding father, who left his imprint on so many aspects of the island state’s system and way of life.

The tributes were mixed with criticisms of the political authoritarianism that was mixed with the spectacular economic growth.

There will be many PhDs written, which would make judgments on his side of the story and that of the critics. As for Lee’s own assessment, he summed it up thus: “What did I achieve? A successful Singapore. What did I give up? My life.”

On the TV news of LKY’s passing, I was impressed by an interview with a young man who runs an Internet views service. He said this was the time to pay tribute to Lee and his achievements, after which would come a period of collective reflection on what happened in the past five decades and how Singapore should go forward.

The times have changed. Singapore too is changing and will doubtless change even more. One of LKY’s major achievements was to be a pioneer of combining the roles of the state and the market in a way that succeeded in generating and sustaining high economic growth, and with widespread social benefits. He did it in a way that was suitable, or that was adapted, to the situation of a nation with a small population, no natural resources and no significant market.

He opted for the model of being a “global city”, that used the world as a source of capital, technology and markets, with foreign companies providing the engine, the world’s population providing the market, and Singapore providing its geographical location and skills.

Singapore also diversified from trade to oil refinery and industry and to being also a global financial centre. It is the combining of state and market that made it part of the East Asian models of development.

This strategy is based on having the state play the leading role not only in setting the overall framework for development but also sometimes playing a direct role in it.

By also involving the private sector in an important role, this model is different from the old state socialism, and by being based on the manifold roles of the state; it is also different from laissez faire free market capitalism. While most manufacturing companies are private and foreign-owned, the state in Singapore has played important roles in selected industries, in banking, in transportation and a range of other services.

Public housing was based on a combination of the state being the developer, construction being undertaken by private contractors, and the ordinary people being the owners by paying the mortgage through their salaries, the whole enterprise organised by the Housing Development Board and the Central Provident Fund.

The state’s overwhelming role in the social sector was based partly on subsidies but also significantly on self-financing by individuals, through the CPF scheme that includes withdrawals for housing and medical needs.

The Economist magazine in 2012 credited Singapore for starting what it called “the new kind of state capitalism” which it said had become the fashion in emerging markets and had come to be a major challenge to Western liberal capitalism.

In fact, there are important variations of this so-called “state capitalism”.Singapore relied on foreign companies to lead its industrial revolution (while the state focused on providing services). Japan and South Korea built their own domestic industries, with eventually world-beating private companies that were egged on by a lot of state assistance and nurturing.

In Malaysia, we have our own model, with the state taking over ownership of the once foreign-owned plantations and tin mines, through state-owned commercially run companies. It has its own national oil company and a production and benefit-sharing arrangement with the global oil multinationals and foreign companies predominant in several industrial sectors; while the state also has its own enterprises in banking, real estate development, telecommunications, utilities, agriculture and manufacturing, usually in competition with local and foreign private firms. The Malaysian model is a hybrid of state and private enterprises, often having both co-existing and competing in commercial activities.

China is said to have been inspired by the Singapore model. After Deng Xiao Ping’s visit to Singapore in 1978, he began the change in the old China model, which through many metamorphoses is now an evolving system of its own – a confusing and complex mixture of state and private enterprises, but always with the leading role of the state.

It has become its own unique hybrid model, combining the Singapore model of attracting foreign investors with the Japan-Korea model of establishing domestic enterprises and industries which dominate the local market and then increasingly penetrate the world market in trade and investment.

The Western countries which now espouse “free market economics” grew on the basis of “state capitalism” in their formative years. Indeed, often a much cruder form of it. Example: the East India Company owning economic sectors in many Asian colonies, supported by military colonial rule and massive economic subsidies.

Having helped their companies to grow into giants, it appears they now want to forbid others from taking policy measures to do so.Even now, the Western countries give massive financial and other forms of support to their agriculture sector. Free market economics is rejected by their states in sectors where they are unable to freely compete.

The East Asian models are now being challenged by Western attempts to de-legitimise the economic role of the state, the latest being free trade agreements such as the Trans Pacific Partnership Agreement, in which the state’s policy space to set the rules in investment policies, government procurement and key services such as finance and telecommunications is being narrowed.

The TPPA also has a section not present in previous FTAs, which seeks to discipline how governments treat their state-owned enterprises (SOEs). It forbids the state from giving any advantages to these enterprises, and the SOEs are not allowed to give an advantage to locals when they buy or sell services and products.

The concept that the “free economy” is best and the state has no role except to enable it has been promoted in developed countries for export to developing countries as the recipe for development. But they did not practise it when they were developing and still do not practise it in areas where they cannot compete.

Martin Khor is Executive Director of the South Centre, a research centre of 51 developing countries, based in Geneva. You can e-mail him at director@southcentre.org. The views expressed here are entirely his own.