personal capacity: I wish to comment on the press statement by Jagdeep
Singh Deo as reported in Berita Daily and many other newspapers on 24
As China continues to develop, so does its global influence. What would the future be like for South-East Asia with a ‘risen China’?
Rising together: No, Chinese imperialism is not simply replacing US imperialism, as China emphasises win-win partnerships, says Prof Zhang. — Handout
PROF Zhang Weiwei is among the most respected scholars in China today. He is a leading expert on China’s “reform and opening up” policies and its status as a “civilisational state.”
As director of the China Institute at Shanghai’s elite Fudan University, he is also professor of International Relations and had served as English interpreter for China’s Paramount Leader Deng Xiaoping. In an exclusive interview earlier in the week, Prof Zhang spoke to Sunday Star about future prospects with China.
As the leading authority on China’s civilisational state, how would you define it, as distinct from a nation state?
With China, it’s a combination of the world’s longest continuous civilisation and a super-large modern state. A civilisational state is made up of hundreds of states amalgamated into one large state.
China is a modern state respecting international law like a nation state, but culturally diverse, with sovereignty and territorial integrity.
There are four features of China’s civilisational state: a super-large population of 1.4 billion people, a continent-size territory, significant culture, and a long history.
If we are returning to an East Asian tributary system, what changes can we expect in China’s policies in this region today?
The tributary system is a Western name for China’s relations in this region (in the past). China is a “civilisational” – as an adjective – state, a modern amalgamation of many (component communities).
During the Ming Dynasty, China was a world power – but as a civilizational state more than a nation state – and did not seek to colonize other countries, unlike Western powers that were nation states. Since then, China’s status and capacity as a nation state has grown significantly. Will it then become more like Western powers now?
China today is a nation state, but different from European (nation) states. It is also still a civilisational state.
The Chinese people are not just Han, although the Han majority is 92%. There are 56 ethnic groups in China, (mostly) minorities.
But China rejected the Permanent Court of Arbitration’s ruling on the South China Sea, initiated by the Philippines, which found China’s claims insupportable.
The tribunal was illegal; it had no right to make such decisions. The Permanent Court of Arbitration is not part of the United Nations.
How can countries in South-East Asia be convinced that the rise of China will not simply result in Chinese imperialism replacing US imperialism?
China emphasises win-win partnerships, such as in the Belt and Road Initiative (BRI). It encourages discovering, building, and benefiting together.
Countries in South-East Asia join the BRI out of their own interest. It is not something imposed by China.
Some countries have described the Second Belt and Road Summit this year as being more consultative than the first. As for the future?
The future Belt and Road Summits will be even more open and consultative.
Is the current US-China trade dispute only a symptom of much larger differences, such as a historic divide in the reshaping of a new global order?
It is more than about trade. With the United States especially, it is zero-sum, but for China it is win-win.
The Chinese economy is larger than the US economy, or soon will be. (In PPP or purchasing power parity terms, China’s economy grew larger than the US economy in 2014.)
The United States is trying to decouple its economy from China’s. How can China ensure that it would not only withstand these efforts but also triumph?
The attempt to decouple the two economies will fail. About 85% of US companies that are already in China want to stay.
Looking at the trade structure, most Chinese exports to the US are irreplaceable. No other place in the world gives a better price-quality ratio in manufactured goods.
So the US cannot win in this decoupling because there are no alternatives (as desirable producing countries). China has the world’s largest chain or network, or factory clusters, for all kinds of goods.
How likely do you see a hot war – more than a trade war or a cold war – breaking out between a rising China and what is perceived to be a declining United States?
The US knows that it won’t win (a hot war). No two nuclear-armed countries will go to war. It would be very messy.
So far no two nuclear-armed countries have fought. There may be a small likelihood of direct confrontation, but not a war situation.
No commercial shipping has been interrupted by China. So the US need not worry.
Can Asean, or an Asean country like Malaysia, help to bring the United States and China closer together as partners rather than as rivals?
Possibly. Malaysia perhaps can help, as it is friendly to both China and the US.
As China continues in its rise, what steps is it taking to provide for more cooperative and consultative relations in this region?
Trade between China and Asean countries, for example, has grown, and has now exceeded China-US trade.
Generally, China’s relations with Asean countries are quite promising, with Free Trade Area relationships as well.
By Bunn Nagara, who is Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.
Poised for growth: Shipping containers sit stacked next to gantry cranes at the Yantian International Container Terminals in Shenzhen, China. — Bloomberg
THIS is a question that is at the heart of the tensions across the Pacific.
To Parag Khanna, author of The Future Is Asian (2019), the answer is almost self-evident.
However, if you read his book carefully, you will find that he thinks global power will be shared between Asian and Western civilisations
For the West, the rise of Asia has been frighteningly fast, because as late as 1960, most of Asia was poor, agricultural and rural, with an average income per capita of less than US$1,000 in 2010 prices.
But 50 years on, Asia has become more urban and industrialised, and is becoming a challenge to the West in terms of trade, income and innovation.
Global management consulting firm McKinsey has just published a study on “The Future is Asian” that highlights many aspects why Asia is both attractive to businessmen and yet feared as a competitor.
Conventionally, excluding the Middle East and Iran, Asia is divided into North-East Asia (China, Japan and South Korea), South-East Asia (mostly Asean), South Asia (India, Pakistan, Bangladesh) and Central Asia.
But McKinsey has identified at least four Asias that are quite complementary to each other.
First, there is Advanced Asia, comprising Australia, Japan, New Zealand, South Korea and Singapore, each with per capita incomes exceeding US$30,000 (RM125,600), highly urbanised and rich, with a combined GDP that is 10% of global GDP.
This group provides technology, capital and markets for the rest of Asia, but it is ageing fast.
Second, China is the world’s largest trading economy, second largest in GDP after the United States, and a growing consumer powerhouse. By 2030, the Chinese consumer market will be equal to Western Europe and the United States combined.
China is also an increasing capital provider to the rest of the world.
Third, the 11 countries of Emerging Asia (Asean plus Bhutan and Nepal, excluding Singapore) have young populations, fast growth and cultural diversity.
Fourth, Frontier Asia and India – covering essentially South and Central Asia including Afghanistan – which have 1.8 billion in population, still rural but young.
Taken together, these four Asias today account for one-third of global GDP and 40% of the world’s middle class.
But what is remarkable is that while the region grew from trading with the rest of the world, intra-regional trade has grown faster, to 60% of total trade, with intra-regional foreign direct investment (FDI) at 66% of total inward FDI, and 74% of air traffic.
Much of Asian growth will come from rapid urbanisation, amid growing connectivity with each other. The top 20 cities in Asia will be mega conglomerates that are among the largest cities in the world with the fastest-growing income.
A major finding is that America First-style protectionism is helping to intensify the localisation and regionalisation of intra-regional connectivity in terms of trade, finance, knowledge and cultural networks.
Furthermore, the traditional savings surpluses in Asia basically went to London and New York and were recycled back in terms of foreign direct investment and portfolio flows.
But no longer.
Increasingly, Asian financial centres are emerging to compete to re-pump surplus capital from Advanced Asia and China to fund the growth in Emerging and Frontier Asia.
In short, intra-regional finance is following intra-regional trade.
In a multipolar world, no one wants to be completely dependent on any single player but prefers network connectivity to other cities and centres of activity and creativity.
As Khanna puts it: “The phrase ‘China-led Asia’ is thus no more acceptable to most Asians than the notion of a ‘US-led West’ is to Europeans.”
But are such rosy growth prospects in Asia predestined or ordained?
Based on the trajectory of demographic growth of half the world’s young population moving into middle income, the logical answer appears to be yes.
But there are at least three major bumps in that trajectory.
First, Asia, like the rest of the world, is highly vulnerable to global warming.
Large populations with faster growth mean more energy consumption, carbon emissions and natural resource degradation. Large chunks of Asia will be vulnerable to more water, food and energy stresses, as well as natural disasters (rising seas, forest fires, pandemics, typhoons, etc).
Second, even though more Asians have been lifted out of poverty, domestic inequality of income and wealth has increased in the last 20 years.
Part of this is caused by rural-urban disparities, and widening gaps in high-value knowledge and skills. Without adequate social safety nets, healthcare and social security, dissatisfaction over youth unemployment, access to housing, and deafness to problems by bureaucracies has erupted in protests everywhere.
Third, geopolitical rivalry has meant that there will be tensions between diverse Asia over territorial, cultural and religious differences that can rapidly escalate into conflict. The region is beginning to spend more on armaments and defence instead of focusing on alleviating poverty and addressing the common threat of climate change.
Two generational leaders from the West have approached these threats from very different angles.
Addressing the United Nations, 16-year-old Swedish schoolgirl Greta Thunberg dramatically shamed the older generation for its lack of action on climate change.
“People are suffering. People are dying. Entire ecosystems are collapsing. We are at the beginning of a mass extinction and all you can talk about is money and fairy tales of eternal economic growth. How dare you, ” she said.
The young are idealistically appealing for unity in action against a common fate.
In contrast, addressing the UN Security Council, US President Donald Trump was arguing the case for patriotism as a solution to global issues. Climate change was not mentioned at all.
Since the older generation created most of the carbon emissions in the first place, no wonder the young are asking why they are inheriting all the problems that the old deny.
This then is the difference in passion between generations.
Globalisation occurred because of increasing flows of trade, finance, data and people. That is not stoppable by patriot-protected borders.
A multipolar Asia within a multipolar world means that even America First, however strong, will have to work with everyone, despite differences in worldviews.
All patriots will have to remember that it is the richness of diversity that keeps the world in balance.
The writer ANDREW SHENG is a distinguished fellow with the Asia Global Institute at the University of Hong Kong. This article is part of the Asian Editors Circle series, a weekly commentary by editors from the Asia News Network, an alliance of 24 news media titles across the region.
|US President Donald Trump discards staff like changing shirts and reverses policies without any forewarnings to staff or supporters alike. This behaviour is described by Armenian President Sarkissian, a quantum physicist-turned-politician, as quantum politics. afp –
THE year 2018 was an exhausting one, but it marked the exhaustion of the old neo-liberal order, willingly dismantled by President Donald Trump to the aghast of friends and foes alike.
We seem to live at the edge of chaos, in which every dawn is broken by tweets that disrupt the status quo. There are no anchors of stability. Trump discarded staff like changing shirts, and reversed policies without any forewarnings to staff or supporters alike.
This behaviour was described by Armenian President Armen Vardani Sarkissian, a quantum physicist turned politician, as quantum politics.
Most of us use the term quantum to mean anything that we cannot understand. The reason why we find quantum concepts weird is that they do not conform with normal logic. As Italian physicist Carlo Rovelli explains it, “Reality is not what it seems”.
Human beings live at the macroscopic scale, which we observe from daily life. We like stability and order. But at the beginning of the 20th century, Albert Einstein and Nils Bohr changed the way physicists thought about how nature behaved. Quantum physics evolved from the study of the behaviour of atoms at the microscopic scale.
Order is only one phase in the process of evolution.
And since the 1980s, quantum science has expanded beyond physics to neuro-science, information computing, cryptography and causal modelling, with great practical success.
Like the iPhone, most people don’t know how it works, but quantum mechanics does work in practice.
The first quantum concept is that it is probablistic, not deterministic. In simple language, there is no such thing as certainty, which classical science, religion and our normal instincts teach us to believe. In the beautiful language of Rovelli, “quantum fields draw space, time, matter and light, exchanging information between one event or another. Reality is a network of granular events, the dynamic which connects them is probabilistic; between one event and another, space, time, matter and energy melt in a cloud of probability.”
Second, Bohr defined a dualistic property of quantum situations called complementarity. Light is both a particle and wave, not either/or. This concept of complementarity leads to the famous Heisenberg’s uncertainty principle, which basically says that the position and velocity of an object cannot both be measured exactly and simultaneously, even in theory. If everything in the world comprises atoms and photons moving constantly, nothing can be measured exactly – the principle of indeterminacy.
The third concept is relational, in that everything is related to something. There are no absolutes, just as there is no certainty. Everything exists relative to something else. Quantum entanglement occurs when pairs or groups of particles interact with each other so that the quantum state of each particle is somehow related to the state of the other(s), even across great distances.
This phenomenon is popularly called the butterfly effect, which dramatically says that a butterfly flapping its wings may cause a typhoon across the Pacific. Einstein called entanglement “Spooky Action at a Distance”, and he tried hard to disprove it. But these effects were empirically verified in the 1970s.
Quantum physics is moving to centre stage because quantum information theory led to the invention of quantum computing. Until recently conventional computers use binary “bits” (one and zero) as the process for calculation of information. But a quantum computer uses quantum bits, called qubits, which can exist in both states simultaneously, and in so doing, it can process information faster and more securely than conventional computers.
This breakthrough means that quantum computing will transform artificial intelligence, deep learning and advance technology at speed, scale and scope that rivals anything we have witnessed in the world of classical computing. The goldmine of quantum computing is going to make fortunes for everyone, but he who controls the infrastructure (or pipes) across which quantum computing will be conducted will be the big winner.
In the Information Age, knowledge, technology and knowhow is more valuable than gold. Central bank monetary creation as well as cyber-currencies like bitcoin, are quantum money, because the marginal cost of production of such “money” is near zero.
We are all so dazzled by such marvellous creation that many investors moved into the alchemy of asset price bubbles. It is no coincidence that the South Sea and Tulip bubbles occurred in an era of great “displacement”, when 17th century investors (including Isaac Newton) had no clue how to price massive returns from new companies colonising the South Seas, or the technological rarity of creating a black tulip.
In qubit terms, hard assets and soft/virtual liabilities are quantumly entangled with each other. If you can generate quantum liabilities at near zero cost, you can control and increase real assets to the disadvantage of your competitors. Put crudely, with a quantum computer and deep learning, you might be able to generate a drone-sized nuclear bomb using 3D printing at very low cost.
Or even more bluntly, you can do this under quantum encryption that the incumbent powers do not even know what you are doing.
It is therefore no coincidence, that the Western Deep States moved quickly against Chinese enterprises ZTE and Huawei, because these two have been big developers and users of quantum computing. First, deprive the competitor from access to the key high-tech fast chips that enable quantum computing to perform at speed. Second, disrupt the management and key talent that would enable such quantum capacity to be operationalised. Third, prevent them acquiring market share to an entrenched level, so that you have time to bring your own technology up to speed.
All these suggest that if you think in Thucydides Trap terms (classical arms race to nuclear war), we will all end up in nuclear mutual destruction.
If quantum thinking is a more “natural” way of thinking about our physical world and human behaviour (since our brains appear to neurologically work in quantum terms), then it means that we need to get rid of old classical thinking and mental traps. The real challenges to global prosperity and survival are climate change, social injustice, corruption, crime and disruptive technology, but mostly outdated mindsets. We need to think through these challenges in quantum terms, which means very new and weird ways of thinking round these obstacles.
Discarding old mindsets is never easy. But mankind has always thrived on getting new solutions to old problems, perhaps this time through a quantum frame of mind. On that optimistic note,
Happy New Year to all!
By Andrew Sheng – Think Asian– Tan Sri Andrew Sheng writes on global issues from an Asian perspective.
|The photo shows electronics for use in a quantum computer in the quantum computing lab. Describing the inner workings of a quantum computer isn’t easy, even for top scholars. — AP|
WHY is it that in the last days of September, 10 years after the failure of Lehman Brothers, the world feels as if it is a dangerous place?
The filing for Chapter 11 bankruptcy protection by financial services firm Lehman Brothers on September 15, 2008, remains the largest bankruptcy filing in U.S. history, with Lehman holding over US$600,000,000,000 in assets. Wikipedia
President Trump’s remarkable speech to the United Nations this week was supposed to re-state the New Order that America has envisioned for the world. And all he got was a laugh.
But it was an important speech, because it spelt out more clearly what everyone knew since January 2017 – his Administration is dismantling what America has stood for since the Second World War.
Out goes the vision of a liberal rule-based stable world under US leadership. What replaces it is a “no holds barred” reality show of bilateral “Art of the Deal” negotiations supposedly to solve what is paining America. Never mind the collateral damage on everyone else, even if they are ultimately American consumers. What everyone heard is that the White House does not care too much about allies or enemies, only what is good for America First, trumped by the speaker’s ego.
Speeches to the United Nations has never been about foreign policy. Speaking in front of 193 member countries, the national leader is actually addressing his home audience, a photo-opportunity to show that as a member of the United Nations, your voice is heard by the whole wide world. Accordingly, other than the famous 1960 case of Soviet Leader Khruschev making his point by banging his shoe at the podium, most national leader speeches to the United Nations are boring homilies. They tend to praise themselves, pay due respect to the UN, and expound what Miss Congeniality says in all beauty contests, “world peace!”
What we got instead from President Trump was raw and edged, “America’s policy of principled realism means we will not be held hostage to old dogmas, discredited ideologies, and so-called experts who have been proven wrong over the years, time and time again.” That statement made a powerful indictment of “experts”, because his supporters feel that it is the elite experts that have run the country for 70 years who have let them down.
If America is doing so well economically, militarily and technologically, why should her middle class feel so insecure? And it is lashing out at everyone else.
The answer lies in not what the speech said, but what it omitted. Everywhere in the world, not least in America, the greatest existential concerns are inequality and climate change. Almost nothing was said about both issues, which are stressing societies and pushing immigration from poorer neighbours across borders to richer nations with cooler climates.
Instead, what was decided was non-participation in the Global Compact on Migration, withdrawal from the Human Rights Council and non-recognition of the International Criminal Court. There was also a barrage against Opec, which contains some of the US’s strongest allies. If other bodies like the World Trade Organisation or even the United Nations do not do America’s bidding, then the cutting of funds or withdrawal is a matter of time. Does that imply that the US will now veto every World Bank or IMF loan to members that she does not like?
In short, it is all about anti-globalisation. In the same breath that “We reject the ideology of globalism, and we embrace the doctrine of patriotism,” Trump appeals to the passion and pride of nationalism. “The passion that burns in the hearts of patriots and the souls of nations has inspired reform and revolution, sacrifice and selflessness, scientific breakthroughs, and magnificent works of art.”
Never mind if a lot of that sacrifice and selflessness was by immigrants and new arrivals.
Outsiders who used to admire America as an open society founded by immigrants with new ideas on how to build a more just society and free economy find instead one that has an increasingly closed mind to global issues. It does seem strange that American innovation, entrepreneurship and dynamism which drew continuously on new talent initially from Europe and then the rest of the world is now walling up its borders, physically, legally and mentally.
There are 40 million immigrants in the US today, representing 13% of the US population. Immigrants founded nearly one-fifth of the Fortune 500 companies, such as Google, Procter & Gamble, Kraft, Colgate Palmolive, Pfizer, and eBay. Today, much of Silicon Valley talent feel like working in the United Nations, diverse, noisy and creative.
The irony of America drawing on global talent and resources is that she has no need to pay for it from exports, but can easily print more dollars. In other words, the Grand Bargain of global trade was the ability of the US to pay for real goods and services with something that can be printed at near zero marginal cost. Even the Europeans are now creating a separate payment system outside the US dollar dominated SWIFT system to avoid being punished for “trading with the enemy”.
When contracts of trust are being renegotiated, no one can feel at ease. One can never solve global problems unilaterally or even bilaterally, let alone calls for more national patriotism. And as the English writer Samuel Johnson scribbled in 1775, a year before US independence from Britain, “patriotism is the last refuge of a scoundrel.”
Leadership has always been about generosity to those who are less well endowed and fortunate than you are. Often, it is not generosity of kind, because that would be buying of votes, but generosity of spirit.
This side of the Pacific, there is awareness that the tensions will not go away with Trump or a change in the November elections. What has happened is that the US establishment has put political interests ahead of economic interests, which means that any settlement will have to go beyond economic considerations.
If trade and political tensions are in for the long haul, can the current US market enthusiasm have sufficient strategic patience?
Now we understand why no one is laughing.
Credit; Think Asian Andrew Sheng
Tan Sri Andrew Sheng writes on global issues from an Asian perspective.
MOST people are somewhat aware about the Fourth Industrial Revolution.
The first industrial revolution occurred with the rise of steam power and manufacturing using iron and steel. The second revolution started with the assembly line which allowed specialisation of skills, represented by the Ford motor assembly line at the turn of the 20th century.
The third industrial revolution came with Japanese quality controls and use of telecommunication technology.
The Fourth Industrial Revolution, or first called by the Europeans Industry 4.0, is all about the use of artificial intelligence, robotics, genomics and process, creative design and high speed computing capability to revolutionise production, distribution and consumption. Finance is a derivative of the real economy – its purpose is to serve real production. Early finance was all about the finance of trade and governments to engage in war.
It is no coincidence that the first central banks (Sweden and England) were established in the 17th century at the start of the First Industrial Revolution. Industrialisation became much more sophisticated as Finance 2.0 brought the rise of credit and equity markets in the 18th and 19th centuries. Industrialisation and colonisation came about at the same time as the globalisation of banks, stocks and bond markets.
Again, with the invention of first the fax machine, then Internet that speeded up information storage and transmission in the 1980s, finance and industry took a quantum leap into the age of information technology. Finance 3.0 was the age of financial derivatives, in which very complex (and highly leveraged) derivatives became so opaque that investors and regulators realised they became what Warren Buffett called “weapons of mass destruction”. Finance 3.0 stalled in 2007 with the Global Financial Crisis and was only propped up with massive central bank intervention in terms of unconventional monetary policy with historically unprecedented interest rates.
We are now on the verge of Finance 4.0 and it may be useful to explore what it really means.
The common definition of Industry 4.0 is the rise of the Internet of Things, in which cloud computing, artificial intelligence and global connectivity means that cyber-physical systems can interact with each other to produce, distribute and trade across the world in a massively distributed system of production.
But what does Finance 4.0 really mean?
What truly differentiates Finance 4.0 from the earlier version is the arrival of Blockchain or distributed ledger technology. The best way to think about the difference is the architecture of the two different systems.
Finance 3.0 and earlier versions were all about a top-down or hierarchical ledger system, like a pyramid, in which trade and settlements between two parties are settled across a higher ledger.
A simple example is payment from Joe in bank A to Jim in bank B is finally settled across the books of the central bank in local currency. But in international trade and payments, the final settlements (at least more than 60%) are settled in US dollar finally across the ledgers of the Federal Reserve bank system.
Finance 3.0 was not perfect and those who wanted to avoid regulation, taxation or any official oversight basically moved trading and transactions off-balance sheet and also off-shore. This was the “shadow banking” system that financial regulators and central banks conveniently blamed on their failure to see or stop the last global financial crisis.
Although technically the shadow banking system is the non-bank financial system, which would include bond, stock and commodity markets, the bulk of illegal, illicit transactions traditionally was done in cash.
Welcome to the technical innovation called cyber-currencies, which was made possible for peer-to-peer (P2P) transactions across a distributed ledger system (commonly known as blockchain). In architectural terms, this is a bottom-up system which technically can avoid any official oversight. Indeed, cyber-currencies or tokens were invented precisely because the users do not trust the official system.
As the populist philosopher Stephen Bannon said, “central banks are in the business of debasing the currency”. Hence, those who want to avoid the debasement of their savings prefer to deal with either cash or cyber-tokens like bitcoin (pic).
What is happening in the rapidly evolving Finance 4.0 is that as the world moves from a unipolar order to a multi-polar world in which other reserve currencies also contend for trade and store of value, the top-down architecture is fusing (or merging) with a bottom-up architecture in which trade, transactions and stores of value are shifting towards the P2P shadow system.
Why this is taking place is not hard to understand. Post-global financial crisis, the amount of financial regulations have tripled in terms of number of rules and complexity on what the official sector can regulate, which is mostly the banking system. It is therefore not surprising that all the innovation, talent and money are moving to outside the banking system into the asset management industry, which is much more lightly regulated.
No talented banker, however dedicated to the values of banking probity, can resist the temptations of working in asset management, away from the heavily regulated environment where he or she is 24×7 under regulatory internal and external oversight.
Another reason why the cyber-P2P business is flourishing is because the official sector is worried that further regulation would hinder innovation. But those who want to increase the complexity of regulation must remember that for every 50 foot wall, someone will invent a 51 foot ladder.
So competition in the 21st century has already moved from the physical and financial space into cyber-space.
If there is one thing I learnt as a former regulator, it is that if the banks are behind the curve in terms of technology, the regulators are even further behind, since they learn mostly from those whom they regulate. But if financial regulators deal with financial innovation through “regulatory sandboxes” where they allow their regulated banks to experiment in sandboxes, they are treating their regulated institutions as kids in an adult game of ruthless technology.
Time for the official sector to make their stand clear or else Finance 4.0 promises to be very different from the orderly world that they are used to imaging. Nothing says this clearer than a recent survey by the Chartered Financial Analyst Institute, which showed that 54% of institutional investors surveyed and 38% of retail believe that a financial crisis in the next one-three years is likely or very likely.
You have been warned.
– Tan Sri Andrew Sheng writes on global issues from an Asian perspective.
Earth-shattering news: The aftershocks of the
general election are not over by any means. Voter turnout declined by
8.84 percentage points from 84.8 in 2013 to 76 this time around.
MOST Malaysians, including myself, went to bed in the early hours of Thursday morning after hearing the news that the Pakatan Harapan coalition of four parties had won a simple majority of 113 seats out of the 222 parliamentary seats contested in the 14th General Election.
It was earth-shattering news that the Barisan Nasional that had ruled Malaysia for 61 years is now in opposition.
The 92-year-old Tun Dr Mahathir Mohamad has just been sworn in as the seventh Prime Minister of Malaysia, after having served 22 years as the fourth Prime Minister from 1981 to 2003.
In 2016, Dr Mahathir quit Umno and came out with the former Deputy Prime Minister Tan Sri Muhyiddin Yassin to form Parti Pribumi.
The Pakatan coalition comprises Parti Primbumi, Parti Keadilan Rakyat led by Datuk Seri Anwar Ibrahim’s wife Datin Seri Dr Wan Azizah Wan Ismail, DAP and Parti Amanah Negara. The last comprises a faction that split off from PAS.
Going forth, there will be a period of political crossovers in which each party tries to bolster its majority at the parliamentary and state levels.
The aftershocks of the general election are not over by any means. My preliminary analysis of the published and available data on the elections showed that voter turnout declined by 8.84 percentage points from 84.8% in 2013 to 76% this time around.
Despite this, the total votes cast in the Parliamentary election were 11.93 million, or roughly 671,000 more than 2013. Out of this, Pakatan got 5.24 million or an increase of 1.25 million votes (over the votes cast for PKR and DAP in 2013) to 43.9% of total votes cast.
In essence, Barisan had a swing against it of just under one million votes to 4.24 million or 35.53% of the total votes cast.
In addition to the rejection of the past government on issues that include the 1MDB scandal, three key trends can be discerned from this year’s general election, which was orderly and surprisingly quiet on polling day, since there were few of the usual rumbustious rallies that followed past elections.
The Malaysian electorate has become mature, learning to be cautious and yet bold in voting for change.
First, it was clear that the urban voters swung decisively to the Pakatan coalition. This trend was clear for quite some time, as the urban population increased with the rural-urban drift.
Umno has traditionally depended on the rural vote for its support, but relied on its urban partners, the MCA, MIC and Gerakan to bolster the urban vote.
This time around, the MCA, MIC and Gerakan were almost wiped out at the polls, with the MCA and MIC party leaders losing their seats and Gerakan winning no seats at all.
This meant that the decisive gains were achieved in the more densely populated states in the West coast of Peninsular Malaysia, particularly with stronger majorities in Penang and Selangor, Negri Sembilan and Johor.
The last was the birthplace and stronghold of Umno, but this time round, even the veteran MP for Johor Baru Tan Sri Shahrir Samad lost heavily.
What was pivotal was the voting in Sabah and Sarawak, which together carried 56 Parliamentary seats and were considered safe “deposits” on which Barisan could rely to carry a majority.
In the end, Pakatan and its ally, Warisan took 24 parliament seats.
Secondly, PAS, the Islamic party that focuses largely on religion, dropped a net of three Parliamentary seats, but took back Terengganu, so that it once again controls two states (Kelantan and Terengganu).
It was clear that the breakaway faction Amanah was not able to draw away sufficient hardcore votes to weaken PAS.
The PAS support amounted to 2.01 million or 16.88% of total votes cast, an increase compared with 1.63 million votes or 14.78% in 2013.
What the rise of Pakatan means is that the urban Malay voters had elected for a change of government and improvements in economic livelihood rather than voting along religious affiliations.
The non-Malay vote, on the other hand, were put off by PAS push for hudud laws and were uncomfortable with Umno’s flirting with PAS on areas touching on religion.
Third, what this general election has done is to bring more new faces and talent into the political arena.
One of the weaknesses of multi-party politics is that under conditions of uncertainty, the tendency was to rely on recycled politicians, rather than experiment with younger professionals.
The new government has the opportunity to engage in generational renewal by bringing in younger leaders from more diverse backgrounds into positions of authority on change at all levels.
Time is of the essence, as Dr Mahathir has promised to stay on as Prime Minister for two years, before passing the baton to Anwar who will be 73 by then.
Nothing would signal more the restoration of the rule of law than the immediate release of Anwar from jail.
To safeguard his legacy, Dr Mahathir has now an unique and historic opportunity to address many of the issues that festered when he was Prime Minister for the first time. If the rule of law has weakened, it was partly because of the controversial steps he took to intervene in the legal institutions in the 1980s.
He needs to strengthen the very institutions that protect the rule of law which he now upholds.
On the economic front, he has inherited an economy that has grown by 5.9% last year, but as the saying goes, the GDP numbers look good, but the people feel bad.
With oil prices back up to over US$70 per barrel, and Malaysia as a net energy exporter, the economic winds are favourable for making the necessary tough reforms.
Cutting GST may be popular, but one has to look closely at the fiscal situation more prudently for the long haul.
How to create good jobs in an age of robotics, even as more youth enter the labour force, is a pressing challenge not just for Malaysia, but throughout the developing world.
On the foreign affairs front, Malaysia will have to navigate between the growing tensions between the United States and China.
Given his feisty style, Dr Mahathir has not been known to mince his words about what he thinks about the South China Sea or for that matter, where Malaysia stands as a leading voice in the South.
In her unique way, Malaysia has voted for a generational change, but with the oldest leader managing that transition. Most new governments find very short political honeymoons, as expectations are now high on delivery. It is always easier to oppose than to propose and implement.
How smoothly that transition occurs will have huge impact not only on Malaysians, but the region as a whole.
By Andrew Sheng who writes on global issues from an Asian perspective.
Mahathir to be sworn in as PM on May 10 https://youtu.be/zsOkQeJxojk After six decades in power, BN falls to ‘Malaysian tsuna..
2017 was a year of smooth tailwinds, even though everyone was
mesmerized by the Trump reality show. Heading into 2018, one issue on
everyone’s minds is whether headwinds will finally catch up when the
tide goes out.
ALL markets function on a heady mix between greed and fear. When the markets are bullish, the investors know no fear and regulators think they walk on water. When fear grips the markets, and everyone is staring at the abyss, all eyes are on the central banks whether they will come and rescue the markets.
Last year was one of smooth tailwinds, even though everyone was mesmerised by the Trump reality show.
Heading into 2018, one issue on everyone’s minds is whether headwinds will finally catch up when the tide goes out.
Last week at a Tokyo conference, Fed vice chairman Randy Quarles was visibly confident about the US economy. Real gross domestic product (GDP) growth through the final three quarters of 2017 averaged almost 3%, faster than the 2% average annual pace recorded over the previous eight years.
The European recovery, barring Brexit, looked just as rosy. Eurozone growth has stepped up to 2.7% in 2017, with inflation at around 1.2% and unemployment down to 8.7%, the lowest level recorded in the eurozone since January 2009.
In Asia, 2017 Chinese GDP grew by 6.9% to 59.7 trillion yuan or US$9.4 trillion, just under half the size of the United States. With per capita GDP reaching US$8,836, China is expected to reach advanced country status by 2022.
Meanwhile, the Indian economy has recovered from its stumble last year and may overtake China in growth speed in 2018, with an estimated rate of 7.4%.
The tailwinds behind the growth recovery seem so strong that the IMF’s January world economic outlook for 2018 sees growth firming up across the board. The IMF’s headline outlook is “brighter prospects, optimistic markets and challenges ahead.”
Expressing official prudence, “risks to the global growth forecast appear broadly balanced in the near term, but remain skewed to the downside over the medium term.”
Having climbed almost without pause in most of 2017 to January 2018, the financial markets skidded in the first week of February. On Feb 5, the Dow plunged 1,175 points, the biggest point drop in history. The boom in 2017 was too good to be true and fear came back with the re-appearance of volatility.
Amazingly, the drop of around 11% from the Dow peak of 26,616 on Jan 26 to 23,600 on Feb 12 was followed by a rebound of 9% in the last fortnight.
Global stock market indices became highly co-related as losses in Wall Street resulted in profit taking in other markets which then also reacted in the same direction.
Will headwinds disrupt the market this year or will there be tailwinds like the economic forecasts are suggesting?
What makes the reading for 2018 difficult is that the current buoyant stock market (and weak bond market) is driven less by the real economy, but by the current loose monetary policy of the leading central banks.
With clearer signs of firming real recovery, central banks are beginning to hint at removing their decade long stimulus by cutting back their balance sheet expansion and suggesting that interest rate hikes are in the books.
The projected three hikes for Fed interest rates in 2018 augur negatively on stock markets and worse on bond markets.
The broad central bank readout is as follows.
The Bank of England and the Fed are leaning on the hawkish side, the European Central Bank (ECB) is divided and the Bank of Japan will still be on the quantitative easing stance.
In his first testimony to Congress, the new Fed chairman Jay Powell was interpreted as hawkish. In his words, “In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2% on a sustained basis. In the FOMC’s view, further gradual increases in the federal funds rate will best promote attainment of both of our objectives.”
What is more interesting is the divided stance facing the ECB. In his latest statement to the European Parliament, ECB president Mario Draghi reaffirmed that the eurozone economy is expanding robustly. Because inflation appears subdued, although wage growth has picked up, he argued that “patience and persistence with respect to monetary policy is still needed for inflation to sustainably return to levels of below, or close to, 2%.”
In an unusually critical and almost unprecedented article published last month by Project Syndicate, the former ECB Board member and deputy president of the Bundesbank Jurgen Stark called the ECB “irresponsible”, suggesting that its refusal to normalise policy faster is drastically increasing the risks to financial stability. In short, the bigger partners in Europe think tightening is the right way to go.
If both central banks begin to reverse their loose monetary policy and unwind their balance sheets, liquidity will become tighter and interest rates will rise.
Financial markets have therefore good reason to be nervous on central bank policy risks.
There is ample experience of mishandling of policy reversals.
After the taper tantrum of 2014, when markets fell on the fear of the Fed unwinding too early and too fast, central bankers are particularly aware that they are walking a delicate tightrope.
If they reverse too fast, markets will fall and they will be blamed. If they reverse too slow, the economy could overheat and inflation will return with a vengeance, subjecting them to more blame.
In the meantime, trillions of liquid funds are waiting in the sidelines itching to bet on market recovery at the next market dip. But this time around, it is not the market’s invisible hand, but visible central bank policies that may pull the trigger.
Man-made policies will always be subject to fickle politics. The raw fear is that once the market drops, it won’t stop unless the central banks bail everyone out again. This means that central bankers are still caught in their own liquidity trap. Blamed if you do tighten, and damned by inflation if you don’t.
There are no clear tailwinds or headwinds in 2018 – only lots of uncertain turbulence and murky central bank tea leaves. Fear and greed will dominate the markets in the days ahead.
AFTER two Category 5 hurricanes (Harvey and Irma) hit the US in October, followed by Maria hitting Puerto Rico, no one can deny that natural disasters are devastating.
With three hurricanes costing an estimated US$385bil, with less than half insured, the poor are suffering the most because they cannot afford to rebuild as the rich.
This year alone, monsoon floods in Bangladesh, India and Nepal have left millions homeless. This year will therefore break all records as Munich Re-insurance data suggests that 2016 natural disaster losses were only US$175bil, already 28.6% higher than the 30 years (1986-2015) annual average of US$126bil.
But how much of these natural disasters are man-made?
Despite US President Trump being sceptical of climate change, the US Global Change Research Program Climate Science Report published this month concludes that “it is extremely likely that human activities, especially emissions of greenhouse gases, are the dominant cause of the observed warming since the mid-20th century”.
Carbon dioxide concentration already exceed 400 parts per million, last occurred about 3 million years ago, when both global average temperature and sea level were significantly higher than today. Roughly one third of carbon emission is due to residential heating/cooling, one third for transport and one third for industrial production.
Human activities on Mother Earth include over-consumption of natural resources, cutting down forests, polluting waters and excessive cultivation/development that caused desertification or soil erosion. You see this from warmer surface and oceanic temperatures; melting glaciers; diminishing snow cover; shrinking sea ice; rising sea levels; ocean acidification; and declining tree and fish stock.
Oceans warming up
Hurricanes are caused by oceans warming up, building energy and vapour levels that create freak typhoons, tornados and massive downpours. At the same time, droughts are also occurring with more frequency for longer.
Scientists estimate that global average sea level has risen by about 7-8 inches since 1900, with almost half that rise occurring since 1993. Everyday, we hear new extreme events, such as unusually heavy rainfall, heatwaves, large forest fires, floods or landslides.
Climate warming is most observable in the water-stressed Middle East and the North Africa/Sahel region, where rapid population growth created desertification, food shortages, civil conflicts and ultimately, outward migration towards cooler climates, especially Europe. This hot region accounts for 60% of global war casualties since 2000, with 10 million outward refugees. About 90% of the world’s refugees and asylum seekers come from four regions with half under the age of 18 years.
A 2016 World Bank report estimated that these water-stressed countries’ GDP could be reduced by up to 6%, with dire consequences on stability. Without water, industries cannot function, food cannot be cultivated and health can deteriorate due to disease from water-shortage and drought.
European estimates suggest that each refugee costs roughly US$11,600 per person to maintain and there are already one million trying to enter Europe last year. The OECD has classified countries such as Afghanistan, Central African Republic, Iraq, Somalia, Sudan, Syria and Yemen as extreme fragile.
The world is already reaching a critical turning point. If the Paris Climate Accord can be implemented, with or without the United States, there is some chance of averting further global warming.
But closer home, we are already witnessing the effects of climate change on our daily lives.
In 1972, Hong Kong experienced a devastating landslide near Po Shan Road in Mid-Levels, which caused 67 deaths and collapse of two buildings. One cause was unstable ground following heavy rainfall from Typhoon Rose eleven months prior to the incident.
This tragedy in densely populated Hong Kong resulted in rigorous slope protection and inspection of drains to ensure that these slips do not occur again. I lived near Po Shan Road and admired how Hong Kong engineers regularly inspected the slope protection measures and that the drains were always clear.
In 1993, the collapse of Highland Towers in Kuala Lumpur was partly attributed to the clearing of the hilltop above Highland Towers, which led to soil erosion and the weakening of the foundations. By the time the residents detected cracks in the buildings, it was already too late. Some of my personal friends were among the 48 persons who were killed in that collapse.
Last weekend, Penang (where I live) had the worst rainstorm and floods because we were hit by the tail end of strong winds from Typhoon Damrey, one of the strongest to hit Vietnam in 16 years, leaving 61 people dead. Driving along Penang Bridge, I can see that the continued hilltop developments in Penang are leaving soiled scars on the previously pristine landscape, I am reminded of Highland Towers and Po Shan incidents. Natural disasters are acts of god, but the size of their impact on human lives are completely within our control.
Soil erosion does not happen overnight, and require responsible developers and conscientious governments, as well as concerned citizens, to be continually vigilant that maintenance of roads and drains, including soil inspections, are serious business with serious consequences.
Modern technology can provide drones and inbuilt sensors that can detect whether erosion is reaching critical levels. Regular maintenance of drains and checks on stability of the soil, especially where there has been recent clearing of trees in steep slopes, will forewarn us all of impending accidents.
As cities are building more and more on hillsides subject to torrential rain, Penang should seek technical expertise from Hong Kong which has extensive expertise on the maintenance of steep hill slopes that are subject to typhoons and sudden rainfall.
Landslides are today used more in political terms than in real terms. The next time landslides happen, residents who watch daily the erosion of their natural environment will know who is really looking after their interests.
Becoming bald: A view of the clearing work seen at Bukit Relau which was visible from the Penang Bridge in November last year. GEORGE
Seeking solutions: Penang Forum member and soil expert Dr Kam Suan Pheng giving her views during the dialogue sessio
Speaking out: Penang Forum members protesting outside the CAP office in George Town. Don’t just make it about worker safety
https://youtu.be/QB45Q2_mOG0 Suspicious activity: A photo taken from Penang social activist Anil Netto’s blog showing an active