TR EMERITUS

By Asrul Hadi Abdullah Sani from The Malaysian Insider PETALING JAYA, Aug 7 — A week after a mammoth anti-Internal Security Act (ISA) rally in Kuala Lumpur, results of a two-day old Home Ministry online poll shows that 91 per cent of 8,722 respondents want the security law abolished. The rest want a review of the ISA which allows detention without trial and first introduced in 1960 against communist terrorists. The results of the poll at 6.15pm is available at www.ikdn.gov.my. DAP national publicity secretary Tony Pua today commended Home Minister Datuk Seri Hishammuddin Hussein for taking the steps to gauge public perception over what the opposition calls a draconian law. “We hope that the minister will not only make this polls for show only and take this a real important feedback to ensure that ISA is abolished. The voice is very clear,” the Petaling Jaya Utara MP told reporters. Critics and opposition parties say the law is now being used against political rivals. Some 80 are still being detained under the law at the Kamunting Detention Centre in Perak. Those previously detained include religious extremists, currency forgers and a nuclear parts middleman apart from opposition politicians and other activists. But Pua criticised the website for a question that is aimed to mislead the public about ISA. The poll asked if Malaysians know that Britain and America referred to ISA to gazette their Anti-Terrorism Act and Patriot Act. “I feel that this question has misled the public because firstly they did not refer to ISA and the ISA Act is not the same as Anti-terrorism and Patriot Act. In UK, when the anti-terrorism act is used they have to go to the courts. "The detention they use is the same with the police act in Malaysia, that is detention of not more than two weeks. But even when they want to have detention for two weeks, they must after two days to go to the courts and request for the detention. So the terrorism act in UK is like the police act in Malaysia,” Pua explained. He also pointed out that the Patriot Act and Anti-Terrorism Act can only be used when the crime is clearly connected to terrorism. “But in Malaysia, matters not related to terrorism can be detained under ISA, writing blogs can be brought to ISA, and writing newspapers can also be brought to ISA,” he said. Prime Minister Datuk Seri Najib Razak has promised a review of the ISA but it is still unclear which provisions will be amended. Opposition politicians and activists have demanded the law be repealed and marched through Kuala Lumpur last Saturday to hand a memorandum to the King. But police locked down the capital city and crushed the protest, briefly detaining some 600 people of which 63 were charged in court. Source: The Malaysian Insider  Read More →

By Manu Bhaskaran from The Edge ONCE THE GLOBAL major changes in the developed economies, which have been the principal economic partners for Singapore. Separately, other trends unrelated to the crisis that have been underway for some time will reach a point where they will have a substantial impact on Singapore. Given these momentous changes, it is timely for Singaporeans to take a step back and think hard about how Singapore should respond. In this context, it is encouraging to see the establishment of the Economic Strategies Committee, which will study some key areas of the local economy and make recommendations for policy changes.   While the ESC sets about its tasks, it will be useful for us to think a little about some of the basic parameters we use to assess our economy and its future direction.   Should we continue to simply aim for high growth? First, what should the aim of economic policy be? The ESC has articulated it as achieving “sustained economic growth, faster than other advanced economies”. At first glance, this seems a good enough aim but on deeper reflection, there are potential problems with this formulation: High GDP growth may be a misleading proxy for citizens’ welfare: Rapid economic growth has already provided Singapore with one of the highest per capita incomes in the world, at US$37,597 in 2008. But, Singapore also has a very unequal distribution of that high income — profits take about 46% of GDP, which is extremely high in comparison with most developed economies. The available data also shows that foreign-owned companies receive almost half of this extraordinarily high profit share. That leaves an unusually low share of the GDP cake for the average Singapore citizen, whether he is an employee or a businessman. This could be why, even though Singapore’s per capita GDP is roughly 11% higher than Hong Kong’s, our per capita consumption is about 21% lower. If we take per capita consumption as a better indicator of welfare, then simply going for high growth per se does not guarantee that we will achieve the best possible welfare outcome for Singaporeans — which we assume is the ultimate objective of policy; and Pushing the economy to grow at such a high rate may even hurt Singaporeans: We only need to look at recent experience to understand this. Singapore grew at a rapid 7.8% in 2005 to 2007 but the result was some degree of overheating in the economy. To achieve that high growth, we pulled in hordes of foreigners, with lots of unintended effects. Allowing in unskilled foreign workers depressed the wages of lower-skilled Singaporeans, especially the older and more vulnerable members of our society. Such a huge inflow of people in a short space of time showed up in surging rental costs, higher inflation and worsening congestion. Sure, we achieved high GDP growth, but much of the growth was concentrated in the foreign-dominated enclaves of high-end manufacturing and high finance. The growth was driven by foreigners who also received most of the benefits. It really is not clear how much net welfare benefit the average Singapore citizen enjoyed from this period of high growth. In short, we need to think hard about whom all this growth is for. We would suggest that the objective of policy should be to maximise the welfare of Singapore citizens, where a range of indicators is used to assess welfare, not just GDP but its distribution for instance. And we need to learn from recent experience about the possible downsides of ramping up economic growth.   POST-CRISIS WORLD ECONOMY— A NEW MODEL OF GROWTH? Second, we need to assess whether the changed nature of the post-crisis global landscape means that we have to re-think some of the assumptions and strategies we have used. The post-crisis world will be very different from the past: Global growth will be measurably lower, gains will be mainly in a few developing economies: The burdens of high public- and private-sector debt from the crisis will combine with weaker financial intermediation, higher oil prices and the rising costs of accommodating climate change to weigh heavily on growth prospects in the US, Europe and Japan. Chinese growth will surge in the coming year but, after that, is likely to be lower than the pre-crisis average as China shifts strategy to lower GDP growth but of higher quality. Other large emerging economies such as India, Indonesia, Brazil and Vietnam are likely to see high growth continue. Overall, external demand will not grow rapidly in the developed economies that are our main markets — the excitement will be in just a few key countries in other parts of the world to which we are building links but which are still far behind the G3 in importance for us; Global economy will be more volatile: Massive monetary- and fiscal-policy responses probably ensure that we will exit the crisis but the costs of such unprecedented policy actions will be high and not yet felt. There remain many stress points that have not been addressed, for example, the value and role of the US dollar and deteriorating conditions in highly indebted emerging economies such as in eastern and central Europe. The global economy will be subject to a series of shocks and stresses in coming years as these shoes drop. It is vital that we build resilience to these shocks. MNCs are likely to change strategies: Low transportation costs, strong home currencies and the willingness of recipient countries to offer tax and other incentives spurred the relocation of production from developed economies to places such as Singapore. But we could well see a consolidation of such supply chains; higher oil prices will translate into permanently higher transportation costs, weakening one factor that spurred relocation. As the crisis ebbs, it is almost certain that the currencies of the more successful Asian economies will have to appreciate relative to developed economies, weakening yet another factor. The fact is that Singapore’s growth strategy has been heavily skewed towards attracting large global corporations — whether in manufacturing or in finance. This makes us more vulnerable to such fundamental changes in corporate strategy; and Changing structure of competitiveness: Not only will Asian currencies appreciate, other factors will probably work to change the competitiveness landscape. China is moving up the value chain, becoming more competitive in several areas that Singapore focuses on. Indian manufacturing companies are restructuring, raising their efficiency especially in precision engineering and auto-related activities. Basically, some really fundamental parameters will change. We may not be able to simply tweak our economic model. We might have to make more radical changes or at least add important new dimensions to it.   ENHANCING THE SINGAPORE ECONOMIC MODEL BY BUILDING INHERENT CAPACITY Given the dire circumstances in which we found ourselves at independence in 1965, we had little choice but to take short cuts to growth. We relied on MNCs because they came as a package that combined capital, top-class management, cutting-edge technology, access to major markets and globally efficient corporate processes. That saved us the trouble and time needed to build that capacity in locally owned companies. Of course, locally owned privatesector companies did participate in Singapore’s growth but outside the banks, real estate and trade services, they were essentially passive bystanders rather than active drivers of Singapore’s growth. The short cut to growth gave us a high standard of living and full employment relatively quickly and was therefore probably the right approach. But, now that we have achieved these, it might be worth making developing the inherent capacity of the economy a key policy objective. By inherent capacity of a country, we mean the critical software that incorporates the blueprints for successful economic activity held by the indigenous workers and companies of a country. This includes workers’ skills, locally-owned intellectual property, the accumulated intangible experience stored in our companies and the adapted cultural habits in society that enable economic agents to work together to produce results. If a good part of a country’s such capacity is located in footloose foreign companies, that capacity may not remain long in the country. But if it has considerable inherent capacity, then its prospects are much better. Look at Germany and Japan after the last war — utterly destroyed in terms of physical infrastructure. But the blueprints for a successful comeback were contained in their own peoples and companies, they retained their inherent capacity. That’s why we saw a miraculous recovery in both countries. And that is also why these societies are so stable — their own peoples and companies are direct beneficiaries from their economic growth, not passive observers alienated from the critical economic processes of their own country.   In short, now that we have achieved one of the highest per capita GDP levels in the world, our aim must be to make that standard of living sustainable and meaningful to its own citizens. If aiming for high GDP growth detracts from the slower and time-consuming process of building inherent capacity, then we should settle for the latter. Source: The Edge  Read More →

From our Correspondent Labor Minister Gan Kim Yong has once again expressed his undivided support for foreign workers. He said it may be too "simplistic" to assume that reducing employer’s access to foreign workers will automatically lead to an improvement in productivity. (Source: CNA) If Singapore is not careful in its policy response, it would instead create "rigidity and distortion" in the labour market which would add costs to businesses and undermine their competitiveness. Mr Gan’s comments came a day after a call from NTUC Assistant Secretary-General Josephine Teo for the government to rethink its foreign workers policy in a bid to boost productivity. The influx of cheap foreign labor in recent years had depressed the median wages of the low income group which has remained stagnant.   The government has always insisted that foreign workers are needed to take up jobs not wanted by locals, to keep the costs of businesses down and to maintain the economy's competitiveness. Singapore's GDP growth in the boom years can be largely attributed to an open labor market where foreigners are easily employed. The high income group has since their income grow tremendously during the same period. The ministers whose salaries are pegged to GDP growth, were also beneficiaries. While Singaporeans have long complained about the foreigners snatching away their "rice bowls", they have no political power to change the government's policy due to the lack of a strong opposition in Parliament. Singapore has been ruled by the People's Action Party since 1959 with an iron fist. Draconian laws are put in place to curtail the civil liberties of the people. A recent bill was passed in Parliament outlawing even a solo protest. Offenders will be liable to be fined or even jailed. The presence of a large foreign population on a densely populated island is not without problems. Last a year, a few protests involving hundreds of foreign workers with unpaid bills took place outside the Ministry of Manpower building. The protesting workers were not arrested or jailed. In contrast, Singapore activists had been charged in court for peaceful assemblies and rallies. It appears that the latest law is directed against Singapore citizens rather than "peaceful" foreigners.  Read More →