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Over the last three decades, several East Asian economies have grown by leaps and bounds. The success of their export-led growth model is regarded, and copied, by many emerging economies as a sure path to achieve high-income status. But with impressive growth came worsening inequality both in personal income and functional income distribution.

This paper looks at the export-led growth model of five East Asian economies – China (Peoples Republic of), Korea (Republic of), Taiwan (Province of China), Malaysia and Thailand – and identifies the global forces and national policies that led to rising inequality and falling wage share. Export-led growth has been one way to counteract falling domestic consumption and aggregate demand. However, inequality can constrain further grow as export markets, faced with strong global economic headwinds, falter. Some countries turn to domestic debt–led personal consumption to pick up the slack. This is unsustainable. If wage share of GDP has been falling and inequality rising, countries will not be able to depend on domestic market to drive growth unless they also restructure their distributive and redistributive regimes.

Click below for full PDF:

GLOBALIZATION, EXPORT-LED GROWTH AND INEQUALITY: THE EAST ASIAN STORY

In this recent article from The Edge Malaysia Dr. Lim Mah-Hui explains how unfettered capitalism can be seen to have actually worsened inequality in Asia and around the world, and discusses some of the ways that inequality can be seen in quantitative macroeconomic patterns and how these phenomena translate into economic instability and the general worsening of society.

The Edge – “Rising inequality a global challenge”

From a recent article in Oxford Analytica

“Since the first announcement in May 2013 by Federal US Reserve Chairman Ben Bernanke that the Fed might scale back or ‘taper’ its asset purchase programme if economic conditions improved, the world’s bond and stock markets plunged. According to EPFR Global, investors withdrew an estimated 25 billion dollars from emerging bond markets…”

Full Document:

Southeast Asian Property Market Carries Growing Risks

 Address to the Full Council Meeting of MPPP

October 25, 2013

Bicycling As One Component, within a Comprehensive Transport Plan, to Solving Traffic Congestion

Selamat pagi dan selamat sejahtera. Dato’ YDP Patahiyah, Ir Ang Aing Thye, Pengarah2 dan Ketua2 Jabatan, Ahli2 Majlis, Para Wartawan, tuan2 dan puan2. Saya harap membahas tentang “Baisikal, sebagai salah satu pengangkutan alternatif untuk mengurankan kesesakan trafik”. Saya minta izin memberi pembentangan dalam Bahasa Inggeris

There are 3 hot issues facing Penang. I call them the 3 Cs – Condos, Cars, Crime representing housing, traffic congestion and crime problems.

The fundamental source of our transport and traffic problem stems from the fact there are too many cars on the road. There will never be enough roads built to accommodate the 10,000 vehicles added every month in Penang. It is well known in transportation studies that the supply of more roads just creates the demand for their usage. The solution lies in better public transport, alternative forms of transportation, and most importantly controlling the use of vehicles. Just building more roads does not solve the problem. Yet this is where I see most of our resources are directed at.

Today, I will just touch on one alternative form of transportation – the bicycle. It is one component of the comprehensive master transport plan in Penang. In human history, the bicycle is the most efficient and cost effective mode of transportation ever invented for moving within a radius of 20 km. Just reflect on these statistics. A car weighs about 1.5 tons and carries one person weighing 70 kg most of the time, i.e. only 15% of its weight; a bicycle weighs 20 kg and can carry 10x or 1000% of its weight.

A bicycle takes up minimum road space; it can go anywhere and does not cause traffic jam. All it needs is a 3-foot lane. Remember the Japanese army conquered Malaya not on armoured tanks but on bicycles. And the Vietnamese beat the French at Dien Bien Phu using bicycles.

A bicycle does not emit any pollution while a car spews tons of CO2 that cause global warming and climate change. Worldwide emission from vehicles is responsible for over 20% of total CO2 emission.

Many cities in the world now have woken to this fact and the more progressive cities are actively promoting bicycling as a form of transport in the cities. The two most progressive cities in the world in this regard are Copenhagen and Amsterdam. Even Singapore is now drafting a comprehensive plan for making bicycle one alternative form of transportation (see Anil Netto’s blog). Penang has taken some baby steps but much more needs to be done.

Copenhagen had its first ten-year bicycle policy from 2002-2012 which made cycling a priority in its city plan. It had 10 KPIs that included – length of bike network, coherence of network, bike modal share of road use, targets for reducing accidents, comfort, speed etc. It had a budget of RM250 million. Bicycle modal share, i.e., percentage of people using bicycle as form of transport within the city, rose from 20% to 50% by 2010. For the larger metropolitan Copenhagen with population of 1.2 million, 21% people use bicycles daily in 2011. The city is now into its second 10-year bicycle plan (2012-2025) which targets 4 core areas – city life, safety, comfort and speed.

People complain that the weather in Malaysia is too hot for cycling. But in Copenhagen the weather is too cold for cycling. The winter average temperature is 32 F i.e. freezing temperature. In Penang, we must plant more trees in the city to provide shade for cyclists and pedestrians. This reduces the temperature by at least 10 degree F.

Georgetown is very suitable for promoting bicycling as an alternative form of transport because it is small only 47 sq mile (i.e. 7 mile by 7 mile) and flat. One can easily cycle within the city limit in 20 minutes. Imagine how traffic will be reduced if more people just cycle around the city during lunchtime instead of driving.

Penang has taken some steps to promote bicycling but mainly for weekend recreation. We now seriously need to promote cycling as one alternative form of transportation for work and commuting. MPPP can be a pioneer in this effort.

The following steps (not exhaustive) should be taken:

  • Provide dedicated bicycle lanes to be painted and reflective road studs laid on the roads to improve safety for these users.
  • Plant more trees to provide shade
  • Provide proper parking space for bicycles
  • MPPP work with private entrepreneurs to start bike-renting and/or bike-sharing schemes
  • We must start to draw up a bicycle strategy, policy and plan and this must be integrated into town planning. It should be coherent, not piece-meal and ad hoc. It must be bottom-up and not just top-down, i.e., the bicyclists must be intimately involved in the planning.   The plan must include a budget.

Lastly, I believe in the concept of leading by example. The mayors of London and few other cities use bicycle as a form of transportation. I propose that our leaders at least occasionally cycle to meetings. This will be a major psychological boost for bicycling and provide an example for the public to follow – to show that it’s cool to bike.

Thank you.

Address to the Full Council Meeting of MPPP
December 19 2012
By Dr Lim Mah Hui

Making Information Accessible to the Public

Selamat pagi and selamat sejahtera. Dato YDP Patahiyah, Pengarah2 dan Ketua2 Jabatan, Ahli2 Majlis, Para wartan, tuan2 dan puan2. Saya harap membincang tentang menyediakan maklumat kepada publik. Saya minta izin untuk memberi pembentangan dalam bahasa Inggeris.

The state and local governments of Penang pride themselves to practice CAT, competence, accountability and transparency. There has been improvement in this regard compared to the previous government, but there is more room for improvement.

Let me give an example. There is at present close to RM 50 million of arrears in assessment and rentals owed to MPPP as of October 2012. This represents one fifth of our budget and a big drain on our resources. This information is of public interest and the public should know how the Council plans to recover this money. I was informed that the Consumer Association of Penang wrote in to Council for this information in 2010 but was pushed around by the Valuation and Finance Departments and was told such data was not available. CAP had to complain to the Biro Pengaduan Awam in the Prime Ministers Department in Putrajaya who then wrote to Council for the information. It took more than a year for Council to provide the information to CAP who was subsequently notified the data is also on the Council’s website.

Other areas that the Council should make information available on its website are:

Its audited budget and its current budget. This should be updated as the last one shown in the website was for the unaudited budget for 2009.

All major housing and commercial projects that have been submitted for approval and the stages of the approval process. The proposed plans of such projects should be made available to the public.

All traffic impact and environmental impact reports of major projects.

The recent report of the arborist regarding trees relocation along Udini Road junction.

The names and contacts of the solid waste disposal contractors and ticket collection contractors. We should encourage the public to monitor their performance and to actively call in regarding complaints or compliments.

We should adopt a positive attitude of sharing more information with our ratepayers.

Thank you.

Speech at Penang Forum 5
Penang – August 4, 2012.

I will begin by referring to two recent and important publications on the direction of Penang as a livable city.

First, is the State government’s Penang Blueprint published by PI and the second, Cities, People and the Economy: A study on Positioning Penang by Khazanah and the World Bank

What is a liveable city (p. 135 of Blue Print)
“Although there is no internationally recognized definition of liveable cities, these can be defined in broad terms as:

• People centered with emphasis on well-being of their residents
• Strengthening of community relationship
• Increasing civic engagement and building environment facilitating human interactions
• Need for well-functioning public realm for meetings and encounters
• Public places must be appropriately human scaled
• Livable cities characterized by short travelling distances achieved with
• Pedestrian network, bicycle networks, efficient transport system

To continue reading this speech, please download the PDF version here >PENANG Forum 5

For more information regarding this Penang Forum, please visit their website at http://www.penangforum.net

The following is a speech made by Dr. Lim Mah-Hui on behalf of the South Centre at a Seminar on the 18th meeting of Afreximbank Advisory Group on Trade and Export Development in Africa, High-level Roundtable 1– Can Africa learn from China?, in Beijing on July 13. The seminar was held in conjunction with the 19th General Meeting of Shareholders of African Export-Import Bank.
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The South Centre is thus very pleased to be invited here to take part in a meeting on this important topic — the relationship and cooperation between Africa and China.
China is a huge country that has great potential to take its rightful place in the world and Africa is an emerging world player after many years on the sideline.
What can Africa learn from China’s great leap into the international world economy and how can China assist Africa takes achieve its goals?
We are living in interesting and perilous times. The Chinese word for crisis is made up of two characters – danger and opportunities. Times of danger also offer opportunities to those who are able to use them to their advantage. The international economy is in its worst crisis since the Great Depression. There could be a break-up of the Euro zone with momentous consequences for the world economy; and the U.S. economy is limping along with high level of unemployment five years after the great financial meltdown. Growth in these two largest economies is below 2% at best. On the other hand, the Asian economies, particularly China, though affected are better off. Growth is forecasted to be about 8% for China and 5.8% for Africa in 2012.
Why has China been able to maintain such stellar economic performance over the last two decades? To me, the key lies in its ability to combine the positive elements of a state economy and a market economy. While a rigid and centrally planned economy of the Soviet type is unsuitable for a complex modern economy, the free-for-all market fundamentalist economy that was touted as the end of history is discredited by the present global economic and financial crisis.
I see two mega-trends or issues for the 21st century. The first is the relationship between the state and market and what is the right mix between the two; the second, related to the first, is the contest between labor and capital for the fruits of growth and its social and political consequences. On both these issues, the experience of China’s development offers valuable insights.
China’s spectacular economic growth took off after Deng Xiaoping introduced market reforms. One of the most important experiments he started in the late 1970s was the establishment of Special Economic Zones (SEZ) in the southern coastal region of China that had a rich history of entrepreneurship. In 1992 after he made a historic visit to the southern region again, he declared the SEZs to be a success and he pushed for expansion of market economy to the whole country. In the same year he appointed Zhu Ronji to head the powerful state planning committee and later also as governor of China’s central bank. Zhu took the best of state planning and market reforms to drive the economy forward.
Fortunately, he rejected the Washington Consensus and the shock therapy model that was foisted on E astern European countries after their breakaway from the USSR. He implemented his famous 16 macro-economic policies that combined capitalist fiscal and monetary policies with outright state planning and administrative controls. He was not wedded to a rigid ideology. To everyone’s surprise it worked. He brought down inflation to 1% but maintained growth at 9% by 1998 that continued for the next two decades.
China introduced market reforms, but they did not abandon state planning and controls. His theory can be termed as “managed marketization”. He cleaned up the banking system, reformed state owned enterprises to become more responsive to market forces, kept a tight control over capital flows, managed China’s foreign exchange rate, encouraged high savings rate, provided incentives for selected foreign direct investments, and drove a hard bargain for technology transfer. In short, instead of succumbing to neo-liberal market fundamentalism, China combined elements of state and market economy.
This is perhaps the most important lesson that China offers to countries that are looking for alternatives to neo-liberalism.
The great financial crisis of 2007-09 called into question market fundamentalism. The trickle-down theory of market fundamentalism has not worked. While it has generated growth, some of which are financially fictitious and unsustainable, it exacerbated inequality, unemployment and poverty. However, rather than taking corner solutions of either market fundamentalism or total state control, we should engage in theory and in practice to find the right mix between the two, realizing that there is NO SINGLE MODEL for all societies. There is a role for both market and state forces; and they should be harnessed and regulated to achieve sustainable development from an ecological, social and economic viewpoint.
This is not to suggest that China’s growth is without problems. There are three pillars to development – growth, distribution and sustainability. China combining state and market forces has produced super-charged growth over the last two decades. But she has not adequately addressed the issues of distribution and sustainability. This is best captured by Premier Wen Jiabao’s remarks after the National People Congress in March 15 2007. He said that although China has experienced steady and fast growth, she cannot remain complacent. He continued that China’s growth is “unsteady, unbalanced, uncoordinated and unsustainable”. How China will address the last two pillars is crucial not only for China but for the rest of the world.
In the recently concluded Rio Plus 20 summit in Brazil, all countries agreed to intensify the implementation of sustainable development, which incorporates the three dimensions of economic growth; social development, social inclusion and social equity; and environmental protection. All three have to be integrated in an appropriate model of development in the future. Of course each country and each region is free to choose how to do this. But both China and Africa have to reconsider their development strategy to take social distribution of benefits, and environmental sustainability into account, when planning economic growth.
Next, I will sketch briefly the areas that China can cooperate with and assist in Africa’s development.
Over the past two decades, China’s economic relation with Africa has grown significantly in terms of trade, investments, and official aid. However, most of these have been concentrated in the extractive industry and the provision of infrastructure related to this sector. There have undoubtedly been gains for African countries from this expansion of export earnings due to increased commodity demand and prices. The assistance provided by China for infrastructure development has also been favourably commented upon.
However, while the resource rich African countries have benefitted from the commodity boom generated by China, there have also been concerns raised that in many countries there has not been enough diversification of the economies beyond commodities, especially into manufacturing, for example by value addition through more processing of the commodities and manufactures based on the commodities. Also, there have been concerns about the environmental and distributional consequences of the extractive sector. It would be useful for African countries to examine more deeply these issues of economic diversification, and social and environmental issues, so that sustainable and equitable benefits can be derived from future commodity production.
Going forward, more emphasis should be placed on developing the manufacturing capabilities of the African countries be it the forward and backward linkages of extractive industries, agriculture, manufacturing for exports, as well as small scale manufacturing industry. Some Chinese firms have set up export manufacturing platforms in the textile and apparel industry in East Africa to take advantage of trade preferential status given by the US and EU countries to Africa.
Another area that China can assist is to assist African countries to build up their capacity in the pharmaceutical drug industry. Africa like other developing regions urgently require access to affordable medicines, not only for HIV-AIDS and malaria, but also for a wide range of diseases and this need will increase in the future. China has increasingly efficient drug companies that have the potential to develop and produce more medicines in the future. It would be useful to consider setting up joint ventures between Chinese and African companies. This is especially because African countries that are LDCs enjoy exemption from implementing the TRIPS agreement with respect to patents in medicines until 2016, and this exemption may also be extended after 2016.   Through such joint ventures, African companies may seek to gain technology transfer from Chinese companies, while the joint venture companies may enjoy exemption from patents, thus facilitating their ability to produce generic medicines and to export them to other African countries.
Special Economic Zones have been a major catalyst for growth in China. In 2009, China announced the setting up of 7 Special Economic Zones in several African countries. This is an important experiment to build manufacturing capability, but whether this success can be replicated in Africa depends of the presence of enabling local conditions such as good infrastructure and institutional governance.
China has introduced bilateral local currency swaps with important trading partners in Asia and Latin America recently. The same could be done with African countries to generate greater trading and investment opportunities.
Finally the present global financial and economic crisis gives China an opportunity to consolidate its relationship with Africa. It is clear that there is no political will at the international level to institute any meaningful changes to the international financial architecture. Hence, the next best solution is to look for regional support and solutions. The alternative of promoting regional cooperation and groupings and a multi-polar world instead of nationalism or a single super power world should be further developed. Asia is in the process of doing it. Likewise Africa and Latin America are doing it. Continued assistance by China to Africa will serve China’s long-term strategic and political interests.
To view other articles in SouthViews, please click here.
For more information, please contact Vicente Paolo Yu of the South Centre: Email yu@southcentre.org, or telephone +41 22 791 80 50.

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