Remembering the legacy of Bandung, Sandakan death and Hiroshima bombing

THIS year marks the 60th anniversary of the historic Bandung Conference
and the 70th Anniversary of the end of the Second World War.
 A copy of the final “atomic bomb” leaflet, I think? I don’t read Japanese, but this was attached to the above memo. If you do read Japanese, I’d love a translation. Please ignore my thumb in the corner — it’s hard to photograph documents that are bound like these ones were.

In order to commemorate the past, a series of conferences and events have been held, the most recent being the Afro-Asian Conference hosted by Indonesia President Jokowi this week. The first Bandung Conference was called by the first Indonesia President Sukarno in April 1955 among newly independent Asian and African nations, beginning what was later known as the Non-Aligned Movement against colonialism. Twenty-nine countries participated, representing 1.5 billion people or just over half of the world’s population. It was the first time that leaders of these countries met to discuss their future after the end of colonialism.

The conference was historic because it was attended not only by Indian Prime Minister Jawaharlal Nehru, but also Egyptian President Gamal Nasser, Chinese Premier Zhou Enlai, Muhammad Ali Jinnah of Pakistan, U Nu of Burma, Nkrumah of Ghana and Tito of Yugoslavia, all giants not only in their countries, but makers of history in the 20th century.

The United States did not attend because it was not sure whether it sided with the European colonial powers or its new role as an ex-colony liberating the world.

The Bandung Conference was a conference of hope that the newly independent nations would build themselves into a zone of peace, prosperity and stability. On the whole, despite some failures, they succeeded. By 2013, these countries together have a GDP of US$21.2 trillion or 28.1% of world GDP, significantly improved compared with their share of less than one-fifth of world GDP in 1955.

Aug 6, 2015 will also mark the 70th anniversary of the horrific atomic bombing of Hiroshima, which led to the end of World War Two on the Pacific side.

Lest we forget, World War Two was a horrific period, since the world lost between 50 million and 80 million people or 3% of world population. Japan lost 2-3 million during that war, but the rest of Asia suffered estimated losses of up to 10 times that number.

Even though memories are fading, there is still a generation who remembered the hardships and atrocies of war, from personal experience of family being killed, bombed or flight as refugees. Even a remote country like Australia could not escape that war. Australian soldiers fought heroically in Kokoda Trail to repell the Japanese invasion of Papua New Guinea in 1942. If not stopped, Australia could have fallen to Japanese hands, changing the course of history.

Image result for sandakan death marchBut the 625 Australian deaths defending the Kokoda Trail paled in comparison to the Sandakan Death March, in which 2,345 Australian prisoners of war died marching from their prisoner of war camp in Sandakan across primitive jungle in Sabah. Only six Australians survived those marches in early 1945, only because they escaped. One in 12 of every Australian who perished in the war died in that death march.

My impressions of this incident are indelible, growing up in Sandakan and following the trail across Sabah on a road built by the Australians to commemorate their dead. It fascinated me that man could be that cruel to other human beings to send them across the virgin jungle without food to certain death.

On June 9, 2014, when Japanese Prime Minister Shintaro Abe addressed the Australian parliament, he did mention Kokoda and Sandakan. In it, he did not offer an apology, but he did sent his “most sincere condolences towards the many souls who lost their lives.” This was very Japanese English, because one gives condolences to the living, not the dead.

Image result for Hitler's Abe imagesIn the Afro-Asian Conference this week in Bandung, he rephrased his words as follows, “Japan, with feelings of deep remorse over the past war, made a pledge to remain a nation always adhering to those very principles (of Bandung) throughout, no matter what the circumstances.”

We note that he is already shifting the official Japanese view on the war from his predecessors Murayama and Koizumi, who offered “deep remorse and heartfelt apology,” in their statements about the war in the 1995 and 2005 anniversaries respectively.

I always thought that the difference between remorse and shame is one that differentiates Western and Asian values. A remorse is a feeling of regret that something has happened but there is no sense of guilt. Shame is a feeling you have injured someone else and you feel guity about it, and you want to make amends.

There is a sharp difference between the German and Japanese attitudes. Seventy years after the war, the German courts are going to try the 93-year old “bookkeeper of Auschwitz”, whereas the Japanese are still revising their history books on what really happened.

What makes Abe’s “deep remorse” poignant is that he is a leader of a faction that wants to re-arm Japan by changing its constitution and he regularly visited or sent ritual offerings to the Yasukuni shrine, which contains the shrines for 14 class A war criminals. Even the Japanese emperor has not visited Yasukuni after these enshrinements.

Most Asians like myself have great respect for Japan, but feel uneasy that the Japanese are beginning to whitewash their role in the war. The Yasukuni shrine has an accompanying museum that seems to suggest not only that the Nanking massacre did not occur, but that US actions to deny Japan energy resources pushed it into war. But these do not explain why Japan invaded China in 1937.

On the commemoration of the 70th anniversary of the end of the Pacific War, will the US leader express an apology or remorse for bombing Nagasaki or Hiroshima? If the Japanese want to understand how the rest of Asia feels about its actions during World War Two, just changing the history book will not solve the deep sense of injustice that war brought to the region. Could those who died or suffered during that period appeal to the rule of law that Abe-san so proudly proclaim today?

All of us want to move on, but not through denying the past. As the philosopher Santayana said, those who cannot remember the past are condemned to repeat it.

Think Asian by Andrew Sheng

 President of Fung Global Institute
Sheng is Malaysian Chinese. He grew up in British North Borneo (todaySabah, Malaysia). He left Malaysia in 1965 to attend the University ofBristol in England, where he studied economics.

Datuk Seri Panglima Andrew Sheng (born 1946) is a Distinguished Fellow of Fung Global Institute, a Hong Kong based global think tank. He started his career as an accountant. He served as Chairman of the Hong Kong Securities and Futures Commission (SFC) before his replacement by Martin Wheatley in 2005.


Related posts:

The Bandung Spirit: strengthering Asian African economic cooperation & legal consultationChinese President Xi Jinping has delivered a speech, with the aim of
carrying on the Bandung Spirit and promoting the common development …

Why should an organisation devoted to saving “succeeding generations from the scourge of war” make it its
business to authorise war?

Making monkeys out of markets

IT’S now official. Even monkeys can beat the stock market index. Cass Business School researchers in London simulated 10 million portfolios of US stocks selected at random. They found that a US$100 invested at the beginning of 1968 would have yielded US$5,000 by the end of 2011, but half the monkey (computer-simulated) portfolios managed US$8,700, one quarter made more than US$9,100 and 10% made more than US$9,500.


So, does the market beat all the professionals if monkeys beat the market?

There is a real lesson here for investors. I had a great debate with a good friend last month regarding the benefits of investing in a world where fast trading algorithms (using super fast computers to detect market opportunities to buy, sell or short stocks make it hard even for traditional asset managers to compete. So what chance is there for retail investors? My friend decided to get out of trading stocks.

Investing has been such complicated business because there are just too many variables to handle. Gone are the days when you think you can understand how markets perform. The rules of the game changed when policymakers began intervening through unconventional monetary policy and politics become part of the equation.

You would have thought logically that growth economies should produce growth stocks. The BRICS economies (Brazil, Russia, India, China and South Africa) met in Durban at the end of March. These five countries accounted for over half of total global growth since 2001, but their stock markets have not done that well. Since its peak in 2007, the BRICS index is down 37%.

Chinese retail investors have declined in number, based on the number of accounts closed. The A share index is down 31% since its peak in 2009, and the Brazil, Russia, India and South Africa stock market indices are all in negative territory since the beginning of this year. On the other hand, both the US and Japan are sluggish in growth and their stock markets performed 11.1% and 20% respectively since the beginning of this year.

Despite being overall in crisis and negative growth, even the European stock market performed in positive territory, mainly due to better performance in Germany and France. There are globally diversified companies in these economies that can outperform despite the slowdown in the European economy.

The real problem is that negative real interest rates around the world are truly destroying the ability of investors to judge what is the right asset to invest in. Markets are clearly bubbly when emerging market investors start investing in taxi licenses.

Accordingly to a Bloomberg report, Turkish taxi licenses today trade for US$580,000 each. My Hong Kong taxi driver was complaining to me that a Hong Kong taxi license was trading over HK$7mil (just under US$900,000) and yielding next to nothing.

It made no sense to him as a taxi driver himself to be an owner. This reminded me that in 1996, golf club membership was being touted as the best investment ever, with the 1997 Asian financial crisis wiping out all gains thereafter.

So what should an honest, no-inside information retail investor do? I guess the old-fashioned advice to invest in diversified and value stocks and maintaining ample liquidity is still sound. Global bonds have done well since the financial crisis due to the massive quantitative easing.

Even those who have speculated on Greek bonds when they were yielding more than 20% have done well. But it is difficult to argue that ten year US Treasuries and German Bunds at under 2% per annum represent no risk. Certainly, Japanese 10 year bonds at 0.55% per annum, when the official inflation target is 2% per annum, must carry considerable interest rate risks.

Over the long-term, there is no question that investing in one’s own home has been good investment. This is officially supported leveraged investment, since most mortgages still require not more than 30% down payment for the first home. The fact that there is a growing middle-class in most emerging Asia means that demand for housing is still on the increase, but given such low interest rates, it is hard to imagine how much further can house prices rise relative to the affordability index.

My own inclination is to go for high yield, solid growth companies that are globally diversified. You basically invested in the region that you are most familiar with, and in companies that demonstrate good governance and know what they are doing. The average price/earnings ratio of Hong Kong, Singapore, Malaysia and Thailand markets are still below those of the US (17.7). China A share has a PE ratio of only 8.1 and a yield of 3.7%.

Of course, the art of investing depends completely on the investor’s risk appetite, age and liquidity requirements. If you are fully invested in illiquid assets or in illiquid markets, you cannot get out even though the returns look good. Property markets are notoriously easy to get into and difficult to cash out, especially in the smaller markets. Bond investments may look good on paper, but when you want to exit, the selling price may be lower than what you think you can get, especially for retail investors.

Knowing that even monkeys can beat the market gives one food for thought. You can do better, but you must invest the time and energy to think through what you are investing in, what risk you are taking and what you want to achieve. My friend in Australia had no formal training in investments, decided that she could outperform the market, relied on her instinct and own research into companies and is now doing pretty well on her own.

Even monkeys know how to survive, so don’t look down on monkeys.


Tan Sri Andrew Sheng is president of the Fung Global Institute. He was recently named by Time magazine as one of 100 most influential people in the world.

Related posts:
Financial crises a result of governance failures 
: Who invented bank deposit insurance? 
New economic thinking 
The year of shame 2012′ get any worse in 2013? 
The rotten heart of capitalism: interest rate-fixing 

The state as market

THE more I study the Indian and Chinese growth models, the more I realise that the current debate over the state versus the market is a false dichotomy.

Both the state and the market are social institutions that are not independent of each other. Indeed, they are inseparable, interactive and interdependent.

Human development or evolution is a complex interaction or feedback between the two. In Small is beautiful author EF Schumacher‘s view, “Maybe what we really need is not either-or but the-one-and-the-other-at-the-same-time”.

India and China could not have become global powerhouses of growth, without the leading role of the state in planning for development. But those states that have worked with markets have succeeded better than those that worked against markets.

London Business School Prof John Kay defines the market as a relatively transparent, self-organised, incentive-matching mechanism for the exchange of goods and services, usually in monetary terms.

In plain language, the market helps to match willing buyer, willing seller under certain rules of the game to determine market price. The market clears when it functions properly, but market failure happens when the market is imbalanced.

Kay reminds us that capitalism is less about ownership than “its competitive advantages its systems of organisation, its reputation with suppliers and customers, its capacity for innovation”.

Because of globalisation and technological change, we are living in a situation of change within change, as if the national state is not in total control of our destinies. Because of the global economy, state policies such as monetary, exchange rate and trade, cannot be independent of what is happening globally.

No man, no company, no state is an island. Globalisation has changed the rules of the game irreversibly.

Why is the state so much bigger and more powerful than before?

In the 19th century, most governments were not larger than 15% of GDP. By 1960, the size of governments in OECD countries had doubled to 30% of GDP. Today, the average has increased further to 40% of GDP.

The state has grown because there has been demand for more and more state services, but there is also concern that bureaucracies tend to grow to perpetuate itself.

I find it useful to think about the state as a market-like institution for exchange of power (in non-monetary terms). Power comes from social delegation the people give the power to the state to protect them and to fairly enforce social rules and laws. Hence, the “state as market” has the same dilemmas as the market information asymmetry and the principal-agent problem.

In large countries like India and China, there are many levels of government central, provincial, city, town, village and rural governments, each with their own departments and even enterprises. Most citizens find it difficult and confusing to deal with complex bureaucratic power. The Peruvian economist Hernando de Soto was one of the first to point out that rural poverty exists, because the poor’s property rights are not protected adequately and their transaction costs are extremely high because of complex government.

In other words, markets are efficient and stable when the state is efficient and stable. It is not surprising from recent experience that financial crises are results of governance failures. As the European debt crisis amply demonstrates, financial markets cannot clear when the fiscal condition of the state is on shaky grounds, and there is no mechanism to make fast, simple, clear decisions.

Finding the right balance between state and market is the real challenge in all economies today. As 20th century British philosopher Bertrand Russell reminded us, “people do not always remember that politics, economics and social organisation generally belong in the realm of means, not ends”.

Today’s demands on the state to provide stability, growth and social equity are complex, because recent dominance of free market ideology has ended up with serious problems of wealth and income disparities and environmental degradation.

Realising that large states with geopolitically significant human and ecological footprints cannot consume like the United States or Europe on a per capita basis, China and India are embarking on ambitious 12th five-year plans to change their growth models to become more environmentally sustainable economies with greater social inclusiveness.

But large economies with many layers of government struggle between centralisation and decentralisation of people, resources and power.

For systems to be stable and sustainable, they have to be adaptable to complex forces of change from internal and external shocks.

To maintain integrity, there are complex trade-offs between winners and losers in each society. Such rules and bargains are difficult when the causes and effects of losses are unclear (such as crisis) and when vested interests resist change for fear of losing what they have. Vested interests are often unwilling to change because they value present gains far more than uncertain futures. Politics is the compromise of contending interests.

The belief that markets are always right assumes that markets always balance. The market cannot balance when the state cannot balance the contending interests. The main reason for the advanced country debt crisis is because their consumption has happened today by postponing the costs to future generations.

This raises a fundamental problem. Whichever way you term it, central bank quantitative easing is ultimately state intervention.

The rise in Spanish bond yields, despite ECB long-term refinancing operations, suggest that the markets are saying there are limits to the growing euro public debt.

At the same time, global financial markets are watching carefully whether inflation in China and India will rekindle global inflation.

In other words, the anchor of global financial stability rests on state debt stability. The state cannot escape being priced by the market.

THINK ASIAN By ANDREW SHENGAndrew Sheng is president of the Fung Global Institute.


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