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.