Liberalisation and empowerment the path to Malaysian prosperity


March 25, 2010

Liberalisation and empowerment the path to Malaysian prosperity

Author: Editorial Board, ANU

https://www.eastasiaforum.org/2019/03/25/liberalisation-and-empowerment-the-path-to-malaysian-prosperity/

It’s nearly a year since the Malaysian people overwhelmingly cast aside the domineering, divisive and corruption-riddled government of Najib Razak for an alternative led by Mohamad Mahathir that promised renewed focus on the people’s interests. The new Pakatan Harapan government undertook to restore good governance, raise the bar for ministers and civil servants, recover embezzled funds and deliver them back to Malaysians as cost of living relief.

A view of a building site beneath the Petronas Towers in Kuala Lumpur, Malaysia, 18 February 2016 (Photo: Reuters/Olivia Harris).

Translating rhetoric into action has thus far proven an uphill battle for an inexperienced government accustomed to life in opposition. It’s struggling to turn the vision into concrete reforms, as it tries to navigate a hostile upper house and entrenched vested interests. Progress has been confined to a handful of easy wins and the multiplication of committees to continue decades-old debates about well-understood policy failings. Malaysians are becoming restless for the government to deliver on the promise of a ‘New Malaysia’ that secures livings standards regardless of ethnicity.

Efforts to deconcentrate centralised power structures and break up state monopolies are central to reinvigorating the economy. This will enable more effective governance and help tackle endemic corruption. Malaysia’s Federal Government commands over 88 per cent of total government revenue and expenditure (the share is closer to 50 per cent in federations like Australia and the United States), leaving almost 170 states and local authorities with limited resources to address local needs. Imperious policymaking from the administrative capital of Putrajaya coupled with non-elected local governments bedevil the effective delivery of local services including law enforcement, education and healthcare.

This week’s lead article by Wing Thye Woo argues that ‘[g]rowth requires state governments that are empowered to plan and implement their own development strategies’. This would require a significant shift from the highly political allocation of development finance that penalised opposition-led states under the former government.

Government-linked corporations (GLCs) dominate the Malaysian economy and that needs to change. GLCs command a majority share of market capitalisation and key sectors of the economy including natural resources, utilities, construction and finance. Policies that reinforce GLC dominance stifle innovative and dynamic small and medium enterprises and competitiveness.

As Woo says, ‘GLCs may perform well in theory, but they don’t in practice — officials inevitably use them for political patronage and personal corruption. GLCs are political creatures, not economic instruments … Downsizing the state-related sector through privatisation is necessary for economic efficiency, political accountability and income equality’.

The government has acknowledged the problem but has been tentative in its approach to this critical reform. Its first substantive policy announcements and budget provided a major setback, reinforcing the role of GLCs in ethnic Malay development strategies and increasing government dependence on GLC dividends. It’s unclear whether the government now has the clout and political fortitude to pursue a privatisation and competition agenda.

Decentralisation is more than just government ownership and power-sharing; it encompasses a shift in the mentality of government from one underpinned by heavy-handed direction to one of empowerment. This requires the creation of institutional and regulatory environments that empower people to shape the policies that affect them, private business and entrepreneurship to fuel the engine room of economic growth, and all levels of government to deliver an enabling environment in which private actors flourish.

Empowerment means replacing ethnic discrimination with inclusive approaches to policy making, lifting up all low-income households. It means constructing a tax and transfer system that reduces rather than perpetuates inequality and cost of living pressures, positively reshaping the social contract between taxpayers and government. And it requires liberating the education system from the mechanistic, dictatorial, one-size-fits-all approach that has prioritised a one-eyed conception of nation-building over the development of inquisitive and adaptable minds.

Effective governance starts with a recognition that meaningful reforms may not please everyone but if done well can benefit all. It requires the strength of conviction to stay the course in the face of interest group pressures, avoiding discouraging U-turns like abandoning intentions to sign the United Nations International Convention on the Elimination of All Forms of Racial Discrimination. It entails more than a solitary sugar tax to raise funds for development and social welfare when the tax revenue share of GDP is a third of the OECD average. And it requires delivering substantive reforms to education in the light (or in spite) of next month’s special task force report.

The government’s recent by-election defeat in Semenyih provides a wake-up call that its support among middle-class Malaysians depends on improving its performance not on disparaging its predecessor. That means harnessing the electorate’s heightened expectations towards charting a more prosperous course for the economy, governance and for the Malaysian people.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

 

Decentralisation the best bet for Malaysia’s growth

Author: by Dr. Wing Thye Woo, Sunway University

Malaysia’s burgeoning middle class has high expectations for future economic development. But the nation won’t escape the ‘middle-income trap’ and won’t have socially-inclusive growth under current government policies. A range of reforms that deliver decentralised decision-making is needed to build the knowledge-led economy to propel Malaysia to the next level of development.

A view of the Kuala Lumpur city skyline in Malaysia, 7 February 2018 (Photo: Reuters/Lai Seng Sin).

Malaysia’s current policy framework has its roots in the 1970 New Economic Policy (NEP) and its socio-political counterpart ‘Ketuanan Melayu’ (Supremacy of Malays). NEP has succeeded in building a large Malay middle class that is informed, skilled and confident about its identity. But it’s also well aware that these two policies rooted in the past are not capable of transforming Malaysia into a developed nation.

To meet these aspirations, reform is urgently needed in three key economic areas. Each area requires a common reform component: the careful entrenchment of decentralised decision-making.

First, the state’s administrative structure inhibits innovative policymaking and prevents effective oversight. The federal government is much larger and more cumbersome than state governments and has disproportionate power.

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Contrasting budgets and spending power reveal the imbalance between federal and state governments. The federal government has legal authority to impose income and sales taxes. But state governments must rely on land-related transactions and fees on small-ticket items like hawker licenses for independent revenue. The provision of most public services is done through branches of federal ministries operating at the state level.

State expenditure is determined by fiscal allocations from the federal government to state governments, and the amounts allocated depend on political considerations. Under the former Barisan Nasional (BN) government, opposition-controlled states received budgetary allocations that were proportionately much smaller than BN-controlled states. State governments are banned from borrowing to finance development projects, and that means they are unable to raise revenue to build the infrastructure needed to clear production bottlenecks in local industries.

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Growth requires state governments that are empowered to plan and implement their own development strategies. Effective decentralisation requires each state government to have its own civil service. States will also need much larger shares of tax revenue, based on factors like developmental stage and tax revenue contribution. They should also be allowed to borrow to finance local infrastructure projects — with the commitment that there will be no federal bailouts — and be invested with significant responsibilities that are currently held by federal ministries.

The second key task is reforming government-linked corporations (GLCs). GLCs are crowding out the private sector, reducing economic dynamism. They also enable corruption that increases income inequality.

GLCs may perform well in theory, but they don’t in practice — officials inevitably use them for political patronage and personal corruption. GLCs are political creatures, not economic instruments.

Competition between GLCs and private firms is intrinsically unfair and harmful for overall growth. No matter how inefficient GLCs are, they can always count on government bailouts. They undermine economic dynamism by buying up their more efficient private competitors. Worse still, they prevent the development of a dynamic Malay business community by pulling capable Malays entrepreneurs away from starting private businesses and into cosy, life-long GLC jobs.

Downsizing the state-related sector through privatisation is necessary for economic efficiency, political accountability and income equality. The only two considerations in choosing buyers should be the size of the bid and the promotion of industry competition. A well-prepared and transparent privatisation process is more important than a speedy one.

The third key economic reform task is diversifying and expanding the banking system. The financial sector’s monopoly structure damages economic performance and worsens income inequality by suppressing the operations of small and medium-sized enterprises (SMEs).

The 1997 Asian financial crisis convinced the Malaysian government that the banking system would be less prone to crisis if regulators could more easily monitor them. The result was the forced consolidation of smaller banks into 10 big banks in 2000.

This action made state investment companies the controlling shareholders in most commercial banks, effectively creating a state-owned banking monopoly. These banks are slow in adopting better payment practices and providing new financial products, shoddy in their treatment of small retail customers, and biased in lending towards GLCs. The small number of banks and the extent of state control in the largest banks are to blame.

One serious defect of the bank consolidation was that Malaysian SMEs began experiencing difficulties in getting capital from the large banks, replicating the international experience that SME financing comes mostly from small and medium-sized banks. In response, the Malaysian government established the state-owned SME Bank in 2005. But the SME Bank is not meeting the sector’s capital needs. It also has the highest non-performing loan ratio in the banking industry. The slow growth of the SME sector means new Malay bus­­­inesses are not emerging and the distribution of income is worsening.

Reforming the banking sector will mean allowing private small and medium-sized banks to exist again, reducing the government’s bank share holdings, and removing restrictions on foreign banks and their activities.

The NEP is essentially ‘Ketuanan Centralisation’ (Supremacy of Centralisation) in the economic sphere, manifesting as ‘Ketuanan Federal Government’ in governance, ‘Ketuanan GLC’ in production, and ‘Ketuanan Monopoly Bank’ in finance.

NEP cannot mobilise the entire brain-power of Malaysia for knowledge-creation because it prevents entrenchment of excellence in socio-economic institutions, and induces brain drain and capital flight. For Malaysia to escape the middle-income trap, ‘Ketuanan Centralisation’ must be purged from the public policy framework to make way for knowledge-led growth.

Wing Thye Woo is President of the Jeffrey Cheah Institute on Southeast Asia and Director of the Jeffrey Sachs Center on Sustainable Development at Sunway University and Professor of Economics at the University of California at Davis; he holds adjunct academic positions at Fudan University and Chinese Academy of Social Sciences.

 

 

Investing in care key to boosting economic growth


March 23, 2019

Investing in care key to boosting economic growth

Authors: Elizabeth Hill, Marian Baird and Michele Ford, University of Sydney

https://www.eastasiaforum.org/2019/03/19/investing-in-care-key-to-boosting-economic-growth/

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The need to increase women’s labour market participation and economic security is on the ‘to do’ list of most governments and major global institutions. By 2025, global GDP could increase by 26 per cent — US$28 trillion — if women participated in paid work to the same extent as men.

But if this goal is achieved, who will look after the children, the elderly, the disabled and ill? Although both women and men participate in care, global estimates show that women assume responsibility for around three-quarters of all unpaid domestic and community labour.

Tensions between women’s participation in paid work and unpaid care work are especially acute in Asia and the Pacific. In this region, women perform more than four times as much unpaid labour as men. Managing this unpaid workload makes it difficult for women to increase participation in paid employment at a level commensurate with their increasing levels of education and training.

Home to over half the world’s population, the Asia Pacific is diverse and changing rapidly, with economic growth delivering new opportunities for women. Hundreds of millions of young rural women have been drawn into factory work, English-speaking women are employed in call centres and back-office processing centres, and highly educated women are engaged by local and global firms in the full range of professional services. This changing employment landscape, alongside other social and economic changes, has significant implications for households and for the care work traditionally performed by women.

Data from Indonesia, the Philippines, Vietnam and Myanmar reveal some of the key points that must be addressed if women’s participation in paid work is to increase. In all four countries women’s labour-force participation remains below men’s, even though it has increased steadily since 2000. High rates of informal employment, common to the region, mean that most women in paid work remain beyond the purview of labour laws and have little or no access to critical social protections like paid maternity leave.

Even when women are formally employed and covered by workplace laws, problems with implementation are pervasive and leave black letter law impotent in the daily lives of many women workers. The gender pay gap, limited access to career progression and associated under-representation in senior management roles weaken many women’s attachment to the labour market.

Demand for care is also intensifying. Despite falling fertility rates, care for children remains a pressing issue in Indonesia, the Philippines, Vietnam and Myanmar. Rapidly ageing populations also raise the demand for care services. Between 6 and 10 per cent of the population in all four countries is projected to be over 65 years of age by 2026.

Governments are vital in delivering social services to help households reconcile their work and care responsibilities. Currently most Southeast Asian governments report low public expenditure on such essential care infrastructure as public childcare, aged care services, age or disability support pensions and maternity leave.

Governments are beginning to pay attention to these issues, but Indonesia, the Philippines and Vietnam still spend less than the regional average on these services. Yet recent International Labour Office calculations show that even low-income countries can afford the cost of social protection for the most vulnerable citizens.

Inadequate government provision of social services infrastructure leaves millions of households across Southeast Asia reliant on low-paid, unregulated and mostly female domestic labour. The unregulated nature of this work leaves many care workers vulnerable to exploitation and abuse. The long hours associated with many of these jobs makes it difficult for these women workers to manage their own care responsibilities. Decent jobs for informal and formal domestic care workers will be essential in making sure that all women are able to reconcile their work and care duties.

Investment in care infrastructure must be part of the workforce participation agenda. Official efforts to improve economic empowerment and security for women requires unpaid care work to be recognised, reduced and redistributed. This will require considerable expenditure on essential care infrastructure and may challenge small and low-income countries in Southeast Asia. But failure to build gender equitable workplace and public care infrastructure will leave global calls for an increase in women’s labour market participation floundering.

Care infrastructure includes legislated workplace policies that allow for family and community care, publicly funded formal care services, and decent work and wages for the care workforce.

While care work is essential to the gender equality equation, it is rarely included in standard prescriptions for increasing women’s economic participation. This is partly because women’s unpaid household labour is not included in GDP, leaving care work invisible to policymakers. But the significant gains to national prosperity and well-being attached to women’s increased economic participation make this an urgent issue.

Workplace and public policy design that promotes recognition and redistribution of care between men and women is essential for gender equality at work and in the home. If women are to take up their rightful place in the region’s workplaces, men will have to step up and take on additional care work. Generating a global understanding that care roles can and should be shared between men and women can act as the first step towards more gender-equal work and care.

Elizabeth Hill is Associate Professor of Political Economy at the University of Sydney.

Marian Baird is Professor of Gender and Employment Relations at the University of Sydney.

Michele Ford is Director of the Sydney Southeast Asia Centre and an ARC Future Fellow at the University of Sydney.

This article is abridged from a version that appears in the latest issue of East Asia Forum Quarterly, ‘Investing in Women‘.

 

 

Time for bolder steps from ASEAN


March 4, 2019

Time for bolder steps from ASEAN

By : Ponciano Intal Jr, ERIA

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ASEAN is now facing circumstances that are fundamentally different from anything it has dealt with before. They require a much more proactive approach on international and regional integration strategies. ASEAN is unlikely to maintain its centrality unless its leaders are prepared to take bold steps, beyond ‘business as usual’.

 

ASEAN has come a long way from its beginnings in 1967. It transformed an area of turmoil, antagonism and violence into a zone of cooperative peace and prosperity, and disparate economic backwaters into an increasingly integrated global growth powerhouse. A region that was a Cold War pawn is now central to the economic and political-security architecture of the Asia Pacific, and Southeast Asian peoples, once largely cut off from one another, are becoming a strong socio-cultural community.

A major reason for this remarkable transformation is that ASEAN leaders collectively stepped forward when faced with tremendous challenges. ASEAN crisis-points in the past are frequently forgotten when assessment is being made of its capacity to deal with new challenges. For example, leaders replaced Preferential Tariff Arrangements with the ASEAN Free Trade Area (AFTA) in 1992 when faced with potential ’fortresses’ in the European Union and the North American Free Trade Agreement. AFTA is still driving regional integration and the ASEAN Community, despite the 1997 financial crisis and the shift in investment flows out of ASEAN and into surging China.

But the new challenges require an even bolder response.

The realignment of great power relations in the Asia Pacific is causing great geopolitical uncertainty. The digital and fourth industrial revolution is expected to accelerate, generating significant regional unease about its impact on lower end employment. On the other hand, there is transformative potential for greater productivity in firms and industries, better growth opportunities for small and medium enterprises, and enhanced resiliency and sustainability across the ASEAN economies.

The surge in protectionism and anti-globalisation in much of the developed world underlines the priority of pursuing inclusive growth, economic openness and regional integration in ASEAN and the wider region through the proposed Regional Comprehensive Economic Partnership (RCEP). The rules-based multilateral trade regime and economic order is vital to ASEAN’s prosperity, but is under threat. The vulnerability of many ASEAN countries to climate change also demands sustainable and resilient development.

The next two decades will see history’s largest increase of middle and upper-middle classes in the India–ASEAN–China corridor, dubbed the ’golden arc of opportunity’. ASEAN needs to be well positioned to take advantage of this opportunity. With far less technological capability and skilled manpower than China or India, ASEAN has to improve markedly its technological prowess, human capital, institutions and infrastructure.

So what can ASEAN leaders do to overcome the immense challenges the region faces?

Nimble and proactive diplomacy that asserts ASEAN centrality and harnesses the collective leadership of middle powers can do much for peace, security and prosperity in the wider region. Bringing together middle powers to raise their concerns will help constrain China–US competition and confrontation. ASEAN can also provide a strong and unified voice to ensure an inclusive regional architecture emerges.

Asian collective leadership is now essential to maintaining and strengthening multilateral rules and trading systems that ASEAN and the wider region rely on for economic prosperity and political security. Successfully concluding RCEP is just the start. But it will be important to ASEAN’s global credibility and voice in brokering a way forward with reform of the multilateral trade regime.

The biggest threat to ASEAN’s open and inclusive development is that to the rules-based multilateral trading system and international economic order. This system is a core interest of ASEAN and other countries in this region. The trade war has highlighted deficiencies in the World Trade Organization and international trading system that need to be addressed. ASEAN and Indonesia through their prominent participation in the G20 process have a common and urgent interest with like-minded partners in framing Asia’s proactive response to this challenge.

A more vigorous and active regional and international diplomacy will only be successfully built on stronger ASEAN foundations. Leaders will need to implement the ASEAN Economic Community Blueprint and other measures that realise an integrated, connected and seamless ASEAN single market and production base. This would help ASEAN compete with China and India’s more liberal trade and investment environments and allow deeper integration across the region.It will also help ASEAN stand firm in its international diplomacy.

Deeper ASEAN integration means making fully operational national single windows, the ASEAN Single Window, national trade repositories, the ASEAN Trade Repository, the ASEAN Customs Transit System, and ASEAN self-certification schemes.

It also means ensuring transparent and streamlined non-tariff measures and a more concerted effort to strengthen regional and national standards and conformance quality infrastructure and systems. Leaders should also develop a strong and liberalised services sector and an open investment regime with freer flow of data and payments, institutionalise ASEAN’s Good Regulatory Practice, and implement a quality Regulatory Management System in each ASEAN country. There also needs to be greater commitment to skills mobility and development within the region, including greater focus on lifelong learning and skills training.

It is also essential to prepare for, adapt to and harness the digital and fourth industrial revolution. This requires creating stronger institutions and policies, with many already embedded in the ASEAN Community Blueprint. Embracing the digital revolution and adapting to new technologies under Industry 4.0 would drive ASEAN forward in upgrading its economies, enhance resilience and sustainability, empower its people, strengthen people engagement and connectivity, improving governance, and strengthen ASEAN’s innovation ecosystem.

Put together, these measures will revitalise ASEAN into a vibrant and influential grouping that is set for success in the decades to come.

Ponciano Intal Jr is a Senior Economist at the Economic Research Institute for ASEAN and East Asia.

 

 

 

 

The emergence of Suukyinomics


March 3, 2019

The emergence of Suukyinomics

 

Author: by Naing Ko Ko, ANU
http://www.eastasiaforum.org

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State Counsellor Aung San Sun Kyi’s National League for Democracy (NLD) administration in Myanmar has been heavily condemned by international policy analysts for its absent economic vision and lack of a tangible policy on minority management. But it seems now there is a plan: Suukyinomics, a brand that began with the announcement on 28–29 January 2019 to amend the 2008 military-backed constitution.

 

Suukyinomics is built on the rule of law and institutional economics. It consists of two broad plans. The Myanmar Sustainable Development Plan (MSDP) aims to achieve a peaceful, prosperous and democratic country. The Myanmar Investment Promotion Plan (MIPP) aims to transition Myanmar to a middle-income economy and persuade foreign investors to part ways with US$200 billion over the next two decades.

The MSDP is structured around three pillars, five goals, 28 strategies and 251 action plans. All are firmly aligned with the United Nations’ Sustainable Development Goals and the 12 Point Economic Policy of the NLD government. The MSDP aims to institute strong macroeconomic management and good governance, prudent fiscal discipline and the maintenance of a fiscal deficit no more than 5 per cent of GDP.

The MIPP aims to integrate domestic and foreign investment promotion in line with the directions of the National Comprehensive Development Plan (NCDP) and the Investment Policy of 2016. The MIPP also aims to improve the business environment — by 2020, Myanmar’s rank in the World Bank’s ease of doing business index should drop to below 100.

The Investment Promotion Committee (IPC) will be established to facilitate implementation of the MIPP and is chaired by U Soe Win, the Union Minister of Planning and Finance. Whether it will be a success depends on the effectiveness of Myanmar’s 1.8 million bureaucrats who continue to be criticised for the quality of service delivery. The government of Myanmar is the largest employer in Southeast Asia and its union civil servant board (UCSB) is unnecessary — it is militant and has inflexible business practices.

There are three shining spots to be found in the NLD’s economic reform during the period 2016–19. The first is related to the rule of law. Anti-corruption efforts have been particularly successful. President U Win Myint’s recent dismissal of ex-advocate general of Yangon Han Htoo and ex-lieutenant colonel Yan Naing Tun represent a milestone in the recent five-decade history of judicial practice and public administration. U Win Myint and the NLD’s senior leadership have done well to clean up tainted politicians even within their own party, expelling elected members accused of misuse of entrusted power for private gain.

The NLD has also made successful gains in modernising the Central Bank of Myanmar (CBM). After being heavily criticised by local banks and the private sector for unseating the governor of the CBM U Kyaw Kyaw Maung, reformers U Soe Thein and U Bo Bo Nge were appointed as deputy-governors of the CBM with the remit of correcting institutional difficulties. The CBM is vigorously stabilising the economy by controlling inflation, reducing the money supply and regulating its money and financial markets after issuing the Burmese Way to Basel Regulation in July 2017.

The CBM-floated foreign exchange rate now permits 13 foreign banks to loan project financing and trade financing. Recently, the CBM allowed for the Japanese yen and Chinese yuan to be used as convertible currencies to tackle the dollarisation of trade at Myanmar’s borders. In contrast to previous administrations, the reference exchange rate of the kyat for account transactions against the US dollar and other currencies is released daily on the CBM website. A financial stability report and Myanmar’s monetary report are released periodically.

The third shining spot is infrastructure. Roads are being built and rail tracks upgraded nationwide. Some of Myanmar’s coastal areas and border trade routes are also undergoing development thanks to Chinese investment.

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According to Aung San Suu Kyi, it is the right time to invest in Myanmar. Still, provision of meaningful assistance for the stateless people of Arakan, Kachin and other minority groups in Myanmar’s border regions remains unaddressed.

Suukyinomics itself is ambitious and its outcomes will be tested in coming years as the NLD attempts to amend the militarised 2008 constitution. Whether the NLD remains in power come 2020 will partly depend on Aung San Suu Kyi’s tactical skill, strategic manoeuvring and the success or otherwise of this new economic plan.

Naing Ko Ko is a PhD Candidate at the Regulatory Institutions Network, College of Asia and the Pacific, The Australian National University.

 

Trump’s Foreign Policy wreckage in Asia


February 20, 2019

Trump’s Foreign Policy wreckage in Asia

Author: by Editorial Board, ANU

http://www.eastasiaforum.org/2019/02/11/trumps-foreign-policy-wreckage-in-asia/

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Right now, he is the most dangerous man in the Free World

The real worry is that beyond Trump’s Presidency all the signs suggest that both the impulse of the United States to engage multilaterally will be very difficult to repair and that Mr Trump has fractured trust in multilateral endeavours around the world.–Editorial Board, ANU

When the Trump administration came to power two years ago, the response by policymakers with a huge stake in the relationship — from the leadership of China to that of rusted on allies like Japan or Australia — was that Trump’s team would settle back after the election and that business would resume with the new administration more or less as usual.

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Burney Sanders– Will he do the BURN in 2020?

The United States was the crux of the economic and political security system on which the world has relied for more than three-quarters of a century. The global economic architecture which the United States and its allies put in place after World War II is now absent US leadership and care. Mr Trump and his team have trashed it. Trump’s trade war with China and his trade actions against others, including US allies like Japan, Europe and Canada, show utter disrespect for its core rules. This system is the international system of rules, whatever its weaknesses, on which Asia’s political security also vitally depends.

The wreckage of Mr Trump’s approach to foreign policy continues to pile up across Asia and around the world.

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Joe Biden must make up his mind soon

The immediate outlook, over the next year or two, promises rising economic and political uncertainty. The real estate market bargaining style that Mr Trump has brought to dealing with these issues undervalues the complex interdependence between the economic and political security interests that are at stake. It undervalues the damaging multilateral consequences of bilateral dealing. That’s what is so risky about the bilateralisation of the US trade negotiations with China, which as the largest trading nation in the world is wisely bound into the multilateral global trading regime. Japan too is under pressure to do a bilateral trade deal with Mr Trump — a deal that goes beyond the multilateral commitments it has made to members of the so-called TPP-11. On the US trade conflict with China, there’s a deepening perception gap with Washington, and diplomatic realignment despite the deep security undertow in some countries.

Asian policy leaders are still coming to terms with the reality that Mr Trump is different and that the United States which delivered his electoral success is never likely to be quite the same. But there’s a growing understanding in Tokyo, Jakarta and even Canberra of what’s at stake in dealing with Mr Trump’s administration and the more proactive response that will be needed to defend core Asian economic and political interests that transcend the anxieties that exist between a rising China and the rest of Asia.

In this week’s lead essay Sheila Smith argues that based on the past performance of the Trump administration, US policy in Asia will ‘be erratic and self-serving’ in the coming year as the Trump administration continues ‘to work out its issues with countries in the region bilaterally and sporadically’. The ‘more openly pugilistic US relationship with China’, she says, ‘unsettles nerves’ across the region.

But the main problem for US foreign policy makers, Smith reckons, is not the behaviour of other global actors, including those in Asia or elsewhere. The main problem is the ‘crippling divisions within the Trump administration itself, and between the administration and the legislative and judicial branches of the US government, [that] could make any attempt to marshal US resources into foreign relations almost impossible’.

The coming year, as Smith says, will likely be a year of domestic political entanglement for the President and his administration. The effect of the political turbulence surrounding the White House and the extent to which it dominates US foreign policy is one dimension. But the lack of focus and consistency in the direction of foreign policy strategy is an altogether higher order concern. Diminished expertise and experience at all levels of the Trump administration undermine the trust that allies, partners and even adversaries can put in the reliability of US posturing.

In the short term, these worries are focused on Mr Trump and his administration. Some think that Trump will have more freedom to pursue his ambitions for ‘America First’ around the world. The immediate issue is how to respond to the ‘America First’ momentum in all its dimensions. But even if there are fewer experts in the government to challenge Mr Trump’s vision, implementation of his goals remains a challenge, especially against what now appears to be comprehensive pushback by the US security community in almost every theatre.

The turmoil at home, Smith warns, could produce more brittle and reactive decisions. This could bedevil meaningful dealings with others around the globe because of the instinct to seek settlement prematurely, in the trade war with China or denuclearisation in North Korea, for example, instead of pursuing stable, long-lasting agreements that serve the interests of the United States as well as its partners.

The crrizeises Mr Trump proudly proclaims that he alone could have dealt with are largely of his own making ( and for he arrogantly thinks he deserves the Nobel Peace Prize). It’s hardly surprising that Asian allies and partners alike should worry about how Mr Trump might deal with a real crisis when there’s a significant move within the US Congress to put limits on the President’s use of nuclear weapons.

The chances that the Trump administration, in this mode, will succeed in mitigating global-system destabilising trade and other tensions with China or, alone, secure an agreement on denuclearisation with North Korea appear remote.

Only multilateral engagement on both these and other issues such as climate change is likely to deliver stable, mutually advantageous outcomes to the United States and all its partners in any of these areas. That’s not on Mr Trump’s agenda.

The real worry is that beyond Trump’s presidency all the signs suggest that both the impulse of the United States to engage multilaterally will be very difficult to repair and that Mr Trump has fractured trust in multilateral endeavours around the world.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

Thailand’s misstep on the way back towards democracy


February 18, 2019

Thailand’s misstep on the way back towards democracy

By Editorial Board, ANU

http://www.eastasiaforum.org/2019/02/18/thailands-misstep-on-the-way-back-towards-democracy/

Princess Ubolratana Rajakanya Sirivadhana Barnavadi, the elder sister of Thailand King Maha Vajiralongkorn. Picture: AFP

Last week, Thailand’s upcoming elections took a bizarre turn when Princess Ubolratana Rajakanya (pic above), Thai King Maha Vajiralongkorn’s elder sister, was registered as a prime ministerial candidate by Thai Raksa Chart, a Thai political party affiliated with the exiled billionaire and former prime minister Thaksin Shinawatra. The King swiftly condemned the move as unconstitutional and an inappropriate interference of the monarchy in Thai political affairs. But both interventions on the way to the 24 March elections leave many questions about the country’s transition from military rule along the road back towards democracy.

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By most reckoning, Thailand is the second most important member of ASEAN. Thailand is Southeast Asia’s second largest economy although its growth rate, which had been running at 6.5 per cent before martial law was imposed, is now languishing at under 1 per cent. Its people are more prosperous than the population-large Indonesia and, although stalled in the middle income trap, its economy includes the most advanced industrial production networks in Southeast Asia and is highly integrated into the East Asian economy.

Thailand’s economy is flexible and globally connected. Its production networks enhance regional productivity and efficiency. ASEAN efforts at regionalising its market and production depend on re-igniting Thailand’s success — positioned as it was at the leading edge of Southeast Asian modern industrial development. Its political troubles of the past half-decade have posed the usual issues for international investor confidence for Thailand itself, but they’ve also raised serious issues about its ability and commitment to deal with ASEAN’s challenges in an uncertain world economy and the new shape of geopolitics in the region.

This year, Thailand chairs the ASEAN group and in that position it will play a crucial role in trying to frame the region’s response to perhaps the most testing international and economic environment that the regional organisation has confronted in the more than 50 years since it was founded. Thailand’s return to democracy after the coup five years ago is in part preparation for the leadership role for which it now has responsibility.

At its roots, the fracture of Thai political stability five years ago was a consequence of the nation’s failure to build a stable consensus about how to distribute political and economic power across society, ordered around the monarchy, the military and bureaucratic elite, and the people, gradually enfranchised through elections after the student uprisings in 1973. The restoration of a measure of democracy this time round depends on the commitment of the most powerful interests in the nation, including the palace and the army, to respect electoral mandates. If things go badly wrong again, Thailand — one of the most successful societies in Asia and a society that is comfortable with its positive international and regional standing — will not only find it more difficult to re-establish its place back on the perch, it will weaken ASEAN’s new determination to assert its centrality in regional affairs.

One view is that Thailand can manage its regional responsibilities, as chair of ASEAN, and continuing political turmoil at the same time. There will be no repeat of the 2009 episode when protesters forced the cancellation of that year’s ASEAN Summit and badly dented ASEAN’s international standing. That’s probably a sanguine view of Thailand and ASEAN’s situation today. The region and the organisation are under intense pressure and searing critical examination. If Thailand’s missteps along the road towards democracy spill over into uncertainties about the process of setting a new strategic direction for ASEAN, the costs will be non-trivial.

The monarchy appears to have shown decisiveness and appealed to worthy principle in dealing with the fiasco created by Princess Ubolratana’s unusual entry into Thai politics via Thaksin’s clumsy tactic. Yet our first lead piece this week by Patrick Jory speculates that the King may have had knowledge of his sister’s and Thaksin’s move. Were that so, it would forebode continuing febrility in the relationship between the monarchy and the bureaucratic elite.

On coronation, it’s believed, the King could in fact extend political amnesties to cement the progress of constitutional monarchy under his reign. If that extended to Thaksin, however, there would certainly be further trouble down the track. Meanwhile, the role of the military and Prime Minister Prayut Chan-o-cha will be decisive. He was nominated as a prime ministerial candidate by the Phalang Pracharat Party at the same time as Princess Ubolratana’s spectacular flameout. Although this was not unexpected, it raises difficult questions. Prayut’s nomination for prime minister by Phalang Pracharat can be argued to compromise the military’s interest in respecting the electoral mandate. The appointment of senators (who have a vote with elected parliamentarians on the choice of prime minister) is by the National Council for Peace and Order of which Prayut’s chair. Senate votes could carry the day in the likely event that there is no decisive majority outcome from the popular electoral vote.

In our second lead piece this week, Greg Raymond canvasses these and other political problems in Thailand today.

‘Much is still to play out,’ says Raymond, ‘but there are reasons to think that both sides of politics may see it in their best interests to act with restraint. One of the beneficiaries of what has occurred is without doubt Prime Minister General Prayut Chan-o-cha’. Prayut looks like he has a strong chance of being elected prime minister. He needs to secure 126 seats from a coalition of his own and other smaller parties, and command virtually all of the 250-member Senate (as is expected given senators are appointed by the junta) to get a winnable 376 seats to ensure his installation as prime minister.

But political emotions are inevitably running high and Thaksin’s might not be the only misstep. Were the military to cancel the election in the light of what has happened, or take excessively punitive measures against the Thai Raksa Chart party, it could trigger unrest and make a volatile situation more so. The Pheu Thai Party, the main Thaksin-affiliated party, is still in the contest if it can preserve its cool and insulate itself from whatever happens to the Thai Raksa Chart party, including possible dissolution.

Prinya Thaewanarumitkul, Vice Rector of Thammasat University, has urged Prime Minister Prayut to stand back and withdraw from the Prime ministerial contest in order to avoid a conflict of interest for the National Council for Peace and Order in its role in the appointment of senators. That would be an act of great statesmanship, but an unlikely turn of events. There is quite a way to go before Thailand restores its rank among the democracies and many uncertainties along the path over the next several months.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.