The FTA with Australia is a significant milestone in bilateral relations

 IT took seven years, including the gap years as a result of the time-out taken to work on the Asean Australia New Zealand Free Trade Agreement, and 11 rounds of talks, but on Tuesday Malaysia and Australia finally signed a free trade accord.  In this regard, it is pleasing that both countries fast-tracked efforts to resolve the differences and deal with the sticky issues that were slowing down the negotiations.  Significantly, the deal that ends tariffs on all Malaysian exports to Australia and more than 97 per cent of Australian goods sold in Malaysia from Jan  1 next year liberalises duties faster than the 2020 target under the Asean Australia New Zealand FTA. 

Moreover, this makes Malaysia the third country after New Zealand and Singapore to be granted duty-free access to Australia. Malaysia will also allow Australian companies to totally own education institutions and telecommunication enterprises and 70 per cent stakes in insurance firms and investment banks. In return, Malaysian enterprises will have access to homeopathy, traditional medicine and other sectors in the Australian healthcare industry.

As it is, Australia is Malaysia's 12th largest trading partner and Malaysia is Australia's 10th largest trading partner. Two-way trade jumped by 6.1 per cent to RM34.0 billion last year and surged by 28 per cent in the first quarter of this year. In addition, Australian investments in Malaysia in manufacturing, mining and other sectors are estimated at US$46 million (RM145 million) and Malaysian enterprises hold investments worth US$2.5 billion in Australia. As such, the FTA is to be welcomed as opening up the Malaysian economy to Australian competition has been reciprocated by the access that is gained by Malaysian companies to the Australian market. Since the pact would substantially reduce barriers for goods and services trading and open up vast opportunities for bilateral trade and investment between the two countries, the expectations are that trade and investment levels will be given a big boost.

Certainly, Australia, whose economy is about six times larger than Malaysia's and which is expected to grow at a faster pace than most of the developed countries in the Organisation for Economic Co-operation and Development this year and next year, is a vital export destination that offers significant growth opportunities. In this respect, the government is on the right track in entering into a bilateral agreement with Australia. It is particularly timely given the challenges posed by the eurozone crisis and the stuttering global recovery. However, a lot remains to be done by business and industry to actualise the tremendous potential for additional trade and investment.

Read more: Bolstering trade ties - Editorial - New Straits Times http://www.nst.com.my/opinion/editorial/bolstering-trade-ties-1.87061#ixzz1w7Co3sgB

Brunei Darussalam: an electoral feint

One of the reasons that Brunei Darussalam stands out in Southeast Asian politics is its status as an absolute sultanate: it stakes out the authoritarian end of the region’s wide spectrum of regime types.

Despite this reputation, the country’s Ministry of Home Affairs announced in March 2011 that an election would take place for the Legislative Council. Under Brunei’s original constitution, a council with elected members had been set up. But in 1970, just three years after ascending to the throne, the Sultan, Hassanal Bolkiah, banned electoral contests, preferring instead to rule by decree under a perennial state of emergency. And in 1984, shortly after Brunei gained ‘full independence’ from the UK, he shut down the council entirely.

Two decades later, though, the Sultan reopened the Legislative Council, then valorised its proceedings by building a grand new edifice. He gave the council a bit of substance too, tolerating its mild imposition of budgetary oversight. And in 2011, five years after first mooting the idea, the Sultan ruled that elections to the council should be restored, at least in small measure.

The Sultan has begun cautiously, only allowing the Legislative Council to be partly and indirectly elected. Specifically, among the body’s several categories of members, a single cohort would be filled by the penghulu of mukim (that is, the heads of sub-districts) and ketua kampong (the heads of villages and longhouses). Within their respective districts, of which there are four in the sultanate, the penghulu and ketua kampong would nominate candidates from among themselves. They would then cast their ballots, electing one member to the council in each district.

Amid much ceremony and police observation, the penghulu and ketua kampong gathered in a morning session to make a total of 53 nominations. The nominees were untainted by any party affiliations or programmatic agendas, for at this early stage in the political development of the 500-year-old sultanate, government servants are barred from joining political parties. Thus, party vehicles, typically short lived, remain principally the redoubts of small-time, usually disgruntled, businessmen. The pengulu and ketua kampong then returned in the afternoon for the polling. In the largest district of Brunei-Muara, the voting centre was depicted by The Brunei Times as ‘abuzz with excitement’, with some 95 heads of mukim, villages and longhouses lining up before two voting booths. After casting their ballots, officials were scrupulously instructed to depart through a separate exit, preventing them from influencing the choices made by those still waiting their turn.

The voting was thus conducted rigorously, but with remarkable efficiency, and was finished across all four districts in less than half an hour. Ballot boxes were transported by security personnel to the capital, Bandar Seri Begawan, for counting by Home Ministry officers. Results were subsequently presented to the three-man selection committee, chaired by the Minister of Home Affairs, Dato Paduka Seri Setia Badaruddin Pangarah. And after reviewing the results, the selection committee conveyed them to the Sultan’s representatives, who duly announced the winners.

The Sultan ‘consented to the appointment’ of the Legislative Council’s full membership three days later. In addition to a speaker and clerk, the body included the Sultan himself, who was wearing his tri-cornered hat as prime minister, minister of defence and minister of finance. It also included 13 other ministers and ‘second’ ministers ex officio. Three ‘titled persons’ and seven persons ‘who have achieved distinction’ were also appointed. But the final cohort, the district representatives, did finally embrace nine heads of mukim, villages and longhouses, four of whom had been freshly elected by their peers.

Despite this revived contestation, it seems unlikely that recent events will do much to raise the sultanate’s standing in the eyes of Freedom House. In its Freedom in the World 2011 report for the previous year, the organisation awarded Brunei the lowly scores of six for ‘political rights’ and five for ‘civil liberties’, cumulating bleakly in a status of ‘not free’. And the report’s lament that no direct elections have been held in Brunei since 1962 imply that partial and indirect elections would do little to mollify it. Freedom House also observes that reform initiatives vary inversely with the oil and gas discoveries that fund placatory public sector employment, with the most recent find by a French energy firm in 2008 encouraging ‘little additional political change in 2009’.

At the same time, local newspapers in the sultanate appear free to operate only because the weak ray of light that they emit is felt to attract foreign investors. Yet editors remain so cowed by the fragility of their licences that they stringently self-censor. Accordingly, those interested in Southeast Asian politics need not fret over any diminution in the region’s array of regime types, for Brunei has stirred only slightly from its deeply implanted authoritarian pole.

Professor William Case is Acting Head at the Department of Asian and International Studies, City University of Hong Kong. 

ASEAN+3 financial cooperation enters a new phase

The 15th ASEAN+3 Finance Ministers’ Meeting was held on 3–4 May in Manila and resulted in at least two important outcomes that marked a new phase of ASEAN+3 financial cooperation: the involvement of central bank governors at the meeting and the inception of a crisis-prevention facility.

After one and a half decades of cooperation, the ASEAN+3 finance ministers finally welcomed the direct participation of ASEAN+3 central bank governors in the Finance Ministers’ Meeting. Only deputy governors had been invited to attend in previous years. The new arrangement is expected to facilitate better coordination between financial and monetary authorities, as they usually have overlapping and interconnected policies. It also responds to the criticism that monetary authorities take a back seat in ASEAN+3 financial cooperation, given the central bank governors do not have an equal role in the process.

But the close relationship between the finance ministries and the central banks in the regional arrangement must not be allowed to hinder the independence of the central banks, particularly in their work to stabilise their respective economies. Also, it is important to ensure the future contribution of central bank governors so that their involvement is not merely seen as a symbolic gesture, but strengthening ASEAN+3 financial cooperation.

Another development in the ASEAN+3 financial cooperation framework is the commencement of the regional crisis-prevention facility, the Chiang Mai Initiative Multilateralisation Precautionary Line (CMIM-PL). This arrangement will complement the CMIM’s existing functions as a regional crisis-resolution mechanism. It is likely that the CMIM-PL’s operating procedure will adopt aspects of the IMF’s Precautionary Credit Line (PCL), since ASEAN+3 finance ministers have agreed to engage with the IMF’s financial safety net arrangement. There are two similarities between the schemes. First, there is the possibility of applying ex-post conditionality for accessing the CMIM-PL, which is also applied to the PCL scheme. Second, the CMIM-PL’s qualification criteria imitate those of the IMF. In addition, the CMIM-PL’s decision-making process will be based on country-specific economic reports and analysis produced by the ASEAN+3 Macroeconomic Research Office, the Asian Development Bank and the IMF.

For the ASEAN+3 member countries, adopting the IMF’s credit line model may ease their efforts to meet the CMIM-PL’s qualification criteria, as many member countries may find it relatively easier to follow the IMF’s scheme, given that it is internationally recognised. The creation of different or new requirements for accessing the regional prevention facility may result in another burden for member countries, especially during times of crisis.

In this new phase of financial cooperation, the ASEAN+3 states are still finding it difficult to forge a new path toward a self-determining regional financial arrangement. On the one hand, they have tried to strengthen the regional decision-making process by introducing central bank governors into the policy-making process. The ASEAN+3 states have also tried to reduce the role of international financial institutions in the regional self-help mechanism by reducing the IMF-linked portion of the CMIM from 80 per cent to 70 per cent. On the other hand, ASEAN+3 financial cooperation has shown its dependence on other institutions by drawing on the IMF’s safety net model and utilising other institutions’ analysis as the basis for its decisions, and has not been confident enough to maximise its own capacity to determine regional arrangements. Hence the future of ASEAN+3 financial cooperation may largely still be influenced and directed by the dynamic of international organisations such as the IMF.

Eko Saputro is a PhD candidate at the School of Humanities and Social Sciences, Deakin University.

The China–Japan relationship and core Australian economic interests

Japan and China are often seen as adversaries, locked into bickering and an historically antagonistic relationship.

They are neighbouring economic giants which have a host of unresolved historical issues to deal with and a natural rivalry for regional — and now global — influence.

But the rivalry and historical baggage no longer dominate the China–Japan relationship today. Much more important is their huge economic relationship — already the third-largest bilateral economic relationship in the world. And the scale and depth of their economic relationship is shaping their political relationship in ways that underline its cooperative, more than its conflictual, elements.

Despite the ongoing political tension, trade and commerce between Japan and China has prospered over the past 20 years or more because of both countries’ commitment to the global trading system and global trading rules. This can be seen most clearly in China’s long 15-year march toward WTO accession, where, on the way, it unilaterally lowered trade and other barriers. 
It showed the world, and potentially worried Japanese business, that it would work within the rules and norms of the global trading regime. Emblematically the most significant trade liberalisation by any country in recent times was the announcement of China’s unilateral trade liberalisation at the APEC Summit in Osaka in 1995.

By any reasonable measure, the institutional reforms that China signed onto when it acceded to the WTO have been implemented faithfully, and disputes with major partners have mostly been contained within the WTO system. China has credibly shown the rest of the world that it is committed to moving toward a market economy system and working within the rules set out for it.

The huge China–Japan relationship is in no way a narrowly bilateral relationship. It underpins regional growth and prosperity, and plays a driving role in East Asian economic integration and the regional production networks that have created this level of integration. The bilateral relationship is nested in a complex set of strong links (led by trade and investment) throughout the region.

Australia and other regional economic partners cannot view their relationships with Japan in isolation from their relationships with China. And Japan’s relationships with these countries are closely bound up with China. Japanese firms — once manufacturing powerhouses confined largely to Japan itself — now produce over 45 per cent of their electronics output and 33 per cent of all their manufacturing output offshore, a very large portion of that in China. Like most international brands, Sony, Panasonic and other Japanese big-name brands assemble their products in China and elsewhere in Asia, and products made in China frequently come with a Japanese name.

Australia’s business with Japan, for example, is no longer confined to Japan itself but involves three- or four-way trade in China and within the region. The strength and international competitiveness of Japan’s core manufacturing activities are inextricably bound to production systems in China and across the region. The idea that the strength of Australia’s economic relationship with Japan does not depend on the strength of Japanese–Chinese ties and Australia’s own links to China is an anachronism, a delusion that no longer reflects contemporary economic reality.

This makes it a top priority for Australia and other regional economies to keep the region open and to support the faltering global trading system, by achieving an outcome from Doha and rebuilding the WTO.

No doubt tensions will arise from time to time between Japan and China — as they must with any two powerful neighbours — and the maritime incident in 2010 was an acute reminder of how both sides, with such a big stake in regional prosperity, need to remain prudent lest they risk damaging their own interests.

Importantly, the region’s relative stability and the lessening of regional political tensions that has accompanied regional economic integration over the past few decades have been secured within the framework of global economic institutions which made these developments possible. Keeping the global system strong and open underpins the huge economic relationship that has grown between the two biggest trading partners in Asia — the second- and fourth-biggest traders in the world — and their neighbours in the regional economy. East Asia Forum

Dr Shiro Armstrong is a Research Fellow in the Crawford School of Public Policy at the Australian National University and co-edits the East Asia Forum.

Suharto’s Gone, But Many in Indonesia Yearn for Him

As Indonesians over the past week marked the anniversary of the reform movement that toppled strongman Suharto 14 years ago, several major newspapers ran a photograph of a banner on a bridge in Banten that seemed to capture the mood of many.

On it, the former president is smiling as he asks, in Javanese: “What’s up? My era was better, wasn’t it?”

The banner, hung up by aspiring politicians from the small One Republic Party, which openly extols his rule, hit a nerve.

It encapsulates for many Indonesians all that has gone wrong with their country since its transition to democracy began in May 1998.

Many now question the quality of that democracy. A common theme running through the recent public debate on the subject is that reformasi — as the reform process is known in Bahasa Indonesia — has lost steam and failed to change the nature of politics in the country as many had believed it would.

In a poll conducted this month by the leading Indonesian broadsheet, Kompas, 54 percent of those surveyed felt that the state of the country’s politics was as bad as or worse than it was before the events of 1998.

Asked to evaluate the state of law enforcement and the fight against corruption, 64 percent felt things were as bad or worse.

Observers say corruption, collusion and nepotism — long associated with the days of the last Suharto decade — are as rife as ever, rule of law remains weak, and social conflict and labour unrest are growing.

In a column in the daily Republika, political scientist Yudi Latif wrote: “Indonesian politics has made technical progress, but suffered an ethical setback.

“The democratic hardware can be polished, but the software continues to have a tyrannical soul, with democracy leaving the demos, the common people, behind.”

Hasyim Muzadi, former chairman of mass-based Muslim group Nadhlatul Ulama, laments the fact that political parties today fail to emphasize integrity when recruiting cadres, but succumb to transactional politics — where elected officials focus on how they can benefit in exchange for making a decision, rather than on making the right decision.

Constitutional Court chairman Mahfud M.D. said: “There is a lot of low politics going on. The system of political recruitment needs to be relooked.”

Others note that the country’s economic growth numbers — 6.5 percent last year — and rising prosperity, while raising the standard of living for many people, have also widened the gap between ordinary folk and the elite.

Incomes may be rising, but so too is the cost of living.

The Kompas poll results are startling. It found that as many as 69 percent felt the state of the Indonesian economy was as bad or worse than before 1998, even though economists and others note that Indonesia’s macroeconomic indicators, like the ratio of foreign debt and gross domestic product, are healthy.

This sentiment did not vary much across people’s educational background, or their province.

Recent months have also seen protests and riots by farmers and factory workers over inadequate pay and unjust land seizures, as incidents of social unrest in the country pick up, some targeting local officials.

These developments have fed the growing sentiment that the country has an abundance of self-interested politicians, when what it needs are leaders who can significantly improve the lot of its people.

At a discussion organized by alumni of the Indonesia Islamic University on Thursday, former president Megawati Soekarnoputri said: “If we reflect on the 14-year journey of reform, it seems there is anxiety on the direction and future of the nation. Why? Because the leadership is at this moment directionless and not effective.”

Her Indonesian Democratic Party-Struggle is in opposition. Observers say she has not forgiven her successor, President Susilo Bambang Yudhoyono, for challenging her to the presidency in 2004, but her views are increasingly echoed by many.

The event was, tellingly, titled “longing for statesmen.”

Reprinted courtesy of Straits Times