Improving Workers' Condition: From Another Perspective

The plight of factory workers, notably in China has captured the attention of many people across the world. Sights of squalid living quarters, seemingly unending working hours and absence of basic welfare in these factory towns resulted in rightful calls for better treatment for the most important people in the production lines.

In a rush to support this just cause, we appear to have forgotten one thing and unknowingly have committed a mistake, that is, of asking the workers what they really want in their working life but instead enforcing our definition of what’s best on them.

A TED presentation by Leslie T. Chang gave support to this view. In a series of interviews with workers whom she had established relationships with, Chang found out that while workers probably appreciate improvements in issues raised as examples above, they actually gain higher utility (in the words of an economist) from things/activities that may result in potentially better jobs. Some of these include the opportunity to learn computer skills and English.

As we close 2012 and embrace 2013, I thought this is a good reminder to everyone who has the good intentions of helping someone: never assume but in the words of Ernesto Sirolli (another TED presenter), shut up and listen before we come up with ways to help someone.

Happy New Year Eve!

Lessons from Winter

I received a copy of Monocle Alpino this afternoon and had been reading it for the entire evening. I do not intend to promote the publication in this post but just want to share an inspiring essays section in it.

There are ten articles about winter and related topics from so many different perspectives, each teaching me a thing or two about certain subject; on how saw-making needs to consider the “ice factor”, on the existence of a job called ice-meister who is responsible for making sure that the ice surface is perfect for skating and on how the notion of hand-knitted has changed over time.

The world is indeed a very big place and there will always be new things to learn. Merry Christmas everyone and thanks for making 2012 an excellent year. The best is yet to be!

Report Card for the 21st ASEAN Summit

The ASEAN Summit was concluded almost a month ago. I had wanted to provide a report card of the summit but was delayed until now. As I see it, there were about four main takeaways, each capable of generating endless debate as to whether it is a good or bad thing.

First in the list is the signing of the ASEAN Human Rights Declaration. For many people, it is indeed an achievement considering that the organization did not come into being with the idea of pushing for human rights. In fact, some would even argue that many of the founders of ASEAN were hardly democratically elected. Yet, some would say that the declaration fell short of expectations as many “standard” norms appear to have been excluded.

Second is the ASEAN Economic Community (AEC). As with other recent summits, ASEAN Leaders pledged their continuous commitment to the establishment of AEC in 2015 but implementation process has been hit with several problems. The decision to delay AEC from 1 Jan 2015 to 31 Dec 2015 further proves this point. Officials can argue that AEC will still come into existence in 2015 but seriously, it is not hard to see that it has effectively been delayed by one year and how that will further affect ASEAN’s credibility remain to be seen.

Third is the announcement of the start of Regional Comprehensive Economic Partnership (RCEP) negotiation. On one hand, it gives the impression that ASEAN is serious in pursuing further economic integration with its neighbours but on the other hand, people are questioning whether anything tangible will come out of this considering the proposed timeline of its conclusion, 2015. One, it essentially clashes with AEC and if you cannot even implement one thing with your existing resources, what can you possibly achieve when you need to divide the same resources to handle two things concurrently. Two, there is a potential impact of South China Sea issue on the negotiation process.

This brings us quite nicely to the fourth and last takeaway, which is the South China Sea issue itself. Unlike the above takeaways where something positive can be distilled from them, I frankly do not see anything positive in this issue. It has wrecked ASEAN unity. It has resulted in several incidents that are likely to increase tensions. It has kick-started some military maneuvers and God knows what will come next.

To conclude, this is not a perfect report card but this is not a bad one either. There are certainly troubles brewing but if the relevant stakeholders can just take one step back and look at the bigger picture, I believe ASEAN can right the wrongs and still come out blazing.

P.S: I survive the end of the world.

Economic Slowdown and Nationalistic Behaviour

Two weeks ago, I mentioned that the Chinese economy is still very much reliant on demand from the West and alluded that it was not really domestic consumption boost or successful diversification, but rather false expectations about the speedy recovery in EU and US that had contributed to the outside appearance that Asia, particularly China has successfully decoupled itself from the West sometime ago when Asia seemed to be doing pretty well as opposed to EU and US (More on Decoupling and Asia).

The latest data released on the Chinese economic slowdown and the need to clear existing inventories served to prove this point. Indeed, an article by Damian Grammaticas from BBC gave some examples of industries where the number of days to clear inventories have increased exponentially.

In that pervious post, I made a passing (and cautious) remark that the Chinese government can consider learning a thing or two from Indonesia, which has been able to drive economic growth by boosting domestic consumption. Learning from Indonesia is one thing. Question is: has the government ever considered boosting domestic consumption as an option to pick up the slack from EU and US? Judging from its past actions, it certainly has. However, boosting domestic consumption is not a free lunch. While they largely fulfill their objectives, interest rate cut and the likes also lead to inflation, default, etc, things that the government has been trying to put a lid on.

Even if they have certain mechanisms in mind to counteract these unwanted side-effects, they may want to tone it down and give the limelight for solving the economic slowdown to the new generation of leaders that are expected to take over the country later this year.

So when you want to do something that will impact your population but can’t really do it for economic and political reasons, the simplest way is to divert the attention of the population away from it. Perhaps this is the reason why China has become more nationalists with regards to South China Sea and other nearby waters in the past few months.

Decentralization in China: Lessons from Gu Kailai

Gu Kailai, wife of Bo Xilai, a former rising star of the Chinese Communist Party, was sentenced to death with a two-year delay last Monday. After the announcement, the focus of the media was on how it was a foregone conclusion and speculations arose about when Bo himself will be charged and if so, what his likely sentence will be.

What’s interesting to me is that no one actually bothered to analyze something that is very much the norm in most countries but is different in China, especially when it comes to court cases; that is the location where Gu was charged. Generally, the accused is charged by the court in the jurisdiction where the alleged crime took place. But here, we have someone who allegedly committed the crime in Chongqing, but charged by the court in Hefei, Anhui, which is a totally different city and province altogether. Why is this so?

When I read the book entitled “The Party” by Richard McGregor, I found that this action has precedent in the case of Chen Liangyu, the former Party Secretary of Shanghai who was charged in 2008. Chen was charged in Changchun, Jilin, also a totally different city and province from the alleged crime. The explanation given in the book was that Changchun was far away from Shanghai and that Shanghai judges could not be trusted to follow Beijing’s order. If this is indeed true, then Beijing has valid reasons for assigning the court in Hefei to charge Gu.

However, I have not brought up this observation simply to explain Beijing’s decision. Rather, what I want to say is that decentralization in China has reached a level where the perception that Beijing still has a strong grip on whatever that is going on in the country is no longer true. The system has been structured in such a way that the highest position in a specific region has a say in almost everything that goes on that he/she is effectively the “ruler” of that fiefdom, up to the point that it is beyond the control of Beijing. Isn’t it ironic for a Government who likes to portray that it has everything under control?

More on Asia and Decoupling

About a year ago, when US and Europe were down, Asia had rebounded and many people were saying that it was a sign Asia had successfully decoupled itself, I cautioned against such a view in a post “Have We Arrived?”

Just about a month ago, China reported that its growth has slumped to a three-year low of 7.6 percent in the second quarter and one main reason was the continuing bad news coming out from Europe amid a slow US recovery. If my argument then was not convincing enough, surely the arrival of these statistics would add substance to it now. It is however not the intention of this post to do just that. Rather, I would like to speculate on why the data a year ago would have misled many people into thinking that Asia had decoupled from the West when it didn’t.

Central to my speculation is the concept of expectations. Few people in China would have expected the crisis in US and Europe to drag for so long considering all the actions taken by the respective governments. They had continued to produce and stockpile their products ready to be exported when the West demanded them. This act of production and stockpiling could have contributed to the rebound observed a year ago. Obviously, this expected demand never materialized. Since the existing stock had not been cleared, there was no need for new production and hence the observed current slowdown.

If domestic consumption had increased substantially over the same period, it would have cleared at least some of the existing stock but this was not the case. Apparently, domestic consumption either remained stagnant or did not increase sufficiently to replace the demand from the West. In fact, if manufacturers were to factor in expected increase in domestic consumption into their production decision a year ago, their existing uncleared stock would have been even higher than if they did not do so. In other words, both the expected increase in demand from the West plus domestic consumption that never materialized has resulted in the current slowdown.

Right about now, people who disagree with this speculation would say that it depends on which part of Asia you are looking at and would point to an Asian country further south of China to make their point: Indonesia. Growth of domestic consumption in Indonesia has been phenomenal, an excellent example of one way a country could decouple itself from the West. Perhaps, China could learn a thing or two from Indonesia about boosting domestic consumption. Is it?

Well, I would again warn against jumping straight to an unsubstantiated conclusion. Indonesia tomorrow could be China today. Indonesia as part of Factory Asia is a supplier of parts and components to China, the final assembler. The current increase in domestic consumption could have been driven by expectations that China will continue to demand parts and components, which is highly unlikely if recent statistics can serve as reliable indicators of how things will evolve.

Growth With Redistribution

I read a book on UN ideas recently and one idea that caught my eye is “growth with redistribution.” I think it is an appropriate idea in light of current instability and push towards a more sustainable growth. The book has it that if we are to continue with the current system of growth where everyone is pretty much doing things for themselves, no doubt the rich will continue to experience impressive growth in the size of their wealth, but the poor also has to reach a certain minimum level of growth in their wealth or earnings in order for them to be able to afford their basic needs.

This inter-connectedness between the rich and the poor can be explained by their demands for goods and services. The fact that much of the world now run on market economy means that prices of goods and service will adjust based on demands and supplies. The rich with their wealth will surely be willing to pay more for a certain good and if many of them do so, it will push the price of the good up if supply is limited. If the poor also demand the same good, then there would be a chance whereby the poor may not be able to obtain this good. And if the good turns out to be a basic necessity, then you have a situation whereby the poor cannot afford their basic needs.

Is this really true? Well, surely you have read about the increasing food and fuel prices lately. In some cases, governments indeed step in to subsidize these goods for the poor but is this sufficient? Perhaps not and with fiscal austerity in their minds, how long will this last?

The concept of “growth with redistribution” is about meeting basic needs for everyone. The rich with their resources can certainly grow more but with basic needs in mind, they perhaps do not need to grow their wealth at the current rate. The poor need to grow their wealth but with redistribution from the rich in mind, they perhaps do not need to slog so hard to the point that it affects their health. It is all about not overspending and using excesses for the benefits if those who are lacking.

It is a beautiful idea in an utopian society and certainly is worth trying in our society but in such a “real” society, is this another idea that is destined for the bookshelves?

Empty Seats in The 2012 London Olympics

The 2012 London Olympics started with much fanfare last week. But as the cameras rolled through the competition venues, many picked up something unexpected: empty seats for matches that were supposed to be sold-out. Why is this so? Jeremy Hunt, UK Minister of Culture, had mentioned that an investigation would be carried out. The outcome will probably not appear anytime soon but below could be some of the potential reasons:

1)    The system may not have been right when it indicates that a match is a sold-out one and it is not surprising considering that ticket allocations were done via some complex mechanisms.

2)    Many of the original buyers could have been people who hoped to make quick bucks and are unfortunately unable to find buyers.

3)    Everything is working fine but the hiccups with security, immigration, etc have scared the spectators away.

Drainage Oil From Another Perspective

The case of drainage oil from China maybe old news for some readers but it is a new one for me, having heard about it from a friend last week. I think that it is a case worth mentioning if we are to consider that China’s food industry continues to draw flaks. However, I would like to end this post with some thought-provoking statements.

For those of you who need a refresher or have never heard about this case, drainage oil is a term used to describe used cooking oil that is poured into the drainage. Rumor has it that some oil recyclers literally collect them from the drainage, process and then sell them back as recycled cooking oil.

According to the media, this is a serious problem in China but is it really true? Could it just have been a case that is blown out of proportion in light of the negative publicity surrounding China’s food industry? If this idea of recycling cooking oil from the drainage has been carried out in the developed countries, would it have been viewed negatively? Would it instead have been singled out as an innovative technique?

Will ASEAN Lose Out From The Trilateral FTA Between China, Japan and Korea?

Sometime ago, China, Japan and Korea finally agreed to kick-start talks that would lead to a Free Trade Agreement (FTA) between them. This move brings about two contrasting views. For the optimists, it shows that the 3 countries are finally ready to put behind their historical enmity in the name of economic growth. For the pessimists, particularly those that believe in ASEAN centrality, it is the beginning of the end of ASEAN’s role in providing neutral ground for the 3 countries to negotiate and engage one another, especially if bilateral communications on some matters are close to impossible.

On the economic front, the pessimists fear that the expanded market size of this FTA would reduce ASEAN’s competitiveness when it comes into being. I would like to argue the opposite. China is such a huge market that it does not really need to add Japan and Korea’s population to its investment attraction strategies in order to attract more investments. In other words, firms that find China as a prospective investment location would not have waited until now before making their moves. They would have done so long time ago. There is certainly a value for Japan and Korea use the expanded market size to attract more investments but given the high labor costs in both countries, I doubt expanded market size is a strong pull factor by itself.

Then, there are those who said that ASEAN may be left out of the East Asian fortress since the FTA does not involve them. But this is an unlikely event since ASEAN has arguably pre-empt this by having FTA with each of them. I will also argue that the regional production networks that have been developed and nurtured over the years is not something that can be altered overnight, more so if there is no basis to do so at all.

Last but not least, the talk is only about to start and most definitely has not yielded anything tangible. For all the commotion, it may end up being another FTA that is trade-light and more driven by politics rather than economics.

Is Plurilateral the Way Forward?

Many trade experts have suggested ways to move forward following the deadlock in the Doha Round. Chiefly among them is for smaller groups of countries to negotiate and implement policies that they can then extend to other WTO members as and when they are ready. The simple argument behind this proposal is that agreement can be reached faster and easier among smaller number of negotiating countries. The question is: can multilateralization really be achieved at faster rate via this proposal, as is suggested, or is it going to further burden the already complex environment? In other words, is this a building or stumbling block?

Let me give a negative perspective of this proposal. When countries negotiate, they do so from their own perspectives, taking into account their own interests. One can argue that although agreement can be reached more efficiently, the contents are probably narrower in a sense that it takes into account only the interests of the negotiating countries. If this agreement is to be eventually extended to other WTO members, will they take it at face value? Well, perhaps not since their interests have most likely not been included in the first place. When the time comes, these members will want to amend some parts of the agreement before they will subscribe to it. However, will the original negotiating countries agree since they will have to concede on some points.

Guarded Optimism for Post-Election Myanmar

The final tally of the by-election in Myanmar is out! The National League for Democracy (NLD) led by Aung San Suu Kyi won 43 out of the 44 seats that were contested. But is this the end by itself? Well, I would think of it as a step in the right direction but definitely not an end because a lot of uncertainties remain despite the historic event.

Firstly, while there is no doubt in her ability to inspire people, a lot of questions on Aung San Suu Kyi’s capabilities to run a country or rather contribute to the running of the country have been raised. This is not surprising considering that she is untested and spent a considerable time under house arrest.

Secondly, even if she is highly capable, critics have questioned her ability to influence key decisions made by the government since the NLD only holds approximately 5% of the parliamentary seats.

Thirdly, while President Thein Sein seems to be highly supportive of the political reform in Myanmar, there have been questions on how much influence he has over the Union Solidarity and Development Party (USDP) and how much power still resides with the military. There is always a possibility of a coup if he cannot convince them that he is right; Myanmar is afterall no stranger to coups.

Although the result of the by-election certainly deserves applause, the path ahead is far from smooth.

The Importance of Aung San Suu Kyi

The opening of Myanmar has been on the news for several weeks, if not months now. Slowly, the world will know more than Aung San Suu Kyi. But for now, let us talk about this lady who is the embodiment of Myanmar itself. I may be wrong in making this conjecture but many people seem to have this question: “If Aung San Suu Kyi was such a threat to the military junta, why did the military never consider eliminating her?” I am sure the military considered this option but never really got to the path of executing it. Why?

First was the domestic consideration. Aung San Suu Kyi is the daughter of General Aung San, who became a strong symbol of opposition to the military after he was assassinated. The military was afraid that if something untoward was to happen to Aung San Suu Kyi as well, it would galvanize the opposition to such a level that even they would not be able to handle despite having the advantage of firepower.

Second was the international consideration. Through the sheer effort of Michael Aris, the late husband of Aung San Suu Kyi, she became and still is the face of Myanmar to the world. As such, the policies of the external powers, notably the Western world, were very much tied to their assessments of how Aung San Suu Kyi was treated by the regime. If they carried things too far, the international pressure could be so strong that their existence itself could not be guaranteed.

Although power has been transferred to the nominally civilian government, there is no doubt that the military still lurks in the background. The chances of them reading this entry is very slim but if they do, I hope they will consider the implications of their action if the thought of eliminating Aung San Suu Kyi ever comes again.   

How Many Amina Filali(s) Are Out There?

The recent case of Amina Filali brings to the public attention practices that supposedly should not have been around in the current state of the world. It is surprising that people in parts of Morocco still think that it is a dishonour for her and her family if a girl/woman is raped. This is tantamount to saying it is her fault for being raped. So, you have a situation whereby instead of consoling and providing support, people around her are actually blaming and perhaps scolding her for her predicament.

What is more surprising is the law allowing the rapist to marry the girl/woman. This brings the question on the state of mind of the girl/woman to be sharing the same bed with someone who has just inflicted some kind of pain or trauma on her. I wonder how many such similar practices or even worse go unreported.

Is Race To The Bottom a Valid Reason for Standard Harmonization?

Just as there are many valid reasons against standard harmonization, there are also many credible reasons for it. But there is one reason for standard harmonization that I just can’t get around: the idea of preventing race to the bottom. The argument goes that in the current globalized world where it is so much easier for firms to relocate their production plants to low-cost locations, firms with existing plants in countries with higher standards (higher cost) can easily shift them to countries with lower standards (lower cost), resulting in job losses. To prevent such a move, countries with higher standards will revise down their requirements and spark a race to the bottom, causing lower standards across the world.

My gripe is driven by the fact that there is no clear evidence where countries have lowered their standards in order to prevent job losses. On the other hand, most countries benefiting from FDI appear to have raised their standards, partly driven by the more demanding middle class whose population share has increased. A point of note is a recent article about how Apple has raised the labour standards in China. Although critics may say that it is a one-off event caused by the widespread negative publicity, it is also correct to say that China has come a long way with regards to how it treats its labour force. Among them, the 2008 labour contract law should ring a bell to most people, not to mention the latest promise by China’s Cabinet to raise minimum wage by 13 percent a year until 2015.

The Intrique of Achieving an ASEAN Community: The Middle Countries

Dr. Surin Pitsuwan, the current ASEAN Secretary General once said that it is countries in the middle that impede the progress towards building an ASEAN community. Why did he make such a remark?

Countries at the top are more than willing to take part in the establishment of community, in particular economic community because they are already highly competitive. A community will allow them better access to the neighboring market and they are certainly not worried that they will lose out in terms of efficiency if they open their borders to freer trade among ASEAN member economies.

Similarly, countries at the bottom are also more than willing to take part in this endeavor because after having been isolated for periods of time, they want to plug themselves into the globalized world and joining the ASEAN community is certainly a good starting point for doing so.

Countries in the middle view things rather differently. Opening their markets to freer trade is bound to benefit some groups but at the same time, is going to hurt some groups and these are not weak groups. Having been protected by their governments, they have grown into strong interest groups capable of influencing government policies. They would definitely prefer to maintain the status quo so as to maintain their current level of wealth and benefits.

Education and Employment in the UK

It does not come as a surprise that one of the thriving industries in times of economic crisis is tertiary education. Enrollments double if not triple as young adults decide to go back to schools and prime themselves in anticipation of recovery. The issue seldom mentioned is the fact that not all young adults have the means or rather the luxury to obtain those additional degrees. This puts them in a rather disadvantage position when it comes to job search as they are of less value than their school-returning peers. In other words, they can never break away from the vicious cycle of no education-no employment. This is indeed the plight of approximately 22 percent of the young adults in the UK whose future hangs in the balance, not to mention the implications that it may have on the nation’s future as a whole.

While critics may argue that tackling this issue will bring no significant improvements in their employment prospects since there just isn’t enough aggregate demand in the economy fundamentally, it is also sensible to argue that the different starting points of these two groups of young adults has already put those with less education in a weaker position regardless of whether times are good or bad.

It is thus justifiable for the relevant authorities to correct this failure either by providing training opportunities to boost their competitiveness or providing support for them to return to school and gain that extra knowledge. Austerity is necessary but should we jeopardize the future of the next generation in its pursuit?

The Two Camps of ASEAN Cooperation Efforts

In my opinion, an inter-governmental organization needs to accomplish two things to be well respected: 1) the ability to convince the various stakeholders, each with their own interests and goals, to come to a consensus and put it in writing as agreements, frameworks, etc and 2) the strength to enforce them even if they may result in displeasure among some of the stakeholders.

ASEAN as an organization has certainly come a long way. While its founding was barely reported in the media and many were rather skeptical in its ability to achieve something noteworthy, ASEAN now has its own charter and can claim credits for numerous initiatives & mechanisms such as the Enhanced Dispute Settlement Mechanism (ESDM) and ASEAN Intergovernmental Commission on Human Rights (AICHR). These are definitely no mean feat, taking into consideration the diversity of the Member States that constitute ASEAN. Hence, the natural step would have been to ask the question on whether they are enforceable or whether they are binding at all.

A closer look at these initiatives & mechanisms would give the impression that they are “toothless”. At this point, optimists like to argue that although they are symbolic in nature, they nonetheless inform us of the inspirations or the goals of the signatories. In other words, we should applaud them for having the courage to put their signatures on something that clearly contradict their domestic environments. Pessimists, on the other hand, argue that precisely because signatories know very well that there will be no consequences for deviation that they have no qualms in putting down their signatures. Both arguments are plausible and you choose a side depending on your inclination.