JPA Managing scholars is incompetent!

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Lin Ern Sheong -JPA scholarship: A bond-free scholarship for young Malaysians

I am currently a 4th year student at the University of California, Berkeley. I am also a JPA scholar.  (JPA stands for Jabatan Perkhidmatan Awam, or the Public Service Department of Malaysia.)

While I am thankful for the JPA Scholarship, I could not fail to note the lackadaisical method which JPA employs to ensure that its scholars return home and serve the nation after graduation, especially those who are not in the fields of medicine and law.

Many JPA-sponsored students I know have not returned home upon graduation from overseas institutions.
The story would go like this. The JPA scholar reports to Putrajaya after graduation, and then tries to apply for jobs with the Government. If he does not hear back from JPA within 12 months, he is released from his 6-year bond with the Government. There is no need to pay back.

I suspect that many scholars do not even report home, but go on chasing their own dreams abroad immediately after graduation.

Indeed, many do not hear from the Government within 12 months. I have also heard of JPA scholars who genuinely wanted to serve the Government but could not, because JPA was unable to give them any postings.

For this very reason, the JPA Scholarship has become a much sought after scholarship. It is effectively a bond-free scholarship! This is a far cry compared to scholarships from other Malaysian corporations such as Petronas, Khazanah and Bank Negara, which are strict with its scholars when it comes to returning home after studying abroad.

It doesn’t make sense to spend hundreds of thousands of ringgit per scholar and then let them do whatever they want after graduation. I have been having a hard time explaining to those of other nationalities why my scholarship’s bond is pretty much nonexistent, despite the fact that so much money is spent by the Government.

Since the incorporation of TalentCorp, things might have changed, as there are now more job openings in the private sector for returning scholars. The question is, has anything really changed?

Hitherto, the JPA Scholarship has been an avenue for brain drain — right under the Government’s nose. If JPA does not have enough jobs for its scholars, they should at least enforce that scholars are to work within the country for 6 years, or else pay the Government back.

Otherwise, I would have to come to the logical conclusion that the JPA Scholarship was meant to encourage Malaysia’s brain drain.

Ideally, the JPA Scholarship should serve the purpose of harnessing Malaysia’s best talent for the public service of the nation.

* Lin Ern Sheong hails from Petaling Jaya and is proud be Malaysian, at home or abroad. He is currently studying Physics and Electrical Engineering in the United States.

* This is the personal opinion of the writer or publication.

Managing scholars

I REFER to Lin Ern Sheong’s letter above.

The topic of JPA scholars returning to Malaysia upon graduation has been a much discussed topic.
However, aside from establishing TalentCorp, it seems that no other concrete action has been taken to ensure that an appropriate action plan is executed to assist scholars with placements in industries.

Being a JPA scholar and currently working in one of the ministries, I have encountered numerous types of JPA scholars: those who returned and wanted to serve the Government as officers; those who returned and wanted to contribute their knowledge in a relevant field of study; those who did not want to serve their bonds; those who refused to return home on graduation; and those who wanted to serve the Government only if the jobs offered were related to their field of study, among others.

These JPA scholars clearly indicate that there must be a well-planned programme to cater for them upon graduation.

Every year, JPA scholarships are awarded to thousands of applicants and suffice to say, keeping track of each applicant is an arduous task.

But, regardless of this, it should not be a reason for our nonchalance in keeping track of the progress of each student, particularly those studying overseas.

With the introduction of the Government Transformation Programme and the reiteration on the importance of Return of Investment, it would only be appropriate if a specific programme, to ensure that these students are placed appropriately in the industry and their talent tapped, is initiated.

Although TalentCorp has been established, it is not an enforcing body (which in my opinion is JPA) and its aim spreads across a continuum of objectives such as trying to get researchers, scientists and professionals working overseas to return.

But there is a need to cater to the placement of scholars upon graduation. Even if they’re not working for the Government, at least ensure that they are working in Malaysia so that the knowledge gained overseas is of good use.

The initiative can even include a technology and knowledge transfer programme that allows these scholars to transfer the knowledge they gained overseas to local industries.

These are my personal opinions but I’m sure the enforcing body, that has been involved in sponsoring students locally and overseas, is more adept in proposing a thorough action plan.

I was a JPA scholar and I graduated as an engineer from one of the best universities in the United States and now, I am working as a diplomatic and administrative officer.

Many of my friends, who are in the same position as I, have either quit or are going to quit because they were not offered permanent positions as officers, and neither were they offered positions as research officers, science officers or engineers.

In short, the talents are not managed in a proper manner and it seems that whether these scholars return or not did not make any difference.

We, the scholars, are left to find our own ways and means to free ourselves from this contractual bondage so that we can expand our knowledge and industrial experience.

I, being one of them, am currently looking for opportunities to pursue my higher level degree overseas. This time, I might choose not to return.

AN OPINIONATED SCHOLAR,
Malacca

The rich, the good and the ugly

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SOMETIMES, we get the impression that people of a certain social class must know one another quite well.

So when we talk about the super-duper rich, we presume that they not only appear on the same Forbes list each year, but they probably have each other's private numbers on their smartphones.

And it does not really matter which country they come from, or which industry they belong to, because their extreme wealth is the common denominator.

So if you look at the richest men on the 2011 list, you can imagine Bill Gates, at No 2, giving Lakshmi Mittal of India, at No 4, a call that goes something like this, “Hi, Mittal, how much richer are you since I last called? Steel prices are rising but I am not doing too bad myself. Microsoft just dished out US$8.5 bil to buy up Skype. Small change, my man!”

But what is the reality? I suspect that while the pursuit of money drives these people, and they may share mutual public platforms, real friendship among them may not be as common as we think.

Gates and Warren Buffett recently brought together 61 American billionaires to a resort in Tuscon but it was not so much a gathering of old friends but total strangers.

Buffett reportedly knew only 12 of those invited though by the end of the evening, he had made 40 new friends.

The one thing in common for these ultra-rich philanthropists is that they belong to the special club of people who had pledged to give away at least half of their wealth under the Giving Pledge initiated by Buffett and Gates.


So what did these people talk about all evening? Apparently, since there was no real bond of friendship, they saw the meeting as a chance to “meet each other, compare notes, eat and laugh.” At least that's what the Associated Press pieced together by talking to a few of the diners after the event, which was totally off-limits to the press.

When my growing-up boys asked me about the important and rich people whom journalists get to meet in the course of work, I used to tell them that, like the rest of us, “the men pee standing, and have to put on their trousers one leg at a time.”

It was my way to remind them that there are more important things that make up a person's worth than wealth and position.

But there is no denying that these philanthropists have the potential to initiate sea changes if they put their hearts in the right place.

And it is good that other rich people around the world, including in Malaysia, are also embracing this concept of giving away part of one's wealth to address the world's many problems.

I was pleasantly surprised that our very own Dr Jane Cardosa, one of the three dynamic Cardosa sisters with roots in Convent Green Lane and Penang Free School, is a recent recipient of a US$100,000 grant from the Bill and Melinda Gates Foundation to further her research into a vaccine for polio and hand, foot and mouth disease (HFMD).

Hopefully, we will see more Malaysian philanthropic ringgit being made available to produce positive social returns.

Maybe someone should propose a study on how to eliminate the bigots and extremists in our midst who seek to build walls that divide, rather than bridges that unite.

And a further study on foot-in-the-mouth disease, which seems to be pretty rampant among the politicians.

Deputy executive editor Soo Ewe Jin realises that there is much good on the Internet that allows us to connect with worthy causes. But it seems that Malaysian misuse of cyberspace is what gets us the headlines.

Innovation Takes Real Effort, Even For Startups

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Martin Zwilling 

Image via Wikipedia

It seems to be an accepted fact these days that big companies normally innovate by buying a startup with innovative products, rather than focusing on in-house innovations. This is a good thing for entrepreneurs and investors, who can win big, but it’s not a given. I see many startups who seem satisfied with a “me too” approach, building yet another social network or e-commerce site, rather than being truly innovative.

Much has been published on this subject, including a new book “Look at More: A Proven Approach to Innovation, Growth, and Change” by Andy Stefanovich, which is really a guide to established companies for unleashing creativity within their organizations. He asserts that the problem is lack of inspiration, and he supports this with twenty years of real case studies from his own experience.

The good news is that most entrepreneurs and startups have more inspiration than almost anything else, and it sometimes leads to success despite their lack of resources and business skills. Yet even entrepreneurs need to focus on the most effective way to unleash innovation, and maximize their chances for success.


Andy offers a simple mantra for innovation, expressed as “Look at more stuff; think about it harder.” This mantra is complemented by a framework known as the five M’s, which are five key principles for unleashing creativity in any environment:

• Mood. Inspiration and creativity requires the right context of attitudes, feelings, and emotions. Every business leader who wants innovation must constantly monitor and set the proper mood for the environment. You can set the right mood by purposefully disrupting the status quo, initiating change, asking provocative questions, and listening.

• Mindset. This is the intellectual foundation of creativity, the baseline capacity each of us has for getting inspired, staying inspired, and thinking differently. Four thinking disciplines which produce a creative, inspired mindset include changing your perspective, taking risks, finding your passion, and challenging assumptions to embrace ambiguity.

• Mechanisms. These are the tools and processes of creativity that help you engineer inspiration into the way you work and empower your organization to embrace the kind of behavior that fosters innovation. Four key steps include building a context, generating ideas, filtering ideas, and building a blueprint for implementing the best ideas.

• Measurement. Even creativity needs guidance and critical feedback on the qualitative and quantitative performance of individuals and organizations. Measurements send a strong signal of what is important and where people should focus their passion and energy. In addition to measuring results, you need to measure mood, mindset, and the mechanisms above.

• Momentum. This is accomplished by the active championing and celebrating of inspiration and creativity that foster a self-reinforcing cycle for increasing innovation. Momentum is an organizational priority for inspired leaders who have a clear understanding of the other four M’s.

Not everyone has to be a leader for innovation to work. Research has indicated that followers are just as important to consider as leaders when thinking about creating the mood and momentum for creativity, inspiration, and innovation. Likewise, the right mindset alone isn’t enough. You have to be able to convince others and sell your ideas.

Thus, even entrepreneurs must not assume that their efforts and their team will be creative and innovative. “Me too” startups don’t get funded, and they certainly don’t get bought for a premium by the sleeping giants who are looking for outside innovation to kick-start their growth again. Thus I suggest that every entrepreneur and every startup review their own environments for the five M’s, to avoid getting tagged as a “has been” before they even “have been.”

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Should Malaysia's interest rates be allowed to increase?

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A Question of Business by G.GUNASEGARAM

Bank Negara’s move to let rates rise, when it may encourage more money to flow in and economic recovery is nascent, puzzles

IT’S easy to understand why Bank Negara raised the amount of interest-free deposits (SRR - statutory reserve requirements) that had to be kept with it by banks by another percentage point to 3% of total deposits. It is to mop up excessive inflows of money.

But it is puzzling why it decided to simultaneously increase the overnight policy rate or OPR, a gauge of the interest rates the central bank offers or pays when intervening on the money markets, by a further 0.25 percentage point to 3%.

This not only results in an across-the-board increase in the cost of doing business by an automatic increase in the base lending rate (BLR – the reference rate to which most lending rates are pegged), it also attracts further inflows of funds to take advantage of the increased interest rates.

Banks have already raised their BLR by 0.3 percentage point to 6.6% and their deposit rates by a similar amount.

The SRR basically restricts the availability of liquidity by tying up funds so that they remain with Bank Negara. This in turn restricts the ability of banks to lend money, helping to ensure that inflows of money don’t find their way into the system.



Bank Negara takes pains to explain that the change in SRR does not reflect a change in monetary stance and is simply a tool to manage liquidity. It adds that the OPR is the sole indicator used to signal the stance of monetary policy.

The simplest way to interpret the latest move then is that Bank Negara feels that there is some amount of excessive demand and this needs to be cooled down. But how can that be so when the overall economy is by some indications growing by less than 5%.

It would be imprudent to raise interest rates and raise costs for all sectors when say, only the property sector, and that too in only some areas, needs cooling off. This has already been dealt with via administrative measures such as 70% financing for those who already have more than two houses.

Perhaps, the central bank is concerned about inflation. Sure, everyone is. But most of this is caused by rising prices of inputs, especially of oil and commodities, rather than sharply increased demand. Raising rates won’t solve the problem but may curtail economic activity when more of it is sorely needed.

The last reason could be to help depositors get a real rate of return so as to encourage savings. But again, the idea is to get spending up which means one would want to discourage savings right now, especially with so much liquidity sloshing around the place.

One can only speculate about Bank Negara’s reasons for letting interest rates rise, especially since rising domestic interest rates and when US interest rates stay low and close to zero, will attract further inflows of hot money and make liquidity management more difficult.

Since the beginning of last year, the OPR has been increased four times, each time by 0.25 percentage point, to make in all a full-percentage-point rise in the OPR. The BLR would have mirrored largely this rise in OPR too.

If you were paying 5% a year for your housing loan a year ago, for instance, it would mean a significant 20% increase in interest costs. And that applies to businesses too.

Still, the OPR is a half a percentage point below what it was before the onset of the world financial crisis in 2008. From that vantage point, Bank Negara’s rate increase still seems within reasonable limits.

But it has to beware of further interest rate hikes during a period when both confidence as well as economic activity is still not strong, especially when a situation of easy liquidity warrants a lower – not higher – interest rate.

By all means, raise the SRR to rein in liquidity, but be more careful about increasing interest rates – there are many downside perils.

● Managing editor P Gunasegaram feels that interest rates and money, like water, eventually find their own level.

Machiavelli from the next century to the next decade

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THINK ASIAN BY ANDREW SHENG

 DURING my 2010 holiday in Turkey, I brought only one book to read George Friedman's The Next 100 Years (pic). Friedman is an American political scientist and founder of the private intelligence company Stratfor. I first came across him through browsing on the Internet and found his analysis of political events uniquely penetrating and bold. For someone to forecast the next century showed an audacity that few would dare to prognosticate, let alone pontificate.

Friedman rightly claims that he has no crystal ball, but his grasp of the grand order of history, the dictates of geography and imperatives of demography and culture all enable him to weave a framework for us to think about the future.

In an age when world watchers are wondering whether Pax Americana is going through self-doubt, Friedman sees the 21st century as the American Age. In his view, the United States is central because of its dominant geography, securely protected by the Pacific and Atlantic oceans, endowed with rich land and small population and the most open, technologically advanced culture in existence. Militarily and economically, the United States has defined the second half of the 20th century and he thinks that North America will dominate the current century.

Friedman is a disciple of the Machiavellian approach to geopolitics to him, it “is not about the rights and wrongs of things, it is not about the virtues and vices of politicians, and it is not about foreign policy debates. Geopolitics is about broad impersonal forces that constrain nations and human beings and compel them to act in certain ways.”

His boldest forecasts is that the European Age has ended, that Turkey will be the dominant Muslim power, that China is a paper tiger, and that there will be a world war in the middle of the 21st century.

Most of us cannot think beyond our lifetimes, but we must thank Friedman for framing our thoughts around what can happen in the future. His new book, The Next Decade: Where We've Been ... and Where We're Going is much closer to home and again, US-centric. It is in fact a lecture to the current and next US President what he or she should be thinking about in this unfolding decade.

He argues quite correctly that the United States must address the question of its unintended empire, in the same way that the Romans and the British had to deal with their position of pre-eminent power. The former British Prime Minister Harold Macmillan famously said that the British Empire was founded not by design, but by pirates. The United States was founded against British imperialism, with its War of Independence and Civil War fought on the moral basis that all men are equal.

Friedman's clear-eyed Machiavellian approach is to state that “justice comes from power, and power is only possible from a degree of ruthlessness most of us can't abide.” In this, he draws upon three great US Presidents Lincoln, Roosevelt and Reagan who understood that power is defined between the limit of good intentions and the necessity of power. To exercise power to ensure goodness requires greatness, but also amorality.

Friedman's fundamental point is that the United States should go back to the idea that the Romans and British did not rule by dominant military power or moral high ground, but by divide and rule a delicate balance of strategic interests to cancel their competing power in the broader interest of Pax Americana.

Friedman reminded us that the US President may appear to be the most powerful person on earth, but actually he has limited powers domestically and can only lead through his powers on foreign policy. The founding fathers designed a constitution where much of state power, civil society, religion, press, culture and arts are checks and balances on the President domestically. In this sense, his job is to prevent the United States from becoming more inward looking but open to global trade, where the US derives its true economic power, both as consumer and thought leader. But trade comes from the hard fact that the United States is the only global military power.

Accordingly, Friedman recommends three power balances. The first is to accommodate with Iran to achieve a new balance in the Middle East, to keep oil flowing and to neutralise the terrorist threat. The second is to manage Europe in such a way that Germany does not align with Russia. After all, there is a resurgence of Germany and Russia that came out of the current crisis in Europe. The third is to manage Asian rivalries between China, India, Japan and the others to ensure that Asia is not a threat to US and global interests.

Friedman's major insight is that the current crisis was due to imbalances in American power that can be corrected, such as speculation and financial manipulation. However, it is the demographic forces and technological innovation that will shape the years to come. America has the advantage over Europe and Asia in its openness to immigration and its still low population/arable land ratio. This means that the United States will still enjoy a demographic endowment, rather than the European and Asian deficit of looking after an aging population with a smaller labour force.

He rightly worries that technology may be lagging behind human needs, because we are still reliant on fossil fuels and there are no game-changing technologies in sight to deal with the challenges of climate warming. Like Asians, he warns that market forces are not enough and that the state must take the lead.

To sum up, Friedman sees that the United States “must manage the chaos of the Islamic world, a resurgent Russia, a sullen and divided Europe, and a China both huge and profoundly troubled.”

There is no other writer who is so clear-eyed and brutally realistic on the global scene. If he is right, we are turning away from the recent US foreign policy of moral preach and reach, back towards no permanent friends or enemies, only permanent interests.

> Andrew Sheng is the author of “From Asian to Global Financial Crisis”.

Machiavelli for the 21st Century: “The Next Decade” Review

Mercenary Trader

George Friedman’s “The Next Decade” could alternately be described as Machiavelli 101 or a crash course in realpolitik.


Friedman’s central thrust is this: America is an accidental empire – like it or hate it, the world must deal with it – and it is thus in the United States’ best interest to maintain the “balance of power” at all costs.

The balance of power is predicated on status quo. When you are at the top of the heap (as America is in Friedman’s view), any major shifts threaten to destabilize the top dog’s position. As the British and Roman empires did before it, the American empire must anticipate and prevent such shifts, blocking up-and-comers from excessive power accumulation.

As Friedman sees it, a century is about events but a decade is about people.  The main actor over the next ten years will be the POTUS, or President of the United States. In his role as shaper of strategy and manager of expectations, the POTUS must act as a classic “prince” in the Machiavelli mold.

This role also involves double-dealing with the populace, in terms of appearing to meet unreasonable demands (such as overwhelming focus on the war on terrorism) while actually focusing on more critical things (behind-the-scenes issues too nuanced or complicated to explain).

To safeguard America’s interests, Friedman endorses what one might call an enlightened amorality – doing what is necessary for the sake of the greater good. Friedman argues for a middle ground between the idealists and the realists, pointing out unworkable flaws at both extremes. The idealists are ill-equipped to function in the real world, while the realists find themselves lost without a guiding moral compass. Ruthless execution in commitment to moral principle is the solution Friedman endorses.

It is easy to see how many people, Americans and non-Americans alike, will be offended by this book. Some will resent the broad brush strokes Friedman uses. Others will resent the hard-nosed subordination of idealistic principles, or strongly disagree with certain controversial forecasts.

But in many ways this book is more valuable as a high level thinking exercise than a blueprint for world events. It is useful to understand, if only in abstract, the various drivers that shape international relations – many of them deliberately unspoken.

Within the text, Friedman makes many provocative assertions. For example:

• Increased global interdependence via free trade can actually increase, rather than decrease, the danger of war.

• Osama Bin Laden’s goal in attacking the U.S. was to encourage local overthrow of Middle Eastern governments (by demonstrating that seemingly invulnerable power structures are actually weak).

• Iran calculatingly embraced a “North Korea” strategy of appearing crazy and unstable for greater advantage at the negotiation table.

• It will be in America’s best interests (from a balance of power standpoint) to back away from Israel – and strike up an uneasy strategic partnership with Iran.

• The European Union was formed out of necessity as a counterbalance to the consolidated power of America and the USSR.

• Poland will be a regional linchpin, especially in terms of counterbalancing a Germany-Russia linkage.

• The U.S. will need a nurturing relationship with China to contain a growing power imbalance with Japan (rather than the other way round).

Again, the most helpful thing about “The Next Decade” is not necessarily the accuracy of the fault lines prtrayed, but the illumination of critical thinking as applied by geopolitical strategists in today’s world.

As a trader with a global macro focus, my biggest criticism – and the reason the book only gets four stars – is because of the short shrift given to the causes and consequences of the global financial crisis.

In his chapter on the financial crisis, Friedman tips his hand early by saying “there was nothing at all extraordinary about what happened in 2008.” (Really!) For the next few pages, the tendency to engage in sweeping generalities overlooks critical details that still shape the world situation today.

Friedman seems oblivious to the fact that the Federal Reserve, the banking system it serves, and Wall Street on the whole have their own internal geopolitics – a mix of influence, legacy and corruption that impacts the global economy greatly.

One is willing to give Friedman a partial pass in this area, as macroeconomics and monetary policy are not his chosen forte. Still, though, the weighting of various financial crisis variables seemed unacceptably light, given how money and finance could aggressively shape some potentially dramatic outcomes in the next few years. (Weimar Germany anyone? Panic of 1907?)

All in all, “The Next Decade” is a fast read (243 pages, written in plain English) that will certainly make you think, whether you whole-heartedly adopt Friedman’s view or disagree with every page. The book could prove an especially fruitful exercise for traders and investors seeking to hone their big picture skills, via the extra practice of connecting dots and putting puzzle pieces together.

Why Malaysia does Aussies’ dirty work for refugees? A Concern over pact on asylum!

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Diplomatically SpeakingBy Dennis Ignatius
 

The problem of asylum seekers is a serious one and Malaysia is right to cooperate with other nations to curb human trafficking. However, any cooperation should not be to our disadvantage.

Malaysia and Australia an-nounced last week that both countries had reached an agreement in principle that would allow asylum seekers arriving Australia by boat to be transferred to Malaysia for “processing.”

Prime Minister Julia Gillard said that the deal would send a clear message to asylum seekers that they “can be sent directly to Malaysia where they will be at the back of the queue.”

Malaysia, for its part, believes that the agreement would send a strong signal that our country should not be used as a transit point and that human trafficking is something that we do not condone.

The agreement is highly controversial in Australia which has been struggling to deal with an influx of boat people or “irregular maritime arrivals” (IMAs), as they are rather euphemistically labelled. In the past 16 months, some 150 boats carrying 7,426 IMAs mostly from Sri Lanka, Iraq and Afghanistan have reached Australia. Few would qualify as genuine refugees.

Australian law, with its emphasis on human rights, makes it extremely difficult and costly for illegals to be summarily deported once they become subject to the Australian judicial system.

Other western countries also face the same conundrum. Over the last two years, for example, several hundred boat people from Sri Lanka have managed to reach the west coast of Canada. Within months, all but a handful of them were released pending a review of their cases. No one is under any illusion that any of them will eventually be deported.

The legal system in Canada is such that even murder suspects cannot be deported if there is a possibility that they might be subject to torture or other cruel and inhuman treatment, including the death penalty.

One of the beneficiaries of this benevolence is a Malaysian murder suspect wanted by our police. Malaysia’s request for his extradition has been denied on the grounds that he might face the death penalty. He is presently pursuing the Cana-dian dream as a free man.

Australia is therefore seeking to interdict illegals before they arrive in Australian waters and detain them in offshore detention centres well beyond the reach of Australian law. The objective is to literally let them rot in such centres as a warning to other would-be asylum seekers. Some might argue that this is the moral equivalent of extraordinary rendition.

Australia has been desperately seeking to persuade a number of different countries, including Indonesia, Papua New Guinea and Timor Leste, to serve as regional detention centres for Australia bound asylum seekers. None, however, have agreed until now. The deal with Malaysia is, therefore, a breakthrough for Gillard’s policy of outsourcing Australia’s detention centres.

While off-shore detention centres might make perfect sense for Australia, what is less clear is how it would benefit Malaysia.

Malaysia already plays reluctant host to tens of thousands of illegal immigrants and refugees. It is a well-documented fact that they endure great hardship and abuse.

The fundamental problem is that Malaysia has steadfastly refused to accede to the UN Refugee Conven-tion. All refugees are treated as illegal immigrants and are subject to arrest, detention, punishment, and deportation. According to Amnesty International, more than 6,000 refugees are caned every year, while others have been trafficked to Thai gangs by corrupt local officials.

Given this situation, there should be genuine concerns as to the fate of those who are now going to be transferred from Australia. In an attempt to assuage public concern in Australia, our High Commissioner in Canberra has stated that the transferees would not be detained in Malaysia but would be allowed to “mingle” with the population at large.

What this “mingle” means is anybody’s guess, but one thing is certain: they will join the vast sea of suffering humanity that comprises Malaysia’s illegal population which is now estimated to number in excess of a million people.

There might even be questions about the legality of this whole exercise under Malaysian law. Will their refugee status be recognized by the Government? Will they be allowed to seek employment to support themselves? Will they be guaranteed safety from RELA harassment? How long will they be allowed to stay in Malaysia? What would happen to them if they are not accepted for resettlement in third countries?

Furthermore, there is a good possibility that rather than discouraging the use of Malaysia as a transit point it might well make us the principal holding area for would-be Australian asylum seekers. Do we want such a dubious distinction?

Clearly, unless Malaysia is prepared to radically alter its approach to illegal immigrants and refugees, we are headed for a right royal mess.

The problem of asylum seekers is indeed a serious one. Malaysia is right to cooperate with other countries to stymie the immoral work of people smugglers and human traffickers. As well, we certainly ought to take our obligations towards genuine refugees far more seriously than we now do.

Becoming a dumping ground for unwanted illegals or doing Australia’s dirty work, however, neither serves our interests nor does justice to asylum seekers.

The Government should seriously review this flawed initiative.

Rocking the refugee boat

Comment By Baradan Kuppusamy

The proposed Malaysia-Australia pact on asylum seekers is aimed at deterring people smuggling but the plan also has its detractors.

THE proposed Malaysia-Aus-tralia pact to tackle people smuggling, under which Malaysia will accept 800 asylum seekers caught entering Australia illegally by sea in return for Australia resettling 4,000 registered refugees living in Malaysia for over four years, is a path-breaking deal.

However, the political opposition in Australia and human rights advocates are slamming the plan as cruel and ineffective.

Australia wants to send 800 boat people to Malaysia for processing as part of a one-off deal, which the government hopes however will be a first step in developing a regional solution.

But human rights advocates said the plan would not stop thousands of asylum seekers from risking their lives on perilous boat journeys to Australia each year.

Others in Australia defended the proposal, saying it would act as a deterrent to people-smuggling in Asia.
Australia has long attracted people from poor and often war-ravaged countries hoping to start a new life, with more than 6,200 asylum seekers arriving in the country by boat last year.

Most are from Afghanistan, Sri Lanka, Iran and Iraq and they use either the coast of Malaysia or Indonesia as a starting point for a dangerous sea journey to Australia.

“This landmark agreement will help take away the product people smugglers are trying to sell – a ticket to Australia,” Australian Prime Minister Julia Gillard said in a statement.

“The key message this will deliver to people smugglers and those seeking to make the dangerous sea voyage to Australia is – do not get on that boat,” she said.

“Under this arrangement, if you arrive in Australian waters and are taken to Malaysia, you will go to the back of the queue,” she said.

Starting from the back of the queue in Malaysia is not what the refugees or asylum seekers want, especially the long delay that this involves.

In this way, Australia aims to curb the people smuggling syndicates that launch the boats crammed with people towards its coast.

Prime Minister Datuk Seri Najib Tun Razak said the agreement was beneficial to both countries and strongly signalled that Malaysia should not be used as a transit point.

Australia would fully fund the arrangement, a joint statement issued by both countries said, adding that the one-off pilot project aimed to “undermine the business model of transnational criminal syndicates, particularly in people smuggling and human trafficking in this region”.

Both countries will work closely with the United Nations High Commissioner for Refugees (UNHCR) and the International Organisation for Migration (IOM) to implement the arrangement, which would be finalised soon, it said.

Australia’s opposition has however slammed the deal as good for Malaysia but lousy for Australia with its opposition leader Tony Abbot saying that “this idea that they will take one and we will take five just risks Malaysia becoming the open back door to Australia”.

Since early 2010, Australia has intercepted more than 140 boats carrying asylum seekers while Malaysia has also caught dozens of people embarking on rickety and overcrowded boats to Australia.

The increasing number of boat arrivals has become a divisive issue in Australia, with the opposition demanding stricter laws to deter would-be illegal immigrants.

Speaking on the sidelines of a summit in Jakarta recently, Najib said the asylum seeker deal would be mutually beneficial to both Malaysia and Australia.

“It’s a big issue in Australia (and) it’s also useful for us because we will send a strong signal that Malaysia should not be used as a transit point and that human trafficking is something that we do not condone,” he said.

Human rights groups have however criticised the plan, complaining that Malaysia was not a signatory to the United Nations refugees’ convention, and claiming that refugees in its detention centres lived in squalid and overcrowded conditions.

But Najib has given an assurance that asylum seekers taken to Malaysia from Australia would be treated humanely.

“What is important is that the entire operation will be conducted under the auspices of UNHCR and the IOM as well,” he said.

Besides, Malaysia had given a clear undertaking that people would be treated with dignity and respect.
Nevertheless, Immigration Mini­ster Chris Bowen acknowledged that the new policy would be controversial.

“I expect protests. I expect legal challenges. I expect resistance,” he said. “(But) nobody should doubt our resolve to break the people smugglers’ business model.”

The Malaysian and Australian governments have asked senior officials to finalise a memorandum of understanding in the near future to set out detailed arrangements.

Saturday May 14, 2011

Concern over pact on asylum

By SHAILA KOSHY koshy@thestar.com.my

KUALA LUMPUR: The Law Council of Australia is concerned with the implications of the recently announced agreement between its government and Malaysia to exchange asylum seekers for refugees.
Its president Alexander Ward said the council “does not agree the trade of asylum seekers for refugees is an appropriate solution to this substantial issue.”

“The council has significant concerns in relation to how this agreement will be managed and how the human rights of asylum seekers and refugees will be protected,” he said in a statement yesterday.

Headlined “Law Council concerned over Australian-Malaysian Asylum Seeker Agree-ment”, the council's statement was posted on its website www.lawcouncil.asn.au.

It noted that Malaysia was not a party to the United Nations Convention relating to the Status of Refugees, a convention to which Australia was a party and therefore obligated by its protocols.

“For Australia to enter into an agreement with a country that is not party to the Convention raises significant concerns regarding the treatment of asylum seekers who are sent to Malaysia,” said Ward.
“Previous concerns have been expressed about the treatment of illegal immigrants in Malaysia.”

While few details have been released about the agreement, the council said it had noted the statement by the Malaysian Bar president, Lim Chee Wee, on May 9 calling for the two governments not to proceed given “the legal situation and conditions that asylum seekers and refugees and their families in Malaysia are degrading, demeaning and dehumanising, and wholly unacceptable to any civilised society”.

The council added that it would closely review the details of the agreement when they are released by the Australian government.

What’s wrong with the international monetary system?

WHAT ARE WE TO DO By TAN SRI LIN SEE-YAN

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President Johnson stated in 1968: “To the average citizen, the balance of payments, the strength of the US dollar, and the international monetary system are meaningless phrases. They seem to have little relevance to our daily lives. Yet, their consequences touch us all consumer and captain of industry, worker, farmer and financier.”

This is true when international financial arrangements are working well; and becomes even more evident when they are not. While not all would argue there is no life left in the international monetary system (IMS), almost all would agree the present system contains inherent contradictions which lead to frequent breakdowns.

Basic principles

Four basic principles underlie the IMS: (i) a country’s sovereign right to regulate internal demand to maintain stable conditions at home in terms of employment and domestic prices; (ii) free international movement of goods and capital and here, substantial progress has been made in meeting this goal; (iii) a system of mixed exchange rate regimes – from fixed exchange rate (eg China) to flexible exchange rate (eg US dollar, British pound and euro) to degrees of managed floats (eg yen and the ringgit); and (iv) a nation’s right to hold international reserves in the form of gold, US dollar and other major currencies. In addition, lines of credit are available from the IMF. The reserves available and potentially obtainable set a limit on the cumulative size of a country’s balance of payments (BOP) deficit, thus acting as a BOP constraint in domestic policy making. But there is no such corresponding limit for surplus nations. The system is asymmetrical; it “punishes” those in deficit and lets the surplus nations alone.

Most countries experience some trade-off between unemployment and price stability. As unemployment is lowered by policies to expand demand (as with the US stimulative packages), the higher is the price that has to be paid in rising inflation. The trade-off varies over time, and from country to country. The rationale behind this relationship centres on the tendency for money-wage increases to outstrip rises in productivity even under conditions of high unemployment. The current state of a jobless growth in the US with low inflation in the face of continuing high unutilised capacity shows no trade-off at this time. But as demand picks up and as growth picks up and unemployment trends down, inflation is bound to creep up.

G-20 finance ministers and central bank governors gather for a group photo during the IMF and World Bank spring meetings in Washington on April 15. — Reuters

What’s wrong?

First, there is the adjustment problem. The present IMS has no reliable mechanism to eliminate BOP dis-equilibrium (ie payments imbalances). This is fundamental. There are three possible ways of correcting a payments deficit: use of trade and capital controls; adjustment of exchange rate; and government policies working through internal changes in income and prices. All three go against the the principles underlying the system. So, when a country experiences a deficit, there is no assurance the deficit will be eliminated before its reserves are used up; or depending on the extent to which market forces are allowed to sufficiently depreciate the currency; or whether domestic policies are tightened enough to reduce demand.

Second, there is the problem of the exchange rate, which usually doesn’t react fast enough to correct imbalances. Destabilising capital flows exacerbate the problem. The IMS is also subject to massive (especially speculative) flows of funds which could complicate BOP adjustment. The flooding of cheap US dollar funds into emerging markets following QE2 (2nd phase of Fed’s quantitative easing) have led to capital controls and managed exchange rates limiting their appreciation. Of late, the size of speculative flows has become too large for even the larger emerging markets to cope. This is not the end. In the event QE2 exits, the impact of large capital withdrawals on the exchange rate can be just as destabilising.

Third, there is the problem of liquidity. The system has no arrangement to generate in an orderly and predictable way, increases in foreign reserves that are needed to meet demands of growing world trade. The creation of SDRs (Special Drawing Rights) in the IMF, as and when needed, is supposed to do the job; but in practice, increases in SDRs have been few and far between. By chance, the Fed’s recent expansionary program, including QE2, is now over-doing the job; indeed, these capital flows have become too large for orderly adjustments to take place.



Finally, there is the confidence problem. The system allows persistently large surplus nations to do virtually whatever they please in postponing real adjustment. Today, about two-thirds of global reserves is held in US dollar-denominated assets (especially Treasuries). China’s international reserves today amounted to about US$3.1 trillion, of which US$1.15 trillion is invested in US dollars. It has been estimated that Italy’s entire sovereign debt (principal plus interest until 2062) totalled US$3 trillion. In terms of oil, China’s reserves can buy 25 billion barrels of Brent crude, equivalent to 13 years of its net oil imports. Indeed, it could pay for the entire Nikkei 225 list of companies, with US$30bil in change. That’s how big China’s reserves are.

True, the Bretton Woods system had served the world economy reasonably well. In a sense, the system operated well in the 50s and 60s but was on borrowed time. The “tearless deficits” during this period left a legacy of a large and growing “overhang” of foreign dollar holdings, which frequently threatens a confidence crisis. Persistent US deficits had since led to a diminution in the quality of the US dollar in the eyes of most foreign holders.

Global payments imbalances require a co-ordinated global action to resolve. This is hard to come by. Of the four problem areas, I think the matter of speculative and exchange rate instability is serious. This involves two aspects: (a) threat imposed by the “overhang” of convertible claims against the reserve currencies (especially US dollar) where such claims are today touching 15% of global GDP (6% 10 years ago); and (b) the danger of private speculative runs against currencies under pressure, especially the greenback. They are inter-related. To top it all, the IMF practice of allowing nations to choose their own exchange rate regimes didn’t help the adjustment process. Fixed exchange rates operated uneasily alongside flexible exchange rates, including managed floats and permutations of these two major regimes, in the hope that somehow policies would be co-ordinated to converge and foster imbalances adjustment. Nothing like it will ever happen as each regime did its own thing to protect its national interest.

And so, until today, the four problems of adjustment, exchange rate, liquidity and confidence underlying the IMS persisted. One thing is clear: there is no political will to reform. The US, for which reform means the diminution of the dollar’s global role, is lukewarm. And Europe is distracted more than ever with protecting the status of the euro and the EU’s sovereign debt crisis. France, as chair of G-20, wants to find an IMS that more accurately reflects the new structure of the world economy. But the major emerging nations, especially the BRICS (Brazil, Russia, India, China & South Africa) want to move away from a virtual one-reserve regime to one based on multiple reserve currencies.

Are payments deficits good or bad?

For most, payments deficits are instinctively bad. But think about it. After all, the purpose of international trade is to obtain goods and services from abroad at less than can be produced (or not available) at home. Imports are the benefits of trade. A trade deficit means more goods and services are being received from abroad than are being given up. Surely that’s good from the deficit nation’s point of view. But this deficit has to be financed. So, the nation either loses reserves (uses savings) or borrows (living on credit), and this may prove uncomfortable as the deficit persists. In the end, the deficit country has to take corrective action, such as deflationary domestic policies (austerity measures), exchange controls, or devalue its currency. All of them conflict with one or more of its domestic economic goals. There is a cost to adjust.

The soft solution is to use reserves (“its function is to render exchange rate stability compatible with freedom for individual nations to pursue national economic goals”). While drawing down reserves or borrowing may reduce the conflict of objectives, it nevertheless increases the potential for future conflict.

That’s exactly what’s happening in the US. It has run persistent deficits for so long that its debt is now too high (close to 100% of GDP) and its liabilities to nations accumulating US dollar reserves (especially China and Japan) have grown so large that it can trigger off a confidence run on the greenback.

This has proved inconvenient at a time when the US continues to need expansionary policies to bring down its high unemployment. Surplus nations have the opposite problem since these surpluses are inflationary and reflect an inefficient utilisation of reserves in the form of involuntary foreign lending. It can be viewed as the mere hoarding of resources that might have enhanced future output and welfare if added on to domestic investments instead. To sum up, today’s mixed exchange rate regimes provide no mechanism for systematic and effective BOP adjustment that does not conflict with major goals of public policy.

IMS reform

Reform of the IMS is clearly needed. V. Lenin once said that “the surest way to destroy the capitalist system (is) to debauch its currency.” The IMS is at the heart of the world economy. When rules of the global monetary game are unclear, inadequate, some even obsolete, nations find it difficult to play; indeed, some may exploit them to their advantage.

This undermines the very fabric of the IMS. Some history. In 1944, Bretton Woods gave birth to the IMF and today’s US dollar-centred IMS. The Bretton Woods conference was dominated by two strong-willed economists, H.D.White (US) and J.M.Keynes (UK). The UK wanted a system in which global liquidity is regulated by a multilateral agency (IMF), while the US (for self-interest) preferred a US dollar-based system.

Because of its enormous political power, the US got its way. Keynes, for all his intellect and persuasiveness, failed to: (i) endow the IMF with the power to create a new global reserve unit as an alternative to the US dollar; and (ii) secure a global regime which forces surplus as well as deficit nations, and the issuer of the reserve currency as well as its users, to adjust. It’s a pity as Keynes’ failures haunt us to this day. Nations with chronic surpluses (Germany, China and Japan) and the US as dominant supplier of US dollar reserves, do not face the same pressures to adjust their imbalances as do deficit countries that are often bullied to do so.

In my view, what is needed is a tripolar IMS organised around the US dolar, euro and RMB (China’s yuan or renmimbi). Let’s face it, neither the euro nor the RMB are in any position today to challenge the US dollar. The world will be better off with a viable alternative to the US dollar. Their interplay forces on the reserve currencies a market discipline earlier and more consistently. This way, central banks seeking to accumulate reserves will have a choice, so that the US no longer has “so much rope with which to hang itself” (so says my friend Barry Eichengreen). Another view is to transform the IMF’s SDRs into an international reserve currency (IRC). The trouble is, the SDR is not market tradable. To be an effective IRC, the IMF will have to be accorded the role of a world central bank. This is unlikely; indeed, a non-starter, as it was in the Bretton Woods days.

At the recent G-20 finance ministers meeting in Paris, all central bankers acknowledged that global imbalances remain a critical problem, and that a solution will involve policy co-ordination. Yet, each played down its own role. Until a solution is found, the “accumulation of foreign exchange reserves is a powerful instrument of self-insurance.” There is no political will to reform only the will to congregate and obfuscate. In the Bretton Woods days, the might of the US called the day. Today, it’s nobody’s call. What a pity.

Former banker, Dr Lin is a Harvard educated economist and a British Chartered Scientist who now spends time writing, teaching & promoting the public interest. Feedback is most welcome; email: starbizweek@thestar.com.my