The Case for ASEAN Trade & Investment Centre

While the worst is over and the global economy is slowly recovering, there is an ongoing perception among the export economies that they can no longer rely on the traditional markets such as US and Europe to sustain their long-term growth. Consequently, the focus of many policy-makers has been on increasing domestic consumption and looking for alternative markets for their exports.

ASEAN economies take this view seriously considering that 600 million people call the region home. The dynamism of the region where each economy complements one another provide another valid reason as to why ASEAN should not only look outward in sustaining its economic growth. Among the many proposals that are circulating around is one on the establishment of a one-stop trade & investment centre (TIC) in each economy who will liaise with its counterpart in the other economies. While the idea is good in theory and should definitely be assessed critically, it may encounter several roadblocks in the immediate short-run and this is ironically due to the region’s dynamism.

Let’s start with the more developed economies. It is unlikely that these economies will shoot down the idea due to ideological clash. Afterall, economies such as Singapore pride itself as an open economy. It is open to more foreign investments and concurrently, does not spare any efforts in getting their homegrown companies to internationalize. The issue is that having stayed true to this belief for a long time, Singapore already has well-established institutions with the same responsibilities as TIC albeit under different roofs. It may thus reject this idea on the ground of redundancy. We can of course argue that instead of establishing a new centre altogether, Singapore can try to re-structure its existing institutions so that it resembles the proposed TIC but why should it do so if it has done well based on the existing model. In other words, convincing these economies will not be an easy task if we want them to buy this idea beyond solidarity.

Moving on to the less developed economies, there is no disagreement that market access is a good thing for their homegrown companies but market access is based on reciprocity. The issue with these economies is that although they want to “take” (in terms of gaining more market access), they are less willing to “give” (in terms of opening their own market) for fear that their companies are unable to compete with others. The trick is then on how we can convince them that the long-term gains far outweighs the short-term losses.

Behind the Protest on Camar Bulan and Tanjung Datu

Being countries that share borders which span for thousands of miles, Indonesia and Malaysia have had their fair share of neighborly argument. The last one involves the area of Camar Bulan and Tanjung Datu in West Kalimantan which Indonesians claim to have been “snatched” by the Malaysians. To show their displeasure, several social organizations staged a protest in front of the Malaysian High Commission in Jakarta. As the protest went on, emotions ran high and physical scuffles began.

For those that are against the protest, such acts are an embarrassment to the Indonesian Government who pledged to settle any disagreements on the negotiating tables. To make matters worse, the protesters are not people from the affected area, whom by argument have the right to show their unhappiness. The point is if the affected people do not protest, why should these people protest? Others are more critical, saying that these people are just politicizing the entire issue for their own benefits.

However, one can also look at this entire episode from another angle. Although these protesters are not from the affected area, they are Indonesians by birth and hence have the rights to fight for lands that they believe should belong to Indonesia regardless of whether they are from the area or not. To put it simply, it is a case of by Indonesians for Indonesia.

Additionally, one can also argue from the perspective that these people are simply taking over the role of the Indonesian Government, both central and regional, who have the authority and right to make their displeasure known to their neighbour. These people are effectively replacing the Government whom they feel is not firm enough on acts that breach the sovereignty of the nation.

Reclamation of the Gulf of Jakarta

The reclamation of the Gulf of Jakarta is expected to affect the livelihoods of many fishermen living nearby. Why is it that a country that is not land-scarce needs to reclaim land? Is this going to be another white elephant project with no direct benefits to the people? Have anyone done a proper cost-benefit analysis of this project?

Isn’t it better to invest in improving the transport infrastructure? Isn’t it better to invest in improving the drainage system?

The Case of Bookstores in Indonesia

In a fast-changing world where the viability of certain industries are being questioned and their demise are taken in stride, I was surprised to find an article in an Indonesian newspaper whose purpose was to sustain bookstores operating in small cities and towns via policies that I believe to be against the spirit of fair competition. Don’t get me wrong. I am not against small bookstores or under the payroll of big publishers. I just think that it is wrong to sustain industries whose viability is dependent on unfair policies.

The story of these bookstores is a common story among many industries, particularly those that used to sell their products via middlemen. In the past, lack of efficient infrastructure and local knowledge meant that producers had to rely on middlemen to get better market access. With improvements in infrastructure, it became more efficient to access these markets personally and so producers began to bypass the middlemen. In this specific article, the story goes that publishers used to sell their books to schools via these bookstores but now do so themselves. Unhappy with the turn of events, the owners of these bookstores said that the government should enforce the policy which states that publishers have to sell their books via these bookstores, instead of bypassing them. They also stated that since schools are getting more resources, they should be willing to pay more for books (which is likely to be the case if they obtain their books from the bookstores instead of the publishers).

These just do not make sense because logically, agents will choose the most efficient outcome for themselves. Publishers will choose to bypass the bookstores and deal directly with the schools because they will obtain higher profits. Similarly, schools will choose to deal directly with the publishers because they presumably will get better price for the books. It doesn’t matter whether they have more resources or not because the idea is to make the most efficient use of available resources. In fact if we argue the case from the perspective that schools need resources to cater to the concept of well-rounded learning, the additional resources that they obtain may not be sufficient even if they purchase books directly from publishers.

Instead of delaying the inevitable from happening, I think it is better if these bookstores start to explore other options. These can include diversifying its business, looking at services that publishers cannot provide to the schools or exiting altogether.

Ethiopia and Foreign Agricultural Investment

Globalization has indeed changed the ways things are done. Nowadays, countries no longer need to set aside lands within their borders for agricultural purposes so as to feed their population. They can lease large plots of fertile land in another country for such purposes and this is what some countries like Ethiopia has exploited to get foreign direct investment (FDI). Ironically, despite being the “food-producers” for the world, Ethiopians are among the world’s most malnourished people. To make matters worse, many Ethiopians have been displaced as their villages lie in areas leased out to these foreign firms. Does it mean that Ethiopia should abandon this strategy of getting FDI?

Not necessarily because it is a good strategy in general. The devil lies in the details. With a couple of twists and improvements, this strategy can potentially aid the growth of its economy. For example, the Ethiopian authorities can demand that these foreign firms bear the costs of the displacements. With a bit of negotiating skills, they can get these firms to build new villages complete with basic facilities such as schools and medical centres. They can also persuade the firms to hire the locals to work in their farms. In response to the claims that foods are not reaching the Ethiopians, the authorities can work out some mutually beneficial agreements where the Ethiopians get access to food grown in their country and the firms do not incur any losses.

There are other countless possibilities to turn this strategy into one that is more inclusive towards the Ethiopian society. What we see now is the results of Ethiopian authorities who are not assertive enough to fight for the rights of their citizens, not a fundamental flaw in the strategy.

Journey to the West: Afghan Immigrants in Greece

To outsiders who learned about the predicament of Afghan immigrants in Greece from documentaries, it is an anti-climactic end to arduous and dangerous journeys that span thousands of kilometers. Many leave their hometowns in search of better lives for them and their families only to find that the “promised land” of Europe is not what they have envisioned in their minds. In an attempt to conserve their savings, many stay in rooms of 10-20 people each when they are originally built to accommodate less than 5 people. Many are unable to find jobs and as their hard-earned savings dwindle, begin to sleep along pedestrian walkways. This is of course besides the issue that many are subjected to discriminatory treatments by the Greeks, who quite rightfully argue that these immigrants are creating social problems in their cities. The question is considering the close tribal relationships among these immigrants, why is it that their predicaments have not slowed down the desire to make the journey to the west?

One possibility is that these immigrants who managed to enter Greece have not been entirely honest with their families and friends back in Afghanistan. I recalled an immigrant interviewed for a documentary who said that he had been sleeping on the streets but was reluctant to tell his family the truth because he was ashamed to do so. To give the impression that he had made it, he actually sent a photo of himself with a luxury car which he claimed was his.

Even if one is to be honest to his family back in Afghanistan, one wonders if it will lead would-be immigrants to think twice before making the journey. After all, the living conditions at home are so dire that one considers it unfathomable that wealthy Europe can be any worse. Rational thinking probably lead to them thinking that life will be better and in a worst-case scenario, cannot be worse. Unless the situation in Afghanistan improves dramatically, the uncertainty in Europe ironically seems to give better odds than staying put at home.

Between Removal of Tariff Barriers and Improvements in Trade Facilitation

Both removal of tariff barriers and improvements in trade facilitation have been promoted as ways to boost trade between countries. At first glance, they appear to have more or less similar impact on a particular country, regardless of whether it is a developed or developing country. After all, removal of import tax by its partner is likely to make its export more competitive relative to domestic products whether it is a developed or developing country. The same can be said with regards to improvements in trade facilitation. It is challenging to argue that they have little impact on say the developing country.

However, there is a possibility that removal of tariff barriers is likely to benefit developing countries more than developed countries and vice versa in the case of improvements in trade facilitation. The developed countries arguably have more efficient production capabilities than the developing countries. It is thus highly likely that their products remain competitive even without removal of tariff barriers by their partners, notably the developing countries. On the other hand, the less efficient production capabilities of the developing countries necessarily mean that they have to rely on removal of tariff barriers to make their products competitive relative to others.

Moving on to improvements in trade facilitation, we have to understand the motivation of each. In the case of developed countries, improvements means better infrastructure and hence better market access. Essentially, improvements in trade facilitation by their partners increase the size of the potential market. On the contrary, companies in the developing countries that are interested in exporting their products would have selected suitable locations to site their facilities ex-ante. In other words, although improvements in trade facilitation have positive impact in general, they are unlikely to be relevant to these companies. Critics may argue that better infrastructure also mean better market access for the domestic companies but considering that infrastructure development has been rather slow or non-existent until recently, there is definitely a possibility that these companies have developed indigenous mechanisms that are not reliant on better infrastructure to improve their market access.

Presented with the above, one wonders if this could be the main reason why developed countries have been stronger advocates of improvements in trade facilitation as compared to their developing peers.

India and International Aid

A couple of weeks ago, I found out that India has established its own international aid agency. While this shows a country that is rising and ready to do more globally, I can’t help but to pour cold water into this perception. India is a developing country where a large percentage of its population still live below the poverty line. Wander around the big cities and you will see slums as well as how the dwellers make ends meet. Travel to the countryside and you will see many villages whose Gram Panchayat are not carrying out their duties and roads which are supposed to be repaired but for some reasons have been left as they are among others. If you have the time to have conversations with the villagers, you will realize that they have long lost trust in their government. So if India really has the capability to help others, why not help its own people?

Resources and politics appear to be the two main culprits. Its fast-growing economy means that it is likely to need more resources. In this aspect, India seems to have picked up the strategy of China, its neighbour or some would say rival. The Chinese has built excellent relationships with its African counterparts. In return for access to their wealthy resources, the Chinese has promised infrastructure development. Through its newly established aid agency, I believe India hopes to replicate China’s success in courting the Africans. Additionally, in an ever-integrated world where many issues are discussed at global forums, India may hope to gain supporters for its agenda.

In its pursuit for “bigger” reasons which I have to acknowledge are valid, the Indian Government appear to have forgotten the welfare of its own people, the very people who put them into power. The two things are not mutually exclusive. There are definitely ways to achieve both and I think India should seriously explore such options.

Trade Liberalization in Asia

Asia has been rather active to the call of trade liberalization. Numerous trade agreements at bilateral as well as regional levels have been signed to the point that Asia is perhaps the reason “noodle-bowl syndrome” was coined. Moving on, what should Asian Leaders focus on? Here’s my take:

1. Look at realizing the full potential of existing trade agreements rather than signing more. Many of the trade agreements are very heavy on removal of tariff barriers. Perhaps, they should now work on removing non-tariff barriers and improving trade facilitation.
2. Engage the private sectors more because ultimately, these are the end-users of the agreements. Many of the small and medium enterprises (SMEs) appear to be in the dark of how they can utilize and benefit from these agreements.
3. Resolve the “noodle-bowl syndrome”. This will result in more efficient utilization of the trade agreements. Additionally, this is perhaps a bottom-up approach to getting a consensus at the international level.

Rising Inequality = Social Unrest?

Rising inequality is often attributed to the many social unrests that China has to tackle recently. But is this the only reason for the spike of social unrests?

Could the increase simply be due to a more open government that is willing to share news of ongoing unrests? Or rather, due to more areas in China being more accessible to foreign journalists?

Could it also be due to people that are more aware of their rights as citizens? Or simply as an act to reject the current norms of interactions between the government and its people?

Have We Arrived?

Despite the debt issues that continue to plague both US and Europe, Asia has pretty much rebounded to the point that many are experiencing overheating economy and high inflation. Presented with this stark difference, many people have made statements, which basically say that US and Europe no longer power the global economy. But are these statements entirely true?

I think as much as Asian leaders and people hope to be less reliant on US and Europe, we have to admit that our economies are still very much export-dependent. Although there is no doubt that the stimulus put in place after the 2008 crisis as well as policies designed to boost domestic demand play a part in the rebound, recovery in US and Europe also do so. If we look at the “Factory Asia” phenomenon whereby many Asian countries send parts to China for final assembly before products are being sent to the end markets, we will find that there is a 3-month lag in China’s imports from rest of Asia and US’ imports from China right around the time when Asia started to rebound. What this tells us is that once positive signs were observed in US, someone presumably called their suppliers in China to make orders. China then imported the necessary parts from the rest of Asia, assembled the products over a 3-month period and then sent them over to the US.

From this perspective, these statements do not fully reflect the reality on the ground and although we are moving towards such an environment, we have not arrived.

Freedom and Growth

The long-running downturn in the Western world and the resilient Asian economies, many of which are nominally democratic have inadvertently churned out the idea of political freedom or economic growth. This is most definitely a very foreign concept in the minds of many people in the West. Indeed, for decades and even centuries, the West has showed us that the two can co-exist and in fact, quite possibly complement each other. There is no doubt that we should not play down Asia’s achievement but is it too soon or is it even right to make political freedom and economic growth mutually exclusive?

At the heart of this idea is the belief that something productive would have been achieved as opposed to time wasted in endless negotiations among politicians in a democracy. Of course, here I am assuming a situation where no single party hold a majority in a parliament and a consensus among the relevant players need to be reached. A very recent example is perhaps the current impasse in US about raising the debt ceiling. Going by the argument and the potential impact that a default may have on the global economy as a whole, would the US have been better off if it abandons democracy altogether?

I think we need to take a step back and ask ourselves what democracy is all about. No doubt economic growth is important but in our quest for this growth, we seem to have been blinded and forgotten what democracy is all about to the extent that we made the two mutually exclusive. It is about collective decision-making. It is about taking into consideration the views of different people, different segments of the society. Surely, it does not imply that it impedes economic growth at any point in time. In fact, inclusivity could have resulted in a more balanced growth. Afterall, who are we to judge that our decisions are the best for the nation? Or superior over the others?

Even if at the end of the day, political freedom and economic growth are indeed mutually exclusive, in reaching a consensus, isn’t it worthwhile to sacrifice a bit of economic growth?

Should the Government leave the provision of medical services to the private sector?

For a while, there have been debates on whether the Government should leave the provision of medical services to the private sector. With spending cuts and debt reduction in the horizon for many developed economies, this issue has once again caught the interest of policymakers.

In my opinion, there are certainly several advantages for public provision of medical services. Letting the market does the work has the potential of causing less attention to be put in areas that are important from the perspective of a nation but less so in the eyes of the revenue-driven private sector. An example is infectious and communicable diseases. We are all aware of the crucial role played by the communicable disease center (CDC) when SARS struck in 2003.

Public provision of medical services also means that the decision to site medical facilities in certain locations are unlikely to be affected by economic factors such as whether the flow of patients will generate enough revenue to cover the cost or the economic status of the people in the surrounding areas. Additionally, by keeping fees affordable, public provision acts as a check to the private sector so as to prevent them from charging exorbitant fees that are out of reach to some segments of the society. In essence, public provision results in more equity, which I think should be the case for any society when it comes to basic medical services.

Obviously, public provision is not a silver bullet and it has its disadvantages as well. Many people have simplified the debates into equity versus efficiency. As public provision is not revenue-driven, services may be below that provided by private sector. While I have not experienced anything in Singapore that makes me question the efficiency of the public medical services, this does not mean that status quo will be maintained in the future. In the UK for example, patients have to wait for days, weeks and even months before they meet their National Health Service (NHS) consultants. Specifically for UK, the fact that patients do not have to pay consultation fees means self-censoring is non-existent and visits to local clinics appear to be their first course of action. This lethal combination of poor efficiency and waiver of consultation fees has led people to question whether equity has saved more lives or instead, caused more deaths.

Of more relevance to the current issues is the view that Government resources are limited. Any savings that can be obtained through privatization of medical services is a good thing as these resources could be used for other purposes, which the Government deemed or justified to be more important.

Likewise, leaving the private sector to provide medical services is not a silver bullet. While the disadvantages of public provision can be overcome, private sector by itself will not embrace the reasons why medical services have been mostly public driven in the first place.

A sensible model for provision of medical services is perhaps a combination of public and private sector whereby equity and efficiency can co-exist and patients have the flexibility to choose her most preferred type of services depending on her medical conditions at that point in time.

This compromise may not be a novel idea to many people. Afterall, Singapore’s healthcare sector already has a good mix of public and private players. In other words, this model has been achieved. To this, I think I would add the word ‘to a certain extent’ because this is certainly not the end of the road. There are still many rooms for improvements pertaining to this synergy. In the long run, the Government may want to pre-empt a situation whereby Singapore is presented with the healthcare dilemma faced by many developed economies now. Coming from the perspective of the Government, the more relevant question is how the private sector can be given a bigger share of the pie without affecting too much the basic tenet of public provision.

Several options can be explored to achieve this outcome. Through its land planning, Government can effectively pinpoint the best locations to site medical facilities. Instead of choosing locations based on revenue considerations, private sector has to choose designated locations. In doing so, the Government has ensured that people in different parts of Singapore are not disadvantaged when it comes to obtaining medical services. A good example is the Khoo Teck Phuat hospital.

Related to the issue of location is consolidation. In a further attempt to cut down spending, the UK has decided to close down several medical facilities that are deemed to be replicative. However, the huge distances across some facilities means that consolidation is not a viable option as it will affect provision in areas where the facilities have been closed down. In the context of Singapore, this is less of a problem because its small size and improving transport infrastructure essentially allow for more flexibility.

One worry with regards to consolidation is the strain that it will put on the remaining public medical facilities. To overcome this issue, regulations targeting both the patients as well as the private sector should be put in place. Pertaining to the patients, self-censoring behaviour can be instilled through for example the increase in the consultation fees. Of course, the possibility of exemption should always be in place to ensure equity. With regards to the private sector, the Government can establish a list of regulations that potential players should abide to if they win the tender to operate. One example is the requirement to allocate a certain percentage of their practice time to patients opting for public provision.

The options mentioned above are definitely non-exhaustive. Most importantly, their applicability in the context of Singapore should be thoroughly studied before they are implemented.

In conclusion, the issue on whether the Government should leave the provision of medical services to the private sector is a multi-faceted one and likely to be driven by the issue of the moment. Until now, no single country can claim that they have the perfect answer and debate by the two camps is likely to continue.

The unintended outcome of Japan’s successful nuclear PR

About two weeks ago, I read an article on Japan’s nuclear safety myth in NYT. In essence, the writer was talking about the amount of resources that are spent on convincing the public on the safety of using nuclear energy. The relevant authorities and/or the companies operating the power plants appear to spare no effort in achieving this goal to the extent that they created information centre that looks a lot like theme parks with characters to appeal to children.

The interesting part of the article is its argument that these public relations exercises are so successful that they start to have the same effect on the planners in addition to the general public that they intend to convince. In other words, people who are involved in the exercises begin to believe that what they are selling to the public is true. As a result, even the authorities and/or companies begin to become complacent and neglect the need to improve safety protocols, infrastructure, etc. To me, this is something extraordinary because you end up being enslaved by the very information that you create.

This brings me to a question about the circumstances on how this may happen considering that we are humans endowed with the ability to enquire. In this case, the original reason for having these exercises appears to have been lost in time, either accidentally or deliberately. One may think that sometime in the process, people who knew the original reason were no longer involved and when they left the scene, they somehow did not manage to pass this on to the subsequent planners. While this information blackout is ideal from the perspective that if you want to convince others, you jolly well convince yourself first, it may have undesirable consequences. One wonders whether the Fukushima incident would have been better handled or even prevented.

Unipolar or bipolar?

My father once told me that when the world was bipolar, Indonesia had one of the strongest military in the southern hemisphere. Then, I could not understand why that was the case because I was born and spend my entire life in a unipolar world. Recent events however have made me understand things better.

To put it quite simply, you cannot play one power against another in a unipolar world but can do so in a bipolar world. When one does not want to provide you with assistance, you always have the alternative option of engaging the other. The lack of military assistance provided to the East Timorese by the Australian has led them to request for assistance from China. In a unipolar world, there will be no gunboats and army barracks for the East Timorese. Additionally, in light of the delay in the funding promised by several developed nations to the Libyan Transitional National Council, one wonders if the ongoing visit by Mustafa Abdel-Jalil to China has got anything to do with this.

Whether the desired wishes of countries are good or bad remain open to debate. What is clear is that these wishes are more likely to be fulfilled in a bipolar world.

China’s migrant workers: In search of prosperity or is it?

In search of better lives for themselves and their families, many people who live in rural China become migrant workers and work in large cities. While the practice of rural-urban migration is common across countries, the presence of traditional registration system that is still operating in China meant that it is not possible for the children of these workers to follow their parents to the cities because they will not be able to have access to services such as education and healthcare. As such, families break up and the children are usually taken care by the elderly in the villages.

At first glance, this seems to be a perfect arrangement. After all, it is unlikely that one’s parents will ill-treat one’s children. With this in mind, migrant workers move to the cities with the sole objective of earning enough money that they hope will get their families out of the cycle of poverty.

But is this true? Perhaps not. While money is important, it is not the only ingredient to get out of the cycle. In the words of an economist, money is a necessary but not a sufficient condition. While money can grease your way out, you need to have the capabilities and the right qualifications to be able to obtain jobs that can get out of your subsistence condition.

When migrant workers leave their children, they inadvertently take parents’ care away from their children and this is not really wise to do when children are in the stage of growing up. This may then affect them psychologically and start to have collateral effect on their education for example. With no good qualifications, the entire cycle seems likely to repeat itself for the next generation.