January 18, 2010

A “Golden Age” for Asia.

This is Tony Tan's vision of a “Golden Age” for Asia.It is published by the Straits Times of Singapore.

"Over the past two years, the world has experienced what is likely to have been the most severe economic and financial crisis of the modern era. But my belief is that the next decade could be a “Golden Age” for Asia. Seeing this become a reality, however, will require us to adapt and innovate, so we can overcome some difficult challenges. These include finding the right balance between the private sector and public management in the financial sector; dealing with short-term economic and financial risks, particularly destabilising asset bubbles; rebalancing domestic versus external demand in growth models; and developing broader, deeper and more efficient financial systems.

First, an update on the global financial crisis.

The global economy has rebounded. After hitting a trough in the first half of 2009, the global economy has seen consistent growth. Massive policy support by governments and central banks has worked.

The recovery should be sustained over this year, after which growth should settle to its long-term trend in 2011. Global growth could hit 3 per cent to 4 per cent in 2010, up from a contraction of close to 2 per cent last year. The recovery has generally been stronger than most analysts expected and could further surprise on the upside.

Growth, however, will be uneven, with the strongest performance coming from the emerging market economies, especially Asia.

Economies at the centre of this crisis — the United States and Europe — should continue to grow over the coming year. In the US, growth could be moderately strong in the first half of 2010 before slowing down to a below-average pace. Although prospects have improved, it does not look like the US will enjoy the growth spurt that typically follows from a deep contraction. Growth in Europe is likely to be weak.

Beyond this recovery, the post-crisis environment will be very different from the world we have been used to, a world dominated by Organisation for Economic Cooperation and Development countries. My sense is that the global economic and financial environment will change in three important ways.

First, the global economy will be extremely reliant on policymakers for the next couple of years. Extensive government support for the financial sector — liquidity support, asset purchase and guarantee schemes, and public recapitalisation programmes — remain in place and have facilitated the healing of money and credit markets. Monetary and fiscal policies are extremely loose and have mitigated the collapse in domestic demand. The current recovery is being sustained by such unprecedented policies. Changes in policies or mistakes will thus have a significant impact.

A key challenge for policymakers is how to time the withdrawal of monetary and fiscal supports. The recovery could be derailed if withdrawal is too early or too sharp. However, policymakers run the risk of creating excessive inflation over the medium term, if emergency levels of policy stimulus are left unchanged for too long.

In the emerging economies, policymakers will have to deal with rising inflation and likely asset price bubbles. Asset prices, particularly real estate for Asia, have been supported by accommodative credit policies and, in some countries, capital inflows. Given likely protracted easy monetary policy settings in the developed world and managed currency regimes in some emerging markets, it will be a challenging balancing act for policymakers to keep prices under control while not snuffing out growth or precipitating another economic downturn.

High unemployment and unhappiness over “bailouts” could lead to populist policies, including excessive regulation and protectionism. There is, especially in the developed world, a feeling that the financial sector has “rigged” the system, so that it cannot lose. The upcoming bonus season, when investment professionals are expected to receive record compensation so soon after last year’s turmoil, will only serve to accentuate such feelings.

There is little doubt that some rebalancing towards better regulation and supervision is needed. But in this environment, there is a risk that such reforms may be too excessive and end up stifling innovation and growth.

The second major change in the post-crisis environment is the increasing importance of the emerging economies, anchored by Brazil, Russia, India and China, or the Brics. As noted by Antoine van Agtmael, who first coined the term “emerging markets”, the next decade is likely to demonstrate that we are truly living in an ‘emerging markets century’.

Emerging economies are expected to account for more than half of the world’s gross domestic product (GDP) growth over the next decade. As estimated by Goldman Sachs, the combined GDP of the Brics will exceed that of the US by then. China will be three times larger than today and two-thirds the size of the US. Emerging economies are going to displace the G-7 as the world’s largest economies, even if their per capita incomes are still lower.

The shift in economic power to the emerging world will likely increase geopolitical risks. For one, emerging economies, especially the Brics, will become key global powers and demand more say on world affairs. An awkward transition is likely to occur: In terms of military power, the US is likely to be dominant for decades to come, and will be called upon to carry out most of the heavy lifting in global trouble spots. However, the US will be heavily dependent on foreign countries, including key emerging geopolitical rivals, to finance its large public debt.

The rise of emerging markets will also put pressure on unrestrained carbon-based growth. Countries are going to face increasing environmental constraints, which will require adaptation and innovation if growth is not to be stifled. Our current carbon-based growth model will need to become more carbon-efficient and environmentally sustainable. This is especially true as an increasingly sophisticated population adds to pressures for more environmentally friendly policies.

Finally, for investors, the rise of emerging markets will mean that a larger proportion of their investments will be in these markets. Far from being a risky part of their portfolio, emerging markets will become a core and unavoidable asset class. At the same time, emerging markets will become a leading source of investment and credit.

The third aspect of the post-crisis environment that I would like to emphasise is the longer-than-expected time it might take for the developed world to fully heal from this crisis. The current recovery could be strong, at least in the very short term, but even the most optimistic economist expects the bounce to be much weaker than in the past. We should not expect growth in the developed world to power a strong sustained recovery.

There are several reasons for this: Notwithstanding substantial improvements, the bulk of the globalised banking system, consisting of major banks in the US and key parts of Europe, are likely to remain impaired and subject to greater regulation. In the US, the banking sector is being supported by massive policy intervention and will likely be stable enough to support sub-par growth. However, it may not be strong enough to support credit needed for sustained growth above potential growth.

Also, US household consumption is unlikely to be robust. Household de-leveraging is likely to take a number of years, keeping overall recovery muted.

What will all this imply for Asia? I group Asia’s challenges into four areas.

First, at the very broad level are the fundamental uncertainties raised by the apparent failure of Anglo-Saxon models of financial sector regulation. At the extreme, these paradigms seem to have placed blind faith in markets and a lightly regulated private sector.

Notwithstanding this, the longer-term evidence points to the great benefits that sound financial sector development and liberalisation can bestow, especially in enabling a successful transition from an emerging to a developed economy.

So, what should Asia do to keep the potential of well-functioning markets while minimising the risks of instability? It will take time before we will know the answers to this question, but Asian countries have never had a blind belief that markets work best or that the public sector is always inferior to the private sector.

Second, Asian policymakers need to respond flexibly to risks as the global economy recovers. One medium-term challenge is managing asset prices. Across the region, we have seen significant rises in equity and real estate prices. These have not, in general, hit their previous peak and can be justified by positive fundamentals. But continued low interest rates could push prices higher and eventually lead to bubbles. Like in the early 1990s, managing large capital inflows and prospective bubbles will be a major task for policymakers. Asian countries have to be vigilant, so that they do not repeat the same mistakes that led to the 1997-98 Asian financial crisis.

The third area of challenge for Asia is the need to rebalance to a more sustainable growth model. This is particularly true for countries with large populations like China and India. Asia’s economic growth model will need to be reoriented from depending largely on exports to a more balanced model that is also dependent on services and domestic consumption.

This brings me to the fourth challenge for Asia. Asian financial institutions and markets have been given a golden opportunity. The globalised Western banking system, hampered by capital constraints and re-regulation, will likely not be able to intermediate the massive capital demand needed to finance Asian growth. This leaves the playing field unusually open for Asian financial institutions.

Fortunately, they generally came into this crisis much healthier than their global counterparts. In order to take advantage of this opportunity, however, Asian banks and capital markets will need to develop quickly. In this context, the regulatory authorities in Asia need to cooperate as never before with one another and financial institutions to develop regional financial and capital markets.

These are difficult challenges, but I am optimistic we can overcome them. Asia’s fundamentals are generally sound, policymakers have lots of flexibility, and the population is hard-working and educated. The next decade could thus be a “Golden Age” for Asia."

RWS: Free Entrance on Opening Day

The Straits Times reported Resorts World Sentosa (RWS),in a bid to keep the traffic flowing into Sentosa, has decided to absorb admission charges for those heading straight to the integrated resort.

The entrance fee waiver, which starts tomorrow, applies to those who drive, take a taxi or ride public buses into the resort.

They will have direct access to RWS’ basement carpark without having to pass through the Sentosa toll booths farther inland.

They will, however, still have to pay carpark charges, taxi fares and the public bus fare.

Taxi passengers will also not be exempt from the S$3 (RM7.20) RWS surcharge that cab companies, except ComfortDelGro — which operates Comfort and CityCab taxis — recently announced.

And for visitors taking the bus, fares will be between S$1.50 and S$3.50 depending on where they start their journey and which bus service they take.

Earlier this month, charges for Sentosa were revised to a per vehicle basis and now range between S$2 and S$7 for those travelling in cars and taxis.

RWS, which begins operations at four of its hotels tomorrow, also announced its parking charges for its 3,500 carpark spaces.

Weekday charges are S$6 for the first hour and S$2 an hour thereafter. On weekends, it is S$7 for the first hour and S$2 an hour thereafter. After 7pm, there is a S$4 entry charge to the carpark.

The resort will cap the maximum parking fee at S$20.

To encourage more people to visit during lunch hours, it is offering discounted parking rates of S$1 for the first hour of parking between noon and 2pm.

Sarah Lim, senior lecturer of retail management at Singapore Polytechnic, said the move is likely to position the integrated resort to start its operations with a “big bang”.

“This will garner it more positive publicity and increase the number of visitors it gets on the first day.

“That, in turn, may arouse the curiosity of those who may not have thought of going to the integrated resort to now go and take a look,” she said.

From tomorrow, visitors can dine at 10 dining outlets located at the four hotels.

Opening dates for Universal Studios Singapore and the casino have not been announced.

The Shortfall of a Super-duper SPM Result


Liong Kam Chong of Seremban is spot-on. Grest super-duper SPM results does not mean you can get into top notch world universities. It may be a beginning, though. As they say in statistical analysis, it is a necessary condition but you need sufficient conditions too, to be able to pass through the door of Harvard,Yale,Princeton,Oxford and Cambridge.

Let us read what Liong has to say in his letter to the STAR today.

"IN LINE with the 1Malaysia concept, a National Scholarship scheme based purely on merit has been set up. It was announced that beginning this year some 30 crème de la crème SPM achievers will be awarded scholarships to further their education in world-renowned, top-notch, Ivy League universities overseas.



This new incentive scheme by the Government and the Education Ministry is most laudable. Top SPM students all over the country can now look forward to fair competition among their peers to secure that highly-esteemed overseas scholarship. If selected, they have also the chance to study in a world-renowned university.

Certainly, there will be no lack of qualified contenders. Nowadays many of our students can excel both in curricular as well as co-curricular achievements.

Even the SPM grading system has accordingly been revamped to facilitate the selection of these best of the best potential scholars.

However, while this is exciting, I think there is a technical hitch. To my humble knowledge and understanding, no world-renowned top university offers admissions to students based solely on their performances in SPM-level examinations.



These universities require more and higher qualifications: the A-levels, STPM (Sijil Tinggi Persekolahan Malaysia), Matriculation, SAT 1 & SAT 2 (Scholastic Achievement Test for universities in the US), or other pre-university study courses.

In fact, it is the students’ performances in these higher level examinations that really count in the selection process. In addition, some of these higher-ranking universities (like Oxford and Cambridge in Britain and Harvard in the US) conduct tests and interview sessions with potential candidates before deciding on their admission.

So it can safely be concluded that SPM scores alone do not determine the university a student can enter later on.

Consider also the following fact. Any experienced secondary school teacher and administrator will tell you that while an STPM/A-level/Matriculation/SAT scorer normally scores in the SPM, not all SPM scorers score in STPM/A-level/Matriculation/SAT.”

This inadvertently points to the inconsistency that may arise if National Scholarships are awarded to SPM scorers who later on do not secure a place in a top-notch, world-renowned, Ivy League university because of lesser performance in their pre-university studies.



Perhaps, National Scholarships should be awarded only to those who have already secured a place in a top university. Or JPA (Jabatan Perkhidmatan Awam) scholars who excel in their A-level/Matriculation/SAT courses and subsequently gain entry into top-notch universities can have their scholarships converted to National Scholarships.

Let’s make it truly a prime mover for our academically strong as well as all-rounder students to achieve greater success and excellence."

My Take:

So,what should JPA do now? With the low command of English by even those who comfortably score "A' in English,can they pass through the interviews or do well in the qualifying entrance examination requirements to Ivy League universities?

We wait in trepidation.

Now You Can Use 'Allah ' but in.............

Debra Chong reported in the Malaysian Insider today that Minister in Prime Minister’s Department, Nazri Aziz said today that non-Muslims are allowed to use the word “Allah” in three states — Penang, Sabah and Sarawak — and the Federal Territories.

This development may diffuse the controversy slightly. So, in a way the government may give the issue more latitude that originally thought though some state authorities hold on to dear life and would not budge on the issue. This will not go well with the hardliners but will more Muslims in authority choose this middle ground? Will Christians and Sikhs still be united in opposing the ban of their use of the word in all the other states?

According to the defacto Minister of Law, this is because other states have enactments on Islam which prohibit the use of the term by non-Muslims.

Nazri had last week proposed that East Malaysian Christians be allowed to use the term, though he maintained that it should remain prohibited to West Malaysians.

“In my opinion, the court decision is only effective for Sabah, Sarawak and Penang, not the other states where it is the law,” the minister in charge of law and parliamentary affairs told reporters after launching a public transport awareness campaign here today.

The federal lawmaker related that he had once gone “incognito” to a church in Sarawak where the word “Allah” was used during service. He added that the Muslims there also had no problems with the word being used by Christians because they understood it was due to “custom and culture”.

“I don’t think they should pass the law in Sabah and Sarawak. I think it’s been the culture there but it’s different here,” he said, referring to the peninsula.

The controversy over the word started after a Dec 31, 2009 ruling by the High Court allowing a Catholic newspaper to use the term “Allah” to refer to the Christian God in its Bahasa Malaysia section.

The ruling sparked off Muslim anger across the country, and has seen unbridled but minor attacks on 10 churches, a mosque, a Sikh temple, and a convent school.

Singapore: Jumping Jack Flash Electronics Exports

Singapore's exports jumped for the second straight month in December as global demand for the city-state's electronics surged.

Exports excluding oil rose 26.1 percent from a year earlier to 13.2 billion Singapore dollars ($9.5 billion), according to Trade and Industry Ministry figures released Monday.

The ministry said sales abroad rose a seasonally adjusted 1.7 percent from November.

Electronics - which account for 40 percent of non-oil exports - rebounded strongly, rising 25.2 percent from a year earlier after falling 6.1 percent in November.

Singapore's economic recovery slowed last quarter as gross domestic product fell by an annualized seasonally adjusted 6.8 percent.

The government expects the economy to grow up to 5 percent this year after contracting by 2.1 percent last year.

We do hope there will be more good news for this island republic.