China committed to upholding peace, stability in S. China Sea island-building, rejects US criticism to isolate China in Asia


Admiral Sun Jianguo, deputy chief of staff of China’s People’s Liberation Army (PLA) addresses the fourth plenary session of the Shangri-La Dialogue in Singapore, May 31, 2015. Sun Jianguo elaborated on China’s foreign and defense policies. (Xinhua/Bao Xuelin)

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China must insist on island-building

During the just-concluded Shangri-La Dialogue, military representatives from China and the US did not engage in the bitter brawling predicted by the media. Both sides have reaffirmed their own stance. US Defense Secretary Ashton Carter asked all claimants, especially China, to cease island-building in the South China Sea, and by cautiously skirting around the question of how the US will respond if China continues its construction activities, Carter didn’t issue further threats against China.

But the US is still able to launch more provocations in this region, perhaps by sending surveillance planes and warships to the periphery of 12 nautical miles from China-controlled islands.

No matter how disturbing the US can be, China must not stop its construction, which is in line with China’s sovereign integrity. If Beijing backs off due to Washington’s threats and some Western countries’ protests, this will create a horrific precedent, which will embolden US-led forces to set tougher positions against China. China should try its best to inject prosperity into the South China Sea, promoting regional economic development and enhancing its disaster resistance ability. Only in this way will the ongoing quarrels calm down.

If China can play its cards right, these expanded islands will not only prevent the South China Sea situation from becoming intensified, but initiate a new constructive thinking for regional development. China’s construction activities will offer an opportunity to break the vicious circle that has been haunting the South China Sea for decades.

These expanded islands will allow China to acquire more initiative to carry out its South China Sea policies. For now, it is China that values regional peace more than any other state, because the stability of the South China Sea is a prerequisite for China to make use of this important period of strategic opportunities.

As of now, military confrontation is still the last choice for all stakeholders in the South China Sea. However, different desires and expectations have caused the complexity in the South China Sea issues. When China can set a firm foothold in the area, it will bring along more elements that can drive peace and stability.

China needs to make broad plans including countermeasures against more US intrusions. Beijing should be fully prepared, both mentally and physically, for possible military conflicts with the US. China needs to clearly express its unwillingness as well as fearlessness to fight. The more prepared China can be, the lower the possibility of military conflict.

This round of contest in the South China Sea is more like a strategic dialogue, through which China and the US can come up with a set of models and principles under which they can show mutual respect around China’s offshore areas.

If China insists on its island construction, publicizes its peaceful purposes, and avoids making these expanded islands a focal point of Sino-US military competition, we believe it will be eventually accepted by the widest number of parties concerned. – Global Times

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China’s plan to lead the globe?


Globe As tensions in the South China Sea between the US and China continue to rise, the US Navy and Air Force are quietly gearing up to fight a war in the disputed region.

If necessary, that is. Both sides say they don’t want any military confrontation on China’s extensive coastal waters, but both are acting as if a military conflict is increasingly likely.

Optimists say that a peaceful resolution of China’s rise as a great power is achievable. The economies of the two powers are so enmeshed that a war sounds unthinkable.

Such is theChina_Prof Gen Liu Mingfu thesis of an important new book just out, “The China Dream,’ by Professor General Liu Mingfu (px), a leading Chinese military thinker and commentator who speaks with the voice of China’s military.

US-China trade accounted for $579 billion last year. Beijing holds $1.2 trillion of US Treasury securities, thus financing a big part of America’s massive trade deficit. China claims its low-cost exports to the US saved American consumers $600 billion in recent years.

China only wants its place in the sun, say its strategists, using the same words as German strategists did before World War I. It’s time for a multi-polar world. The age of American world empire is over, writes Liu Mingfu, words that will not endear him to Republican hawks and neoconservatives.China's Dream_Prof Jen Liu Mingfu

Pessimists retort that Britain and Germany fought two world wars even though they were major trading partners. History is replete with examples of rising powers eventually going to war with the status quo powers resisting their rival’s economic and military growth. The Franco-British-Russian alliance against Germany prior to World War I is a perfect example.

One need not be a swami to see that China’s surging power will soon clash with that of the American hegemon. The battle lines are already drawn: China’s aggressive claims to the South China Sea – viewed by the US Navy as an American lake. Taiwan. Tensions over Burma. Korea. China’s access to the open seas.

According to Prof. General Liu, the days of America’s world domination, or hegemony, as he terms it, are just about over. By 2030, China will be the world’s largest economy in absolute terms (today it rivals the US in purchasing power parity), regaining the geopolitical primacy it formerly enjoyed until the 1500’s when it was the world’s leading economic power.

The US must find a way to accommodate China’s growing power, a point also made for many years by this writer. A policy of containment is not likely to work unless India becomes a principal participant. My first book “War at the Top of the World” deals with the scenario of a future India-China war in the Himalayas, Karakoram and Burma. India has been very cautious in joining any American-sponsored alliance against China.

Liu writes that America must quietly cede some of its power to China in the same manner that the British Empire did to the United States after 1900. The United States and China must share power and jointly rule the world as benign hegemons.

He insists that China has no territorial ambitions and never will. “China suffered 470 foreign invasions within 65 years from 1840 to 1905,” asserts Liu, though incursions would be a more accurate term. During this period, China was raped and pillaged by the western colonial powers and Japan. Hatred of Japan seethes throughout Liu’s book, as it does among most Chinese.

One could argue that China’s annexation or ‘reunification’ of Tibet and Sinkiang were aggressions. China considers them part of historical China, along with truant province Taiwan.

Liu points out that China never invaded or seized its smaller neighbors Korea, Burma, Thailand, or Laos.

Instead, China’s emperors always preferred to dominate without aggression so that its smaller neighbors respected the will of China and acted respectfully – rather as the United States in the 20th century with Latin America. China, writes Liu, wants peace and prosperity in order to keep growing its economy. China remains an inward-looking colossus, content to be the Middle Kingdom.

America, according to the undiplomatic Liu, is a paranoid giant, afraid of the outside world and addicted to the need for enemies abroad. “Americans feel lost without any enemy.” Washington’s occupation and despoliation of so many countries, notably in the Muslim world, generates endless enemies and a war psychosis. America, he claims, is a half-democracy: democratic at home but promoting dictatorships abroad. He seems to believe that China is as democratic at home as the US – a claim that defies reality.

Liu asserts that China is devoted to peaceful relations, non-interference in other nations, and the desire to help build world prosperity, not just its own power or political system. What’s more, Liu modestly asserts, China should lead world development since Chinese are more intelligent and cultured than any other people and heirs to a 5,000-year history!

Interestingly, Liu depicts the 1950 Korean War as a major victory for China because it showed that an Asian nation could fight off the world’s greatest military power. He claims that the US did not invade North Vietnam out of fear of the Chinese People’s Liberation Army after its bloody experience in Korea.

Will Washington back off and allow China to be the master of Asia? It seems highly doubtful. But unless some kind of modus vivendi is found, a military confrontation is likely to follow, one that the US might very well loose. China would be fighting virtually at home or just off its coast. The US, by contrast, would fight thousands of miles across the Pacific from its distant bases. The US might even win, but China would undoubtedly come back for more.

The “China Dream” thesis has been actively taken up by China’s communist leadership. But two things might derail China’s rise to world domination. First, China’s history is replete with example of internal strife, civil wars, and regionalism. This “Chinese curse” could come back to haunt Beijing.

Second, as I read Liu’s panegyric to Chinese greatness and peaceful humanism, I kept recalling Lord Acton’s wise maxim about absolute power corrupting absolutely. It happened in Washington, and there’s no reason why it might not occur in Beijing.

By Eric S. Margolis who is an award-winning, internationally syndicated columnist. His articles have appeared in the New York Times, the International Herald Tribune the Los Angeles Times, Times of London, the Gulf Times, the Khaleej Times, Nation – Pakistan, Hurriyet, – Turkey, Sun Times Malaysia and other news sites in Asia. http://ericmargolis.com/

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The Malaysian Education: bleak and bright side, a wake-up call


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The bleak and bright side of Malaysian Education

Malaysia may be getting dismal marks for education but there are dedicated people making a difference to improve scores.

IT’S probably the best definition of insanity: doing the same thing over and over again and expecting different results.

The famous quote is often wrongly attributed to Albert Einstein but whoever said that, it makes sense, especially in the context of the Malaysian education system.

It’s madness to continue spending billions on education without seeing any improvements in quality.

The Education Ministry has been allocated RM56bil this year, RM1.4bil more than what it received last year.

Our expenditure on basic education is more than double that of other Asean countries and also South Korea and Japan.

Yet Malaysia remains stuck at the bottom third of the global schools league, as confirmed by the results from recent assessments such as the Programme for International Student Assessment (PISA) and the Trends in International Mathematics and Science Study (TIMSS).

The Organisation for Economic Co-operation and Development’s 2012 study, based on test scores in mathematics and science among 15-year-olds in 76 countries, shows that Malaysia is languishing at 52nd, way below top-ranked Singapore, Hong Kong, South Korea, Japan and Taiwan.

Our students were out-performed by Vietnam (12), Thailand (47), Kazakhstan and Iran (51). In Asean, Malaysia only ranked higher than Indonesia (69).

In March, Deputy Prime Minister and Education Minister Tan Sri Muhyiddin Yassin said he was shocked by Malaysia’s poor results in international education assessments and admitted that the standards were not good enough.

He said the Malaysia Education Blueprint 2013-2025 (Preschool to Secondary) and the Malaysia Education Blueprint 2015-2025 (Higher Education) were designed to improve the system, stressing that time was needed to see the changes.

The truth is, we don’t have the luxury of time and patience is wearing thin.

We inherited a solid education system after independence, just as Singapore did. But over the past three decades, successive ministers of education have made a mess of tinkering with the system, mostly for political motives.

Earlier this month, Johor Ruler Sultan Ibrahim Ibni Almarhum Sultan Iskandar suggested that Malaysia emulate Singapore’s education system with English as the sole medium of instruction.

Urging the people to be open-minded about the proposal, he said Singapore’s single-stream education system had not only helped to foster unity in the republic but also created a prosperous society.

It is still not too late to bring back the era of racial harmony and unity experienced by people of my generation, who are products of English schools during the 60s and 70s.

As the Johor Sultan has pointed out, there would always be a gap between the races in the country if our education system continues to be based on race and language, not to mention the increasing influence of religion.

But in spite of the weaknesses in the system, it is heartening to see committed parent-teacher associations and non-governmental organisations pushing fervently to get situations improved.

Last Saturday, I was at Sunway University where groups of eager teenagers were taking part in a Young Inventor Challenge, organised by the Association of Science, Technology and Innovation (ASTI), an NGO of volunteers who have been mentoring and encouraging students to excel in science.

ASTI is led by the unassuming Dr Mohamed Yunus Mohamed Yasin, who is credited with bringing about change in the attitude towards science and maths in Tamil schools across the country.

I wouldn’t have known about the quiet science revolution if not for blogger Syed Akbar Ali’s recent post about what Dr Yunus and his group of dedicated friends have been doing over the past 12 years.

As a result of participating in ASTI’s Science Fair for Young Children, Tamil schools are scoring top grades for science and maths in the UPSR.

Last year, SRJK (Tamil) Taman Tun Aminah, Johor Baru, emerged as the top school for the UPSR with 43 pupils scoring straight 7As while others scored 7Bs.

They are making headlines abroad too. In March, three students of SJK(T) Ramakrishna, Penang, beat 300 contestants from all over the world to win first prize at the 35th Beijing Youth Science Creation Competition.

Durgashini Srijayan, Kumurthashri Ponniah and Sugheson Ganeson won the gold medal under the Excellent Youth Science Creation category of the contest for their invention of an eco-friendly thermo container.

In October last year, SJK (T) Kulim’s R. Prevena, V Susheetha and former student R. Rasyikash won the Double Gold Award at the British Invention Show in London for their energy-saving drinks-dispensing machine.

Building on the successes of the science fairs, ASTI started the Young Inventors Challenge, which is open to all secondary schools, three years ago. From the initial 19, the number of schools has since increased to almost 200, including a team from Singapore.

ASTI also organises Creative and Critical Thinking Camps designed for primary schools up to tertiary level, and the ASTI Innovation Community Award to recognise the contributions of individuals or groups using science and technology for beneficial projects.

It also works with Germany’s Goethe Institute in organising the annual Science Film Fest to produce documentaries and teaching films about science.

And it has been doing all these with an annual budget of RM800,000, raised largely from well-wishers, including its 400 volunteers.

Dr Yunus’ philosophy is simple: “Stop complaining, get involved. As patriots, we can help the country do well too.”

By Veera Pandiyan

> Associate editor M. Veera Pandiyan likes William Butler Yeat’s definition of education: it is not the filling of a pail but the lighting of a fire.

Take OECD education report as a wake-up call
The Star Says

ITS does not feel good to know that a new report by the Organisation of Economic Cooperation and Development places us at 52nd among 76 countries in terms of our students’ grasp of basic skills.

Singapore takes the top spot, thus reinforcing the recent call by Johor Ruler Sultan Ibrahim Ibni Sultan Iskandar that we emulate the island nation’s single-stream education system, which uses English as the medium of instruction.

He said having schools in only one stream would unite Malay­sians and boost their competitiveness.

These developments tell us that our education system can be a lot better. Then again, we all know that.

The fact that Malaysia has two education blueprints – one focusing on preschool education and primary and secondary schools, and the other on higher education – shows that the Government is already taking steps to transform our education system.

The blueprints’ plans stretch until 2025, which means we should not hope for many overnight improvements.

Meanwhile, it is wise for us to keep enhancing our understan­ding of exactly how our shared prosperity is built on education.

New ideas and insights in this area are valuable because they help us to shape and refine policies and practices relating to the education system. At the very least, they encourage us to see things in a different light.

It is clichéd to say education is the cornerstone of development, but what if somebody comes up with projections of how much economies can benefit if school enrolment and education quality go up?

In fact, the OECD has done just that in a report titled “Universal Basic Skills: What Countries Stand to Gain”. Published on Wednesday, it is the same report that has Malaysia in the bottom third of the class based on our teenagers’ mathematics and science scores in international tests.

Let us not get hung up on these rankings. The report is 116 pages long and has a lot more to offer than bragging rights and naming-and-shaming opportunities.

For instance, it makes abundantly clear that an underperforming education sector costs a country dearly. The OECD warns that poor education policies and practices will result in a loss of economic output amounting to a permanent state of economic recession.

The organisation also points out that high-income status does not automatically eliminate shortco­mings in education.

It is also interesting that the OECD argues that when there is universal achievement of basic skills in a country, its economic growth will be more inclusive.

The report suggests that there is still much to learn about how we can strengthen our education policies. We should be open to fresh thinking and approaches.

At the same time, we must not waver from the commitment and noble intentions reflected in the blueprints.

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Big homegrown successes in India from Sillicon Valley’s returning ‘fail fast’ engineers


India Startups

Taking failure as a norm would be a major cultural shift in India, where high-achieving children are expected to take steady jobs at recognised job

India learns to ‘fail fast’ with startups

Families that expect children to have respectable jobs may be beginning to accept failure as the tech industry starts to come of age.

After ping pong tables, motivational posters and casual dress codes, India’s tech startups are following Silicon Valley’s lead and embracing the “fail fast” culture credited with fuelling creativity and success in the United States.

Taking failure as a norm is a major cultural shift in India, where high-achieving children are typically expected to take steady jobs at recognised firms. A failed venture hurts family status and even marriage prospects.

But that nascent acceptance, fuelled by returning engineers and billions of dollars in venture fund investment, is for many observers a sign that India’s US$150bil tech industry is coming of age, moving from a back-office powerhouse to a creative force.

“There is obviously increased acceptance,” said Raghunandan G, co-founder of TaxiForSure, which was sold to rival Ola this year. He is now investing in other early stage ventures.

“My co-founder Aprameya (Radhakrishna) used to have lines of prospective brides to meet … the moment we started our own company, all those prospective alliances disappeared. No one wanted their daughters to marry a startup guy.”

Srikanth Chunduri returned to India after studying at Duke University in the US, and is now working on his second venture. “I think what’s encouraging is that acceptance of failure is increasing despite the very deep-rooted Asian culture where failure is a big no,” he said.

IT’S OK TO FAIL

The shift has come about, executives say, as engineers began returning from Silicon Valley to cash in on India’s own boom, as hundreds of millions of Indians go online.

“Investors too want to find the next Flipkart, and most of them come from Silicon Valley backgrounds, so they bring that culture,” said Stewart Noakes, co-founder of TechHub, a global community and workspace for tech entrepreneurs. “That’s changing the Indian norms. It’s becoming ok to fail and try again.”

Big names like Flipkart can also mean the prospect of a lucrative exit for investors, covering a multitude of failures. To be sure, the pace of change is slow in altering a culture that has produced top software engineers for decades, but – as yet – no Google, Apple or Twitter.

Cheap engineering talent keeps startups afloat far longer than in Silicon Valley, where companies last less than two years on average. And the freedom to fail remains restricted to a small portion of India’s corporate fabric, booming tech cities like Bengaluru or Gurgaon outside New Delhi.

There is also still no revolving door with big corporates, whom one senior Bengaluru headhunter described as beating down salaries of executives who dared to risk – but then came back.

ROLE MODELS

India Startups_Flipkart

India learns to ‘fail fast’ as tech startup culture takes root

But big homegrown successes like e-tailers Flipkart and Snapdeal or mobile advertising firm InMobi, as well as the multi-billion dollar firms set up by former executives from the likes of Amazon.com, Microsoft and Google, have created role models, encouraging graduates to take risks.

“With success stories, people accept it as a legitimate exercise,” said Ryan Valles, former CEO of coupon site DealsandYou and a former executive at Accel Partners, now working on a new project.

Meanwhile, billions in investor funding have fed the sector. External cash – as opposed to more traditional bank loans tied to individuals, or family savings – makes a difference. Failing there can involve walking away Silicon Valley-style, not years of court proceedings in a country with no formal bankruptcy law.

There has also been, to date, no major collapse.

“What’s happening is healthy: people recognising that some things will fail, that it’s largely a failure-based industry, in the same way that movies, music or pharmaceuticals are,” said Shikhar Ghosh, senior lecturer at Harvard Business School.

An estimated 70-90% of start-ups fail.

But the biggest test may be the first bust after the boom.

“That will be the test: whether people come back into the market and how they treat the people who lost their money,” said Ghosh. – Reuters

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China says: we can build High Speed Rail by 2020; Malaysia and Singapore push back deadline


Making connections: Liow (left) speaking with Liu Yunshan, secretary of the Secretariat of the Communist Party of China Central Committee. – By Patrick Lee The Star/Asia News Network

KUALA LUMPUR: China is confident that it can build the Kuala Lumpur-Singapore High-Speed Rail (HSR) line by 2020.

China embassy’s economic and commercial counsellor Wu Zhengping expressed confidence that the original target date could be met – within certain parameters.

“Technically, it’s possible if Chinese companies are awarded the contract. We will be able to achieve that by 2020. We’ve still got five years,” he told The Star in an interview.

He was commenting on reports that the HSR line would not meet its original target date.

Wu pointed out that it took a mere three years to build the 1,318km Beijing-Shanghai HSR line, which was completed in 2010. It opened to the public in June 2011.

The 350km Kuala Lumpur-Singapore line is expected to cost about RM40bil while there are matters between Malaysia and Singapore which are expected to be ironed out by year end.

Wu said China was determined to build the line, adding that it would fall in with its plans to link Kunming to Singapore via some 2,700km of rail.

Calling it the “Pan-Asian Railway”, he indicated that this would cut through Laos, Thailand and Malaysia.

He added that not all of this railway might be high-speed lines, especially in Laos, which has rough, mountainous terrain.

Wu said the HSR traffic might not be enough to justify building such a line but spoke of an economic “spillover effect” if it were to happen.

Chinese companies here, he added, might even start to develop areas near the Singapore-Kuala Lumpur line.

“If China is awarded the contract (in Malaysia), we’ll encourage Chinese companies to locate their factories and firms along the railway line,” he said.

He also said there were plans to build high-speed train cars in Malaysia should China be given the contract.

Asked what would China do if Chinese companies were unable to win the HSR bid, Wu said Malaysia had given assurance that this would be “open, fair and transparent”.

Transport Minister Datuk Seri Liow Tiong Lai, who is in Beijing on an official visit, said while he welcomed the offer from China, the open tender would only be called after details of the project had been thrashed out between Malaysia and Singapore.

He said a memorandum bet­ween the two countries would be signed by end of this year, adding that it would then take another year to complete the technical study.

“By then, only we would know what is the actual period (needed to build the line).

“It is too early to say that the project can be completed by 2020 when we do not have the details yet,” he said.

Tell us: Which country would you like to get your fast rail from? 

Singapore, Malaysia push back deadline for high-speed rail link –Reauters

SINGAPORE – Singapore and Malaysia have decided to push back an initial deadline of 2020 for the completion of a high-speed rail link between the wealthy city state and Kuala Lumpur, their prime ministers said on Tuesday, citing the complexity of the project.

The Southeast Asian neighbours said they hoped to reach agreement by the end of the year on a new timeline for the railway link, which will cut travel time between the cities to 90 minutes.

“We looked at the original timeline of 2020, and think it is not really realistic,” Singapore Prime Minister Lee Hsien Loong told a news conference, adding that the project was very challenging to carry out.

“We have to take a bit more time to do it well, but to do it without delay.”

Singapore and Malaysia set a completion date of 2020 when they announced plans for the high-speed rail link in February 2013, but gave no estimate of the project cost.

Hailed at the time as a major breakthrough by some analysts, the announcement reflected an improvement in ties between the neighbours. Singapore was once part of Malaysia but they separated acrimoniously in 1965, clouding diplomatic and economic dealings for decades.

On Tuesday, Malaysian Prime Minister Najib Razak said construction of the link with the Malaysian capital would take five years, design one year and the tendering process another year. “We both decided that bilateral issues pertaining to the high-speed rail project will be settled by the end of the year,” Najib said.

FireEye threats of cyber espionage loom with the coming 26th Asean Summit in Malaysia


Photo by hfuchs/Relaxnews.

PETALING JAYA: Regional government and military officials, businessmen and journalists involved with the coming 26th Asean Summit in Kuala Lumpur could be among the targets of a recently discovered cyber espionage group, claims an Internet security firm.

FireEye, which exposed the presence of the APT30 group of hackers snooping on governments and businesses, including those in South-East Asia, said some of its previous attacks had been launched before key Asean meetings.

“Based on previous experience, I believe that this group and possibly others will try to use that meeting (26th Asean Summit) as part of their ruse to potentially target businesses and governments in the region,” said Bryce Boland, FireEye’s chief technology officer for Asia Pacific in a telephone interview here yesterday.

In its report, FireEye, which is based in the United States, said APT30 had a distinct interest in organisations and governments associated with Asean.

The group had released a malware in the run-up to the 18th Asean Summit in Jakarta in 2011 and the Asean-India commemorative Summit in 2012.

One of the domain names it used to command its malware was aseanm.com

AFP had reported that the APT30 group was “most likely sponsored by China” and that there was no immediate reaction from the Chinese government, which had always denied allegations of cyber espionage.

The two-day Asean Summit from April 26 is expected to discuss various issues, including maritime disputes between China and Brunei, Malaysia, Vietnam and the Philippines in the South China Sea, and the formation of a single market and production base in the region.

“The hackers are after intelligence and information, primarily about political changes, political positions, especially over disputed territories, border disputes and trade negotiations,” said Boland.

“We have also seen that when they target journalists, they are specifically looking for information in relation to understanding concerns about the legitimacy of the PRC (People’s Republic of China),” he said.

The group has also attacked businesses to steal information on deals, manufacturing plans and intellectual property such as schematic diagrams.

According to the FireEye report, Malaysia is one of seven countries with targets hit by the group, which has operated largely undetected for the past 10 years.

Others are Thailand, Vietnam, South Korea, Saudi Arabia, India and the United States.

Boland said the group mostly attacked their targets via spear phishing emails with attachments that appeared to be from a known contact but were in reality sent by the hackers.

The attachment, which can be in the form of a document with an Asean-related title, will contain a customised malware that is activated the moment that it is opened.

It allows the attacker to gain control of the victim’s computer and retrieve information from it.

Boland advised computer users not to open suspicious e-mails.

“Businesses and governments should ensure that their IT infrastructure not only protects them from attacks but can detect the extent of damage done in the event of a successful hack.”

By Razak Ahmad The Star/Asia News Network

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Regional issues today developed from the past to predict the future, the winds of change in Asia


To appreciate how issues today had developed from the past is also to understand how they are likely to develop in the future.

  “Since Sultan Mahmud Shah of 15th-century Malacca at least, Malay rulers have had no problems with a powerful China“.

MANY people can be so absorbed by specific issues as to neglect the larger picture that created them. Thus much misunderstanding persists of the issues themselves.

This failure to see the wood for the trees also affects many professional analysts or “country watchers”.

Putting issues in the news in their proper context is crucial.

In the late 1980s, economic growth in East Asia had become both contagious and self-evident. Talk of the coming 21st century as “the Century of Asia and the Pacific” had been gathering momentum.

After Japan’s stellar economic performance from the 1970s, rapid growth would visit the East Asian “tigers” – Hong Kong, Singapore, South Korea and Taiwan – then the other countries of South-East Asia and then China.

Few countries at the time could see that never before in history had both Japan and China, old rivals with their historical baggage still in hand, achieve economic ascendancy at the same time like now – but Malaysia was one of them.

Since economic strength meant diplomatic and political clout, tensions between Tokyo and Beijing could grow to unmanageable proportions with potentially devastating effects throughout the region.

Something had to be done to anticipate and contain any such fallout.

In December 1990, on the occasion of the visit to Malaysia by Chinese Premier Li Peng, Prime Minister Datuk Seri Dr Mahathir Mohamad proposed the formation of the East Asia Economic Grouping (EAEG).

This would comprise all the countries of South-East Asia and China, Japan and South Korea working together towards a more integrated regional economy.

Since economics was less controversial than politics, the EAEG would skirt political sensitivities while a culture of working together as a region could in time overcome them.

Such regional cooperation that acknowledges and encourages regional integration could also pre-empt and minimise any economic crisis.

But that was not to be. Australia and the US had not been included and opposed the EAEG, the latter also pressuring Japan to reject it.

Within Asean, Indonesia’s Suharto rebuffed it because as senior regional leader he had not been consulted, while a West-leaning Singapore still preferred Occidental leadership to anything so distinctly Asian.

Singapore then proposed a watered-down East Asia Economic Caucus (EAEC), this compromise being a subset of the larger Asia-Pacific Economic Cooperation (Apec) grouping largely to assuage US insecurities. After the EAEG died, the EAEC withered away.

By 1997 a financial and economic crisis struck East Asia, devastating the economies of Indonesia, Thailand and South Korea in particular.

There was no regional grouping or bank to help deflect, absorb or otherwise mitigate it.

South Korea then stepped up the drive to form an Asean Plus Three (APT) grouping, with the EAEG’s same 13 countries. The crisis also gave China an opportunity to demonstrate regional leadership: it suspended its planned currency revaluation, thereby helping to cushion the shock of the crisis.

Throughout the whole long-drawn saga, the unspoken issue for some countries was the impending economic dominance of China that they could not accept.

Thus they opposed the EAEG, as if China’s economic dominance could be restrained in the absence of a regional grouping. The reality would have been quite the reverse: with South Korea and Japan balancing China, and Asean countries at the fulcrum.

Meanwhile an underlying Western presumption shared by West-leaning Asians is that once China achieves economic ascendancy, it would mimic the West in acquiring overseas colonies and generally throwing its weight around.

That remains a heavily constructed hypothesis at odds with the history of China and the region.

China had been a great maritime power before, but had never embarked on naval conquest in a region where naval power trumps all other strategic options.

And through the years of talk on the EAEG, EAEC and APT, China’s economy kept on growing.

Then came China’s massive projects resulting from, and further empowering, that growth: the New Silk Road Economic Belt (“One Belt, One Road”) linking Asia and Europe overland, the Maritime Silk Road at sea, and the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank to fund them.

In contrast only Indonesia’s still formative and insular “maritime highways” idea, just a tiny fraction of China’s proposals in scale albeit grandly positioning Indonesia as a Global Maritime Fulcrum, appears to be the only response from the region.

Why has the rest of South-East Asia, or East Asia in general, become mere passive spectators to China’s bold plans? Why have other countries not offered their own thought contributions in response to China’s proposals?

Indonesia has, through different presidential administrations, clung to its informal position as first among equals in Asean. It has foraged for opportunities lending it such a profile, though not always elegantly or consistently.

On President Joko Widodo’s first visit to Beijing for an Apec summit last November, one month after he became president, he asked that the AIIB be moved from Beijing to Jakarta. That was a non-starter.

He recovered some equilibrium last month on state visits to Japan and China. On the day of his arrival in Tokyo, an interview was published in Japan in which he said China had no legal basis to its South China Sea claims.

That was three days before his arrival in Beijing, where the news had preceded him. One day after his arrival there, a bilateral agreement had been fleshed out for full-scale economic cooperation.

Now that much of the dust has settled on which countries would, or would not, be founding members of the AIIB, the challenge of projecting possible futures begins.

The positives include there being more international support for the multilateral lending institution than expected, a good mix of countries in Asia and Europe, and that the bank will proceed unimpeded.

However, the negatives include the voluntary absences of the US and Japan, two major economies that would have made the bank more multilateral, better resourced and further enriched with the collective experience of multilateral lending.

Playing somewhere in the background is the Western-oriented anxiety that a militarily powerful China may one day edge the US out of the region.

That prospect goes against the grain of China’s deep policy pragmatism and interests.

US military dominance in East Asia is often credited for keeping the peace in the region.

That peace has meant unfettered transportation and travel that has benefited the region, most of all China, in its imports of fuel and raw materials and its exports of manufactured goods.

China has had ample opportunity to learn from the tragic errors of not just the Soviet Union but also neighbouring North Korea, where overspending on military assets only wrecks the economy. The same applies to the US itself in profligate spending on questionable foreign wars.

China’s focus on infrastructure for facilitating trade is clear, its economic priorities echoing those it has had for centuries. Since Sultan Mahmud Shah of 15th-century Malacca at least, Malay rulers have had no problems with a powerful China.

Such a China had prioritised economic growth and cooperation without meddling in local affairs except to provide protection against hostile outside powers.

There are still no indications that modern China would deviate significantly from such a position, other than perhaps “protection” today including cushioning the shocks of economic crises.


Behind the Headlines by Bunn Nagara

Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia. The views expressed are entirely the writer’s own.

Winds of Change in Asia

The birth of new development banks led by developing countries and the United States’ failure to block them are signs of rebalancing of economic power, especially in Asia.

The world must adjust to the rise of new powers. It will not stop just because the United States can no longer engage. If the results are not to the United States’ liking, it only has itself to blame! – Martin Wolf

 

China’s Asian Infrastructure Investment Bank (AIIB): U.S. Asian, European “Allies” Pivot away from Washington

IN the last month, the international media has been carrying articles on the fight between the United States and China over the formation of the Asian Infrastructure Investment Bank (AIIB).

Influential Western economic commentators have supported China in its move to establish the new bank and judged that President Barack Obama made a big mistake in pressurising US allies to shun the bank.

The United States is seen to be scoring an “own goal” since its close allies the United Kingdom, Australia and South Korea decided to be founding members, as well as other European countries, including Germany and France, and most of Asia.

The United States also rebuked the United Kingdom for policies “appeasing China”, but the latter did not budge.

The United States did not give any credible reason why countries should not join the AIIB.

Treasury Secretary Jack Lew said the new bank would not live up to the “highest global standards” for governance or lending.

But that sounded like the pot calling the kettle black, since it is the lack of fair governance in the International Monetary Fund (IMF) and World Bank that prompted China to initiate the formation of the AIIB, and the BRICS countries (Brazil, Russia, India, China and South Africa) to similarly establish the New Development Bank.

For decades, the developing countries have complained that the developed countries have kept their grip on voting power in the Breton Woods institutions by clinging to the quotas agreed upon 70 years ago.

These do not reflect the vastly increased shares of the world economy that the emerging economies now have.

Even the mild reform agreed upon by all – that the quotas would be altered slightly in favour of some developing countries – cannot be implemented because of US Congress opposition.

The big developing countries have been frustrated. They had agreed to provide new resources (many billions of dollars each) to the IMF during the financial crisis, but were rewarded with no reforms in voting rights.

In addition, the unjustifiable “understanding” that the heads of the World Bank and IMF would be an American and a European respectively remains in place despite promises of change.

So much for legitimacy of lectures about good governance, merit-based leadership and democratic practice, which are preached by the Western countries and by the IMF and World Bank themselves.

The BRICS countries then set up the New Development Bank, which will supplement or compete with the World Bank, while China created the AIIB to supplement the Asian Development Bank (ADB), which also has a lopsided governance system.

The new banks will focus on financing infrastructure projects, since developing countries have ambitious infrastructure programmes and there is gross under-funding.

Critics anticipate that the new banks will finance projects that the World Bank or ADB would reject for not meeting their environmental and social standards.

But that is attacking something that hasn’t yet happened. True, it would be really bad if the new banks build a portfolio of “bad projects” that would devastate the environment or displace millions of people without recognising their rights.

It is thus imperative that the new banks take on board high social, environmental and fiduciary standards, besides having good internal governance and being financially viable.

The new institutions should be as good as or better than the existing ones, which have been criticised for their governance, performance and effects.

It is a high challenge and one that is worthy of taking on. There is no certainty that the new banks will succeed. But they should be given every chance to do so.

The AIIB, in particular, is being seen as part of the jostling between the United States and China for influence in the Asian region.

A few years ago, the United States announced a “pivot” or rebalancing to Asia. This included enhanced military presence and new trade agreements, especially the Trans-Pacific Partnership Agreement (TPPA).

It seemed suspiciously like a policy of containment or partial containment of China. The United States combines cooperation with competition and containment in its China policy, and it retains the flexibility of bringing into play any or all of these components.

China last year announced its own two initiatives, a Silk Road Economic Belt (from Western China through Central Asia to Europe) and a 21st century Maritime Silk Road (mainly in South-East Asia).

The first initiative will involve infrastructure projects, trade and public-private partnerships, while details of the second initiative are being worked out.

The AIIB can be seen as a financial arm (though not the only one) of these initiatives.

China is also part of negotiations of the RCEP (Regional Comprehensive Economic Partnership) that does not include the United States.

Last year, it also initiated a study to set up a Free Trade Area of the Asia-Pacific, which will include the United States.

These two intended pacts are an answer to the US-led TPPA. It is still uncertain whether the TPPA will conclude, due both to domestic US politics and to an inability to reach a consensus yet among the 12 countries on many contentious issues.

Meanwhile, prominent Western opinion makers are urging the United States to change its policy and to accommodate China and other developing countries.

Former US Treasury Secretary Larry Summers said this past month will be remembered as the moment the United States lost its role as the underwriter of the global economic system.

Summers cited the combination of China’s effort to establish a major new institution and the failure of the United States to persuade dozens of its traditional allies to stay out of it.

He also called for a comprehensive review of the US approach to global economics, and to allow for substantial adjustment to the global economic architecture.

Martin Wolf of the UK-based Financial Times said that a rebuff by the United States of China’s AIIB is folly. This is because Asian countries are in desperate need of infrastructure financing, and the United States should join the bank rather than pressuring others not to.

The real US concern is that China might establish institutions that weaken its influence on the global economy, said Wolf.

He added that this is wrong since reforms on influence in global financial institutions are needed and the world economy would benefit from more long-term financing to developing countries. China’s money could push the world in the right direction.

In a devastating conclusion, Wolf said the world needs new institutions.

“It must adjust to the rise of new powers. It will not stop just because the United States can no longer engage. If the results are not to the United States’ liking, it has only itself to blame.”

The winds of change are blowing in the global economy, and many in the West recognise and even support this.

Global Trends by Martin Khor

> 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.

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