Publication in Economics, Politics and Public Policy in East Asia and the Pacific

Lessons for the Philippines from the US financial crisis

Author: Gloria O. Pasadilla, PIDS

September 2008 might well be considered the most traumatic period in recent financial history, with shocking unfolding one after the other. The US government-sponsored enterprises, Fannie Mae and Freddie Mac, went into conservatorship. AIG appealed to the US Federal Reserve Bank for a bailout. Wall Street stock prices plummeted. Financial titans like Merrill Lynch and Bear Stearns sought cover from the white knights, Bank of America and JP Morgan Chase, to avoid bankruptcy. Lehman Brothers disappeared from the financial map. And the US government committed approximately $1.4 trillion (so far) to bail out the financial sector. Although there is a greater measure of confidence now, economic conditions remain moribund and uncertain, at least until next year.

What can the Philippines learn from the global financial crisis? How does all this affect the Philippines?

Read more…

The beginning of benign neglect?

Author: Tobias Harris

Aso Taro has returned from his meeting with Barack Obama, the first such meeting between Obama and a foreign leader at the White House, as the Japanese media has repeatedly emphasized. The LDP website invokes this phrase like a mantra in its summary of the prime minister’s visit, as if citing the name of the US president could save the party from ruin: “Prime Minister Aso Taro — the first among the world’s leaders to meet with President Obama at the White House.” (I feel like the phrase needs an exclamation point.)

Others have been less effusive. Read more…

Obama’s to-do list for China

Author: Nina Hachigian, Center for American Progress

The debate about whether to engage China is over – we are now about 20 years into a common-law marriage. The debate about whether China will join the international community is also over. Beijing has been signing up for multilateral forums as if they were going out of style. The great challenge for the US Secretary of State Clinton is to influence China to play a larger role in preventing global catastrophes in these areas: the economy, nuclear proliferation, climate change and pandemic disease.

China deserves high marks for acting quickly on the global economic crisis. Beijing turned on a dime from trying to cool down its economy last summer to enacting potentially potent stimulus measures over the last months. Some measures, such as a plan to invest $123 billion in universal health insurance over the next three years, could lay the foundation for a social safety net that will help establish a broad Chinese middle class, which would support the growth of the American middle class by fostering a robust market for U.S. exports. Moreover, working with the International Monetary Fund, Beijing is helping to bail out Pakistan, whose economic stability the United States is concerned about, to put it mildly.

Read more…

Sex, race and religion still political weapons in Malaysian politics

Guest Author: Amrita Malhi, ANU

The Malaysian national and state elections on 8 March 2008 surprised all observers.

Prime Minister Abdullah Badawi’s ruling coalition, Barisan Nasional, lost its two-thirds majority in the federal parliament, and a coalition of secular and Islamist opposition parties, Pakatan Rakyat, won five state governments.

The election saw Malaysia’s ethnic voting patterns break down to an unprecedented extent.

Pakatan leader Anwar Ibrahim heralded the result as a ‘New Dawn’ for Malaysian politics. Pakatan’s rise seemed to finally enable the creation of a new politics that could somehow unite both Islamists and liberal cosmopolitans against ethnic and religious political manipulation.

Very quickly however, the possibility of a genuine political challenge to Barisan began to fade.

Read more…

Emissions confusion: trading vs taxes

Author: Frank Jotzo

Some dramatic shifts in Australian political positions on climate change policy seemed to happen over the last few days. Parliamentary enquiries into the merits of emissions trading were initiated then extinguished only to be revived by the other side of politics, and confusion reigned over who supports an emissions tax over emissions trading. Some on the left as well as the right argued that emissions trading should be ditched in favour of a carbon tax. For example, the Australia Institute’s Richard Denniss claims that an emissions tax is better for the environment because under emissions trading individual action to reduce greenhouse gases is futile. Meanwhile John Humphreys at the Centre for Independent Studies says that a tax is better for business than trading.

Can both be right, and do they in fact agree? No and no, and the reason is that the real arguments remain hidden.

Read more…

Post-1996 Japan-US allliance

Author: Tobias Harris

Prime Minister Aso Taro has arrived in Washington in advance of his meeting with President Barack Obama Tuesday.

Despite Obama’s welcoming Aso as the first foreign leader to meet with him in Washington, and despite Secretary of State Hillary Clinton’s visit to Tokyo last week, the Japanese establishment continues to fret about the new administration’s approach to Japan. Sankei, for example, notes the “exceptionally warm welcome” being bestowed on Aso by Obama — especially considering that the president is due to give a State of the Union address Tuesday evening — but wonders whether the Obama administration is as committed to Japan as appearances would suggest.

Read more…

Clinton’s visit to Indonesia

Author: Peter McCawley

Hillary Clinton’s visit to Jakarta last week was presented as extremely successful. She said all the right things, and her Indonesian hosts made all the right moves in return. But what do we make of it? Answer: Hard to say, really, because the visit was basically a honeymoon visit. One U.S. blogger even called the visit a ‘lovefest.’

It is interesting that the Obama Administration decided to have Secretary of State Clinton make Asia the destination of her first international visit.

Three points are worth noting.

First, the symbolism of the order in which the countries are being visited – Japan, then Indonesia, and only then Korea and China – is of some interest. The decision to visit Japan first (something of a contrast with the priorities of the Rudd Government here in Australia a year ago) underlines the key importance of the U.S.-Japan bilateral relationship in bolstering stability in Northeast Asia.

Read more…

Aso’s missed opportunity

Author: Tobias Harris

As Aso Taro’s poll numbers continue to plummet — in addition to reaching 11% approval in the Mainichi and Sankei Shimbun polls, his disapproval rating in the Sankei poll is at 80.2% — and as the likelihood of an LDP defeat in this year’s general election rises, it is worth asking whether there was anything Aso could have done differently.

Looking back, Aso’s downfall may be presented as inevitable, the result of the economic crisis and the missteps of his predecessors over which Aso had little control.

But to render that judgment would be letting the prime minister off too easily. While Aso has faced tough conditions, he has done remarkably little to help himself.

Waiting until Nakagawa Shoichi’s blowup in Rome to appoint Yosano Kaoru as finance minister may prove to be one of his greatest errors.

Read more…

Hillary Clinton: Japan should engage in Asian nukes reduction

Author: Yoichi Funabashi

U.S. Secretary of State Hillary Rodham Clinton looks “presidential.” She carries herself in a dignified and distinguished manner befitting that of the ideal vision of a president.

This is shown in her concise comments, solid logic, thoughtfulness, physical and mental toughness and her awareness of her role as her nation’s chief diplomat.

Her responses to my interview earlier this week were straightforward; she did not evade any question.

She paused briefly at one point to sip her tea, taken with no sugar or milk, and did not forget to smile before continuing.

While the interview lasted only about 10 minutes, her presence and answers spoke volumes and demonstrated that American diplomacy would be a vigorous one as she works in tandem with President Barack Obama.

Read more…

Iron ore and the market power myth

Author: Christopher Findlay

The FIRB criterion for assessing foreign investment proposals is the national interest. In the context of natural resource projects, this means capturing the value of the assets for sale.

We are reminded of this in recent comments on the Rio-Chinalco deal from two different angles.

China Iron & Steel Association secretary-general Shan Shanghua said last week 

The $US19.5 billion ($30 billion) deal between Chinalco and Rio Tinto announced last week strengthened China’s hand in breaking a ‘duopoly’ in Australian iron ore mining.’ (source)

Shan is saying the way to look at the deal is in terms of its impact on competition.  He assumes Australian producers have market power and wants to stop them using it.

Over the longer term, it’s possible Chinalco-Rio could break the duopoly… (but) it was too early to tell if the deal would have any effect in the short term’, Shan said.  

Read more…

China’s exchange rate policy dilemma

Author: Yiping Huang, ANU

U.S. Treasury Secretary Tim Geithner’s accusation that China was manipulating its currency during his confirmation hearing once again placed China’s exchange rate policy under the spotlight.

Although the White House quickly clarified that it would wait for Treasury’s assessment on the issue in April, the timing of this accusation from a top incoming U.S. economic policymaker could not have been worse.

Not only is China now the only major stabilizing force in the global economy, but the U.S. desperately needs China to support its own efforts in arresting the downward spiral of the financial crisis.

Yet financial market investors do not seem to buy the argument that China will be forced to appreciate its currency. In fact, the non-deliverable forward (NDF) market prices in a 1.3 per cent depreciation of the Chinese yuan against the U.S. dollar (USD) within 12 months.

Read more…

Anything goes in Japanese politics

Author: Tobias Harris

As Prime Minister Aso Taro prepares to travel to Washington to meet with President Barack Obama, he leaves behind a political situation that is nothing short of chaos.

Asahi has published a snap poll that found that 71% of respondents — and 76% of self-described independents among the respondents — believe that Aso should resign immediately, while a growing number of respondents favors an election being called quickly. Meanwhile, DPJ leader Ozawa Ichiro’s edge over Aso in category of who ought to be prime minister continues to grow, as Ozawa gained six points and now is favored by 45% of respondents compared to Aso’s 19%. The cabinet’s approval rating dipped only slightly, falling one point to 13%, but that’s surely cold comfort for the prime minister.

More important than public opinion polls, however, is the mounting dissent within the LDP from all corners. Perhaps the most significant development is Koizumi Junichiro’s announcement that he will absent himself from a lower house revote on the bill that provides funding for the government’s stimulus payment plan. 

Read more…

Reflections on the Bangladeshi National and Local Elections

Author: Jeremy Gross

On December 29, 2008, Bangladesh held its most credible and most peaceful elections to date. They were free, fair, and without the usual violence and disruption that has accompanied most elections in Bangladesh. Voter turnout hit 88 percent, a remarkable figure for a country with a history, albeit an interrupted one, of regular elections.

These elections differed from years past. Both the orderly management of the elections and a belief that a new style of politics was being ushered-in in Bangladesh, gave the public a renewed sense of confidence in government. The run-up to the cancelled January 2007 elections was marred by street violence and accusations of manipulation of the voter list. In February 2007, the new members of the Bangladesh Election Commission (BEC) worked tirelessly to ensure that the December 2008 elections would be a success, and faced few of the criticisms and complaints brought against its predecessors.

In a remarkable display of organizational mobilization and determination, the BEC worked with the military to gather data from every household in the country to produce a new electoral roll. When finished, it contained photographic identification of all 81 million registered voters. It also had 12 million voters less than the dubious electoral roll the previous BEC had planned to use in January 2007.

Read more…

How can Japan be saved?

Author: Tobias Harris

With the sudden departure of Nakagawa Shoichi from twin posts of finance minister and state minister responsible for the financial services agency (FSA), Yosano Kaoru has been elevated from state minister for economic and fiscal policy and now holds all three positions simultaneously, making him, to borrow a term from American politics, the Aso government’s economy czar.

It is most likely a temporary arrangement; the government has indicated that he will stay in place until the budget is enacted, but thereafter the posts will be divided, either with Yosano being bumped back down to his state minister’s post or with Yosano’s becoming a “permanent” (insofar as anything about the Aso government can be described as permanent) replacement for Nakagawa.

Nevertheless, until that happens, Yosano bears a heavy burden ― it is not for nothing that Ozawa Ichiro wished his go partner good luck, not least because Ozawa and his party will do all they can to make his life more difficult.

Read more…

Darwin, Lincoln and the survival of the slave-masters

Author: Humphrey McQueen

February 12 was the bicentenary of the births of Charles Darwin and Abraham Lincoln. Their personal convictions towards slavery were pretty much the same. The name of the former is entangled with Social Darwinism as a doctrine about survival of the fittest. This distortion of ‘fitness’ sustains a pseudo-scientific basis to justify the naturalness for the division of human society into masters and slaves, whether chattel-slaves of the plantation South or wage-slaves of the capitalist factories. By contrast, the conventional ignorance about Lincoln is of the Great Emancipator.

Darwin’s hostility to chattel slavery shines through the concluding pages of the Voyage of the ‘Beagle’. After a page cataloguing atrocities, he dissected some of the arguments proposed in defence of slavery:

It is argued that self-interest will prevent excessive cruelty; as if self-interest protected our domestic animals, which are far less likely than degraded slaves, to stir up the rage of their savage masters. … It is often attempted to palliate slavery by comparing the state of slaves with our poorer countrymen; if the misery of our poor be caused not by the laws of nature, but by our institutions, great is our sin; but how this bears on slavery, I cannot see; as well might the use of the thumb-screw be defended in one land, by showing that men in another land suffered from some dreadful disease … It makes one’s blood boil, yet heart tremble, to think that we Englishmen and our American descendants, with their boastful cry of liberty, have been and are so guilty…

Darwin then consoled himself with the reflection ‘that we at least have made a greater sacrifice, than ever made by any nation, to expiate our sin’.

Read more…