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

Managing China’s treasure trove – Singapore Style

Author: Peter Yuan Cai

The city state of Singapore has been an endless source of fascination for Chinese leaders since the time of Deng Xiaoping. Its legendary efficiency, its miraculous transformation ‘from the third world to first’ and above all, the iron grip of the People’s Action Party on power through non-lethal means are lessons that Beijing may be thought keen to emulate. Singapore has more to offer beyond fraternal sharing in Machiavellian power tricks. Despite its small size, the Singaporean government is a big player in the world of sovereign wealth funds (SWFs). The Singapore Government undertakes investment through Temasek Holdings and the Government of Singapore Investment Corporation. The better known of the Siamese twins is Temasek, one of the oldest and most respected sovereign wealth funds around, according to the Wall Street Journal.

Temasek has recently undertaken a radical restructuring of its top management by recruiting a top corporate heavy hitter, Charles ’Chip‘ Goodyear, the U.S.-born former chief executive of the Australian mining giant, BHP Billiton, to replace its incumbent Ms Ho Ching, wife of the current Singaporean Prime Minister. The decision was made after a whole string of disastrous investments in failing Western financial institutions that saw its total assets decline from US$ 134 billion to US$ 84 billion. More importantly, the Economist commented that ‘Mr Goodyear is the kind of A-list executive who will help persuade the countries receiving potential investment that Temasek really is independent of the government’.

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Obama and East Asia – Weekly editorial

Author: Peter Drysdale

This week will see the inauguration of a new administration in Japan. In October, Indonesia’s government-in-waiting will assume office. It is timely to reflect upon how the Obama administration can shape America’s relationship with East Asia in the context of what Gerry Curtis describes in this week’s lead as the transformative change that is taking place around the region. Obama brings huge assets to America’s dealings with Asia. A world-view that sees strength from multilateral engagement and a personal connection with both Indonesia and other parts of the region are just two such assets. But Curtis reminds us that there is no cause for complacency in managing US relationships in East Asia. Read more…

Obama and East Asia: No Room for Complacency

Author: Gerald Curtis, Columbia University

The Obama administration’s foreign policy in East Asia has been characterized more by continuity than by change, building on policies of previous administrations that have served U.S. interests well. But there is a danger that, forced by events to focus attention on the world’s hot spots, continuity will shade into complacency, leaving the administration to constantly try to catch up with developments in an East Asia that is rapidly changing.

Managing trilateral relations among the U.S., China, and Japan requires a multi-level approach. Each of these countries is in a transformative period that is changing the dynamics of their interaction. Bilateral relationships will remain central. It is unrealistic and unwise, however, to think of the U.S.-China bilateral relationship as comprising a G-2 for dealing with regional and global issues. The notion of a G-2 exaggerates China’s strengths. It is not in the interests of the U.S. to encourage China to believe that it has more power to influence global affairs than it actually possesses. Being the largest overseas purchaser of U.S. Treasury notes gives China considerable leverage in relations with the U.S. But one should not underestimate the mutual hostage quality that results from China being the largest holder of U.S. bonds, which has a kind of economic Mutually Assured Destruction character to it.

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Japan: Why the LDP will lose today

Author: Tobias Harris

In September 2005, Junichiro Koizumi, then Japan’s prime minister and leader of the long-governing Liberal Democratic Party (LDP), defied expectations and led his party to a smashing victory over the opposition Democratic Party of Japan (DPJ) in that year’s general election. The LDP won 296 of 480 seats in the House of Representatives, the first absolute majority for the ruling party since Japan introduced a new electoral system in 1994–and, together with its junior coalition partner Komeito, the LDP-led government wielded a supermajority for the first time since the party’s creation in 1955.

Now Koizumi, three years removed from the premiership and retired from politics, is surveying an entirely different political scene: an almost certain defeat for the LDP on the same magnitude as its victory in 2005. It will probably lose its position as the largest party in the Japanese House of Representatives for the first time in its history.

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Japan: The DPJ prepares for its first steps towards a new style of government

Author: Tobias Harris

The general election may be a day away, but the DPJ’s position in the polls seems secure and so the party is acting like a ‘responsible party’ and putting plans in motion for its transition into government.

I have written of the names mentioned for the leading positions in a Hatoyama cabinet — but naming politicians to the leading cabinet positions as early as next week is but one of the party’s plans for the first days after an electoral victory.

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The DPRK wants a new venue, a new game

Author: Ron Huisken

It is not hard to read into Pyongyang’s behaviour in the Six Party talks. There is a profound ambivalence about what it should be asking for and even about whether it should be in the negotiations at all.

This ambivalence seems to have been tested by the Bush administration which, in its second term, switched from demands to negotiations, and private bilaterals with the DPRK outside the Six-Party framework. It even delivered on a key demand: delisting the DPRK as state sponsor of terrorism, in October 2008.

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The Internal Security Act in Malaysia: abolish, not reform it

Author: Siaan Ansori and Greg Lopez, ANU

Some 20,000 or so Malaysians met the full force of Prime Minister Najib’s security forces when they demonstrated peacefully on August 1 in Kuala Lumpur against the repressive Internal Security Act (ISA), a draconian law used by the Malaysian Government to quell the Communist insurgents after the Malayan Emergency. By Malaysian standards, this was a mammoth demonstration; not only in size but also in the statement it made, considering the extent to which Mr Najib had gone to stop it. The government’s response to the demonstration casts further doubt on Mr Najib’s commitment to democratic reform.

Since coming into power on April 3, 2009, Mr Najib has portrayed himself as a reformer. He released 13 ISA detainees, including key HINDRAF leaders, and promised that he would amend the ISA. In addition, he also implemented some populist reform measures in the economic sphere. Although these changes raises Mr Najib’s popularity within the electorate, analysts have observed that Najib’s strategy mimics UMNO’s tried and tested formula of quick political wins which are long on form and short on substance.

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India: Bold vision needed for exports

Author: Rajiv Kumar

The new five year Foreign Trade Policy (FTP) will be announced on 27 August . This is an opportunity for the Minister of Commerce and Industry, who has just signed two free trade agreements (with South Korea and ASEAN) in less than 10 days, to reverse the plummeting trend in our exports and set the medium-term course for Indian exports to achieve a sustained and high growth trajectory.

It is clear that with our exports stuck at around 1 per cent of global exports for the past 60 years, our policies have not been successful in making India an exporting nation. The external environment is clearly not the most propitious, with world trade expected to decline by 9 per cent in 2009. This is the sharpest fall in more than two decades. It is therefore, a formidable challenge to give exports a real push and needs a bold and innovative approach that must also be fully cognisant of our ground realities.

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How the DPJ can get Japan growing again

Author: Tobias Harris

Growth or aid, Yomiuri tells us, is the key point of difference between government and opposition manifestos. The LDP wants to promote economic growth, while the DPJ stresses protection for citizens. Sankei says the same regarding last Monday’s debate among party leaders.

All too often in recent months DPJ leaders have encouraged the idea that the LDP is concerned with growth, while the DPJ cares about livelihoods, as if economic growth has nothing to do with the wellbeing of the Japanese people. Of course, at times the LDP has been overly focused on economic growth: after all, Nakagawa Hidenao’s ‘rising tide’ school refers to the idea that a rising tide of economic growth will lift all boats in the economy. (In this blog post, Nakagawa demands that the DPJ state a growth target.) If Japan learned anything this decade, however, it is that growth is not enough. After all, despite Japan’s having its longest sustained economic boom for the better part of this decade, all too many Japanese did not experience it as such. But at the same time, the DPJ cannot ignore policies that will promote sustainable economic growth. At the very least, without a growing economy it is difficult to see how the government will meet growing liabilities for social security without severe tax increases.

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No Rush to Talk With North Korea

Author: Andrei Lankov, Kookmin University

Bill Clinton’s trip to Pyongyang and the release of the American journalists confirmed what many observers have suspected since early July: North Korea is indicating its willingness to re-start talks with the United States. There are reasons why Washington should not rush to the negotiation table immediately, but few people doubt that these talks will start relatively soon.

The negotiations are likely to be characterized as talks about getting the North to give up its nuclear weapons. But one should not be misled: No amount of diplomatic dealing can achieve that goal.

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Doha Round: what India’s new government needs to do

Author: Kaliappa Kalirajan

Though India has demonstrated that there exists broad political support for its economic reform program, agricultural trade policy reforms need to be accelerated. The new government enjoys a better standing than before in terms of stability. Its challenge now is to mitigate the inefficiency that exists in Indian agriculture and to close the gap between its potential and actual performances by implementing a proper policy framework.

As a net exporter in agriculture products, India has more to gain than to lose from trade reforms. It has sufficiently high bounded rates on most products, and therefore flexibility can be ensured against unfair competition. It does not have to worry about its agricultural subsidies as they are already below the required ceiling. Also, it does not have any serious domestic opposition to reckon with. All of these factors place India in an advantageous position.

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China needs to fine-tune policy now

Author: Yiping Huang, ANU and Peking University

China’s consumer and producer price indexes, major gauges of inflation, fell in July, pointing to greater deflationary pressure. Indeed, overcapacity will make price hikes, or inflation, almost impossible in the foreseeable future.

But soaring asset prices fuelled by excess liquidity and infrastructure projects recently launched under the government’s economic stimulus package will eventually jeopardize macroeconomic stability – unless policies are adjusted now.

Widespread concerns about inflation have recently been premised on three conditions: a falling CPI, which seemed likely to bottom out by the end of this year; record bank lending in the first half, which pushed up inflationary expectations; and soaring world commodity prices, which may trigger domestic inflation – a scenario that seemed to be supported by recent increases in rice and meat prices.

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Japanese election – Weekly editorial

Author: Peter Drysdale

Unless the pundits are all wrong, next weekend will see the DPJ in Japan win an historic election victory. Except for a brief period under the Hosokawa Cabinet in 1993, and the short lived Socialist Katayama government in the 1940s, the Liberal Democratic Party has effectively held government for over six decades. Yoichi Funabashi’s lead this week asks what this might mean for Japan’s democracy, and whether Japan will at last be transformed into a mature two-party democracy. Readers of this site have benefited from Tobias Harris’s analysis of developments in the lead-up to the election over the last year. However decisive the victory of the DPJ, there is sure to be a period of uncertainty and confusion as the new government takes rein. For one thing, the DPJ plans a big shake up of the relationship between politics and the bureaucracy. This will take some time to sort itself out. There are also contradictions in DPJ policy strategies, and there will be a jostling for power and influence as the new government takes over. But the overwhelming feeling within the Japanese electorate, including the normally pro-LDP farmers and business community, is that this is time for a change. There is a widespread willingness to take a risk on new political leadership. Funabashi reminds us that this may or may not mean a fundamental change in the character of Japanese politics. He cites the prescience of my old friend, Masamichi Inoki, who questioned whether an effective two-party political system was in the making in 1955. Whether times have changed, we shall have to wait and see. Whatever the case, a change of government in Japan is likely to boost confidence, and, despite Funabashi’s justifiable worries about its impact on Japan’s longer term growth prospects, give a boost to the Japanese economy in the short term. And if it does what Funabashi hopes for, and strengthens the base of robust political argument in Japan, that will be a real bonus for Japan’s performance in the long term.

The contest of policies in the Japanese elections

Author: Yoichi Funabashi

Halfway through the 2004 U.S. presidential primaries, a taxi driver engaged me in conversation as he drove me from a hotel in Qingdao, in the eastern part of China’s Shandong province, to the airport.

‘In the United States, the Republicans and the Democrats appeal to the public by highlighting the differences in their policies. That is why there is dynamism in their politics,’ he said. ‘In China, with the Kuomintang in Taiwan becoming more realistic, what would happen if a two-party system was set up with the Communist Party and the Kuomintang and have the two alternate in government? By the way, what is the situation in Japan? Are there two major parties in Japan like in the United States? Are they competing with each other? What are the choices presented to the people?’

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Afghanistan: a British nightmare?

Author: Amin Saikal

General Sir David Richards, the incoming head of the British Army and former commander of NATO’s International Security Assistance Force (ISAF) in Afghanistan, has predicted that the British involvement in Afghanistan’s state and security building could last for another four decades. His comment, which comes at a time when the number of British troops killed and wounded has dramatically escalated and the domestic support for the Afghan war has evaporated, is bound to invoke further among the Afghans the bitter historical memory of British interferences in their country. This can only assist the Taliban and their supporters to reinforce their claim that the British have come once again to subjugate Afghanistan.

Of course, it was a strategic mistake from the start to deploy British troops in the hotbed of the Taliban insurgency in Helmand Province along the border with Pakistan. The Taliban could not have wished for a better nationality to fight than the British. It has provided them with a very effective propaganda tool to galvanise public support and enlarge their circles of recruitment.

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