Friday, March 27, 2015

Singapore - a success story all right, but at a price

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The city-state's phenomenal prosperity and stability owe as much to the vision of Lee Kuan Yew as to the repressive tools by which government has maintained public order

I expect this unfortunate, self-lacerating habit of ours to go into full swing in the wake of the passing of Singapore's tenacious and deeply feared founding leader - Lee Kuan Yew. Lee, who presided over the affairs of the smallest country in Asean for over three decades, was a contemporary of three other strongmen - Suharto of Indonesia, Mahathir Mohamad of Malaysia, and Marcos of the Philippines.

By far, only Lee's legacy has endured. It is difficult to argue with success. Under Lee's autocratic leadership, Singapore transformed itself from an insignificant trading port in the southern tip of the Malaysian peninsula into one of the top financial centres of the global economy. More than 7,000 multinational corporations have offices in Singapore, most of these serving as their main Asian headquarters.

From being a transshipment point for finished products and raw materials, the country has become a dynamic centre for manufacturing. Unlike Indonesia, it has no oil of its own. But it is now the biggest oil-refining centre in the region, and a major producer of oil rigs. Singapore remains a port, indeed, it is one of the world's five busiest ports, and an important hub for ship repairs. Its gigantic airport is the gateway to Southeast Asia, Australia and New Zealand.

Chronically fearful of sliding back, Singapore continually reinvents itself. To boost its tourist industry, it abandoned a long-standing ethical policy against gambling by inviting the world's largest casino operators to set up shop in their city-state. Very quietly, it has also moved into a new sector of the modern economy - the life sciences - bringing in top scientists from all over the world to work at its cutting-edge laboratories.

For some years now, it has been aggressively recruiting the top high-school graduates from the region, luring them with full scholarships, and offering them employment and permanent residency when they graduate. Close to a 100,000 foreign students study in Singapore, making it Asia's most important educational centre.

Singapore's public bureaucracy can compete with the best-run private corporations in governance and compensation. A strict meritocratic system governs recruitment into the civil service. The best and the brightest are plucked out from the graduating classes of every year, and invited to work in government. They are sent to the best schools abroad for further training. When they finish, they must come home.

At one point in their apprenticeship, they are taken on an exposure tour of the region, where they familiarise themselves with the economic environment, the politics, and social realities of Southeast Asia. Not surprisingly, Singapore's top civil servants are among the highest paid in the world.

The whole country is a technocrat's dream laboratory. In Singapore, planners are at work daily, formulating new programmes and policies, anticipating issues and complaints, and preparing the responses, long before the public has even thought of them. This view of governance as a planning exercise keeps the role of politics to a bare minimum. Virtually the only time it is allowed is during elections.

Protest is a highly regulated activity; the designated place for this endangered activity is the "Speakers' Corner". Beyond it, you need a police permit for a public gathering of five or more people.

If you make allegations of corruption or wrongdoing against any government official, you could be held liable for libel. The late Lee Kuan Yew was known to file such cases against his critics, and to doggedly pursue them until the offending party pays a financially ruinous fine. If you criticise government programmes and policies, you will be challenged to offer a better alternative; otherwise, you will be browbeaten into publicly admitting the foolishness of your views.

Yet, Singapore's past is far from that of a society of sheep. Indeed, this tiny nation has had a glorious tradition of political dissent. Lee himself belonged to a generation of courageous Singaporeans who spoke sharply and fought fiercely against the British who ruled them until 1959.

Most of those who joined Lee at the founding of the People's Action Party were socialists. They were progressive intellectuals, young professionals and labour organisers who passionately loved their country, but did not always agree on how it should be run once it was free.

One of Lee's implacable critics was Lim Hock Siew, a cofounder of the People's Action Party. On Februay 2, 1963, he and a 100 other activists were rounded up in a crackdown against suspected communists.

Jailed under the infamous Internal Security Act (ISA), which gave the executive the power to indefinitely detain anyone considered a threat to national security, Lim spent the next 20 years in prison, refusing an early offer of release in exchange for publicly acknowledging his faults.

The dreaded ISA remains in force until now, a grim reminder to Singaporeans and the rest of the world that this city-state's phenomenal prosperity and stability owe as much to the vision of Lee Kuan Yew as to the repressive tools by which the government has maintained public order.
(extract selected from Randy David’s article)

Fiji’s ‘coup babies’ just starting to log on to democracy


This generation has not lived in a period of genuine democracy, free from militarism, chiefly patronage, and racially-based and biased politics. According to preliminary figures, 47 per cent of the voting population was within the ages of 18–35. Out this group, 75 per cent voted for the first time.

The majority of these first-time voters were young people whose political conscience had been formed during an intense period of military rule from 2006–2014. For over half a decade, these young minds have been exposed to only one set of political views: those of the military. This suppression was assisted by stringent enforcement of media censorship, which effectively strangled investigative and critical journalism in the country. The mangling of free thought in Fiji has resulted in a mediocre and passive media.

Expanding political resistance to the military began within blog sites, before moving to social media. In this new online space, dissenting voices, otherwise suppressed in a restricted media environment, were able to re-emerge.

Other reasons for the rise of social media in Fiji include the ability to communicate instantaneously and directly, especially with a growing youth population, increasing internet accessibility with expanding information and communications technology devices, and more competitive costs. Most political parties extended their campaigns onto social media, concentrating more of their efforts on Facebook.

Facebook has become Fiji’s most use22d social network, with 260,000 accounts as of January 2014. 70 per cent of Fijian Facebook users are aged 18–35. Young people are engaging actively on Facebook and are the key drivers in the expanding digital space of social media. Since opposing views tend to be expressed on social media, harnessing the youth vote online could potentially have resisted the military-led and -backed establishment.

But, as the election result showed, this was not the case. The military-backed and -led political party, Fijifirst, won 60 per cent of the vote in the 2014 national elections. Youth participation on social media wasn’t enough to resist the established military powers. Why was this?

Facebook penetration is still only 24 per cent of the total estimated population of Fiji, which means that a substantial number of young people still have yet to access Facebook. Those that do access Facebook, do not always actively engage in critical discussion online.

Despite social media’s expanding clout, traditional media still dominates in terms of penetration and audience size. Since traditional media is compelled to favour the ruling military, the government’s narrative therefore overwhelms any alternative social media narrative. As a result, critical youth engagement, which encompasses constructive criticism is still subject to the confines of traditional media and ultimately to the agenda of those who control and constrain it.

Fijifirst also appeared to be the most cognisant of the campaign advantages provided by social media. Fijifirst already had a head-start due to their domination of traditional media. The party then enlisted the services of a local communications company to administer the party’s social media campaign. They tailored and choreographed the political party’s image, successfully attracting an extensive online audience. The party’s social media savvy can be seen through their use of specific techniques, such as multiple pages, publicly staged images, and concise statuses and captions. As a result, the Fijifirst party recorded almost 63 per cent of the total Facebook audience.

It is highly likely that a substantial amount of Fijifirst’s engaged audience were young people. Through both traditional and social media channels, young people were effectively swayed to support the establishment.

Social media engagement in Fiji is rising dramatically even beyond the elections, as more and more young people now engage in Facebook group discussions. With more internet service providers in the country, internet access is expanding rapidly. This is coupled with a surge in hand-held devices with social media capabilities. With a new parliament in place, social media activity is increasing, particularly within opposition groups. The participation and engagement of young people with Fiji’s new parliament through social media has just begun.

Jope Tarai is a graduate student and researcher at the University of the South Pacific, Fiji.


Islamic Radicalism: Its Wahhabi Roots and Current Representation


Radicalism, in various forms, has made significant inroads in several countries of Central Asia and in the Caucasus - in particular the three countries that share the Ferghana Valley, namely Uzbekistan, Kyrgyzstan and Tajikstan, Chechnya, and the Russian Republic of Daghestan. Known as fundamentalism or "Wahhabism," it poses a direct challenge to the ideal vision of a state that the newly founded nations of the region have embraced. In addition, the broader ideology name "Wahhabism" represents a serious challenge to the theology and practice of the mainstream Sunni Islam to which most of these nations' populations adhere. Should this radicalized understanding of Islam continue to spread unchecked, radical interpretations could threaten social stability at the local, national, and regional levels and create serious geopolitical dangers to which neighboring powers, as well as the US and Europe, would have to react.

Today, throughout the world, there has been a wave of radical movements, which sometimes turn militant, whose source can be traced to the Wahhabi movement. What is this movement and how did it spread throughout the Muslim world, and now the Western world? What are its ideological differences with traditional Islam and how are these differences influencing and supporting modern day radical movements? What can be done to diminish the power of these movements in vulnerable states such as those in Central Asia and the Caucasus?

Traditional Islam views religion as a pact between man and God and therefore the domain of spirituality. In this belief, there can be no compulsion or force used in religion. From the time of the Prophet Muhammad (s), peace and tolerance were practiced between different religious groups, with respect to distinctions in belief. Contrary to this, the "Wahhabi" ideology is built on the concept of political enforcement of religious beliefs, thus permitting no differences in faith whatsoever. In "Wahhabi" belief, faith is not necessarily an option; it is sometimes mandated by force.

Origins of the Wahhabi Movement

The origins of nearly all of the 20th century's Islamic extremist movements lie in a new Islamic theology and ideology developed in the 18th and 19th centuries in tribal areas of the eastern Arabian Peninsula. The source of this new stream of thought was a Muslim scholar named Muhammad ibn Abd-al Wahhab, hence the name "Wahhabism."

The premise of this new, narrow ideology was to reject traditional scholars, scholarship and practices under the guise of "reviving the true tenets of Islam" and protecting the concept of monotheism. Ibn Abd al-Wahhab's brand of "purification" of Islam consisted of prohibiting many traditionally accepted acts of worship, reverence of the person of the Prophet Muhammad, peace be upon him and the pious saints, and burning books containing traditional prayers, interpretations of law and commentaries on the Qur'an and Hadith. He encouraged his followers to interpret the holy books for themselves and to act on their interpretations in light of their own understanding, regardless of their understanding of fundamental principles or lack thereof. Anyone who did not profess to this new ideology was considered outside of the realm of Islam - an apostate, disbeliever or idolater, thus making the shedding of their blood and confiscation of their wealth permitted. In this way, he was able to secure a significant following whose legacy continues in one form or another until today.

Over time, Ibn Wahhab's ideas spread far and wide, being debated, called into question and sometimes supported. A struggle ensued between the staunchly orthodox Ottoman Empire and the "Wahhabi" tribes. The Wahhabis were put down until the eventual dismantling of the Ottoman Empire in the 1920s and the dissolution of its influence. Finding a new opportunity among the tribes, Wahhabis were able to reinstate their beliefs and assert their influence on Muslims of the Peninsula.

Gradually from 1920 until today, they were very successful in establishing an "accepted" new ideology in Islam whose essential characteristic is extreme views and interpretations, as contrasted with traditional Sunni Islam. Coming under the guise of reform of the religion, the movement gathered momentum in the last three decades with support from a number of wealthy individuals. As it has grown, the movement mutated and splintered, with the eventual outcome that some groups went to the extreme in radicalization of their beliefs.

Influence of Wahhabism Today

The Wahhabi ideology is antagonistic to non-Muslims and to traditional practices including seeking intercession by means of the pious saints in Islam, accepted by traditional Sunni Islam for over 1400 years. By rejecting any form of hierarchy such as that followed by traditional Sunni schools, the Wahhabis rejected traditional rulings on a wide range of subjects, invalidated the four schools of thought and its accepted interpretations of law, as well as issued declarations of unbelief for those who disagreed.

While this new ideology prohibited many traditional Islamic forms of worship, its followers did not become overtly militant until recently. Now "Wahhabi" followers have taken up an increasingly confrontational standpoint attempting to impose their ideology in many regions around the world. The Wahhabi mentality asserts that Islam may be reformed by means of the sword. Thus the movement has manifested itself as armed insurrections throughout the world, especially where governments are weak and unable to resist aggression effectively.

Unfortunately, this narrow ideology has appeared and flourished in Islam, but not because of Islam. Previously, Islam was always presented in a peaceful, tolerant manner. The Prophet Muhammad (s) used to present his neighbors or friends that were not Muslim with gifts and flowers, never holding a sword against them, or ever instigating a struggle or a fight. There are many events in Muslim history where the Prophet made peace treaties with non-Muslims. Islam, despite its rapid spread in its first three centuries, never imposed its beliefs on anyone, as attested by the scrolls of history.

Under this modern ideological extremism, Islam's essential principle of tolerance has been abolished. The Holy Qur'an mentions repeatedly that there is no compulsion in religion and that all people are free to practice any religion they like. Those of the Wahhabi ideology selectively apply verses of the Holy Qur'an to support their ideology, whose basis is to impose its beliefs upon everyone, Muslim and non-Muslim alike.

Theory in Practice: Declaration of War against Governments

Just as the spread of Wahhabism flourished outside of the Arabian Peninsula after the fall of the Ottoman Empire, it now poses a significant challenge to the region of the former Soviet Union. While these countries were "protected" from all types of religious influence under Soviet rule, the fall of the Soviet Empire and the vacuum of religious teaching made this area fertile ground for the spread of this new ideology.

Wahhabi belief provides the religious and ideological underpinnings to enable militant movements to take up arms against existing governments if they deem the need arises. Though these movements are ideological in nature, they easily resort to armed struggle. While most governments are able to reconcile and reach compromises -- as one may easily compromise with a moderate Muslim -- extremists reject any kind of compromise, insisting on their way and no other. They have tunnel vision, believing in a duty and message to deliver.

The extremists who have turned militant declare war against anyone with viewpoints contrary to theirs; thus, declaration of war against a government is commonplace. In Egypt, they oppose their government. Similarly in Jordan, they oppose their government. In Syria, Pakistan, Algeria, and many other countries "Wahhabi-minded" groups oppose their governments as they have begun to do in the Caucasus and Central Asia. The approach of these movements is to infiltrate mosques, Islamic teaching centers, and charitable organizations from where they indoctrinate religiously oriented people with their ideas and methods. They forcefully impose their views on weak societies, in hopes of conquering one and establishing a base for further control. They justify their militant acts and illegal means of financing their cause by claiming to wage a "jihad" for the preservation of Islam.

Today, we have many examples of this phenomenon, whether it is individuals declaring war on America, or vigilante groups coming against their governments in Central Asia. This contradicts the explicit teaching of the Prophet Muhammad, not to oppose a ruler as long as he does not prevent the performance of prayer, even if he commits injustice. Thus, those of the Wahhabi mentality use Islam when it suits them and likewise, contravene it at their convenience.

Using Islam to Justify Prohibited Actions

The term "Islamic" is grossly abused by extremists who attribute to the religion all kinds of rulings, which in fact contradict the essence of the religion in spirit and in particulars. Among them is the fatwa that justifies the use of terror tactics such as suicide bombings of civilians and attacks against non-combatants in marketplaces, schools, offices, and places of worship. Similarly they have issued a fatwa legitimizing the use of drug money to finance their campaign, despite the fact that narcotics are strictly forbidden in Islam.

Islamic extremists have ruled permissible and recommended the production of drugs and their sale on the streets of Muslim and non-Muslim nations. With such illicit monies, these extremist groups finance the development of their global network, purchase weapons and supplies, and build their front organizations, which represent them under the guise of Islamic activism.

Containing the Spread and Growth of Extremism

It is very well known that certain networks have flourished in many countries throughout the world. Small but well-financed militant movements arise, coming against their government and the common people, instigating conflict. The danger lies when an outside government supports such extremist movements under the false impression that this constitutes preserving religious freedom.

In Uzbekistan, for example, rather than legitimize these vigilante groups as part of the religious fabric of the society, there should be system of checks to insure the government is not fostering the growth and spread of radical movements, whose stated goal is elimination of the legitimate government by any means, including armed struggle. There are known groups who are not permitted in many of the Middle Eastern countries, thus, it is unreasonable to single out Uzbekistan as being required to recognize these same groups as a legitimate religious party. There must be some type of code of ethics devised to differentiate legitimate religious groups from those who use the threat of force to impose their ideology.

The problem of extremism exists not only in far distant countries, but in the US as well. It can be dealt with more effectively if the West better understands Islam and builds bridges with moderate Muslim individuals and nations. To support "religious freedom" abroad without having knowledge of whom one is supporting (i.e., an extremist movement) is an irrational misuse of the laws protecting the religious rights of individuals.

To understand such movements, one must understand the scope of Islam and the psychology of Muslims, since what we are seeing today is an ideological movement turned militant. It is important to note that the Wahhabi ideology itself is extreme in its interpretation and can turn militant over time. Why is this form of thinking attractive to some Muslims? What are the political agendas behind "religious" movements? How are holy books used to justify illegal actions performed in the name of the religion? Education is a key factor in containing and countering the spread of this type of extremism and its associated movements.

It would be highly beneficial if a think tank or research institute were to be formed in order that government officials, researchers, and media understand Islam on a deeper level, rather than making rash generalizations based on superficial understandings. To truly understand the world Islamist extremist movement, one must realize it is not just a social phenomenon as so many theorists mistakenly assume, but is a full-fledged ideological war of words and weapons alike.


Thursday, March 26, 2015

Indonesia's ethnic-Chinese companies create opening for China

JAKARTA -- The ethnic-Chinese-led companies that play an outsize role in Indonesian business are also a force behind the country's economic shift toward China.

     Their fortunes rising on healthy domestic demand, these companies are seeking outlets abroad. For China, they represent an inviting base for political and economic bridge-building with Indonesia.

     Official statistics put the number of ethnic Chinese in Indonesia at 2.8 million in 2010, or 1.2% of the population. But the actual figure ranges from 5 million to 10 million, an association of ethnic Chinese says.

     Moreover, they make up nearly 40 of Indonesia's 50 richest people, as ranked by the U.S. magazine Forbes. Around 40% of the 50 most valuable companies on the Jakarta stock exchange are run by ethnic Chinese. On the business side, Indonesia and China are already compatible.

     The two countries suspended diplomatic relations during the Cold War years of 1967 to 1990. Ethnic-Chinese Indonesian companies turned to Japan, partnering with the likes of automakers Toyota and Suzuki. Some 95% of new vehicles sold in Indonesia bear Japanese brands.

     Mainland Chinese companies have started sidling up to Southeast Asia's biggest economy. Alibaba Group, the e-commerce giant, said last month it is stepping into the Indonesian market in a tie-up with Alfa Group, a big ethnic-Chinese retailer. Internet services heavyweight Tencent has joined forces with Indonesia's biggest media company, which is headed by an ethnic-Chinese entrepreneur.

     China surpassed Japan in bilateral trade with Indonesia in 2013 and is catching up in foreign direct investment. Inflows of Chinese investment roughly tripled last year. Moreover, the Chinese are showing enthusiasm for the rural infrastructure projects that President Joko Widodo's government is seeking. While 90% of Japanese investment goes into the capital region here, 60% of Chinese inflows go the rest of Indonesia. SADACHIKA WATANABE

China is facing risk of deflation, and the destructive cycle of declining prices is starting to spread all over the Asia-Pacific region.

All of Asia feeling China's 'new normal'

China is facing risk of deflation, and the destructive cycle of declining prices is starting to spread all over the Asia-Pacific region.

     After the bankruptcy of Lehman Brothers Holdings in 2008, China introduced bold pump-priming measures and rapidly increased its imports of raw materials. Its neighbors rode through the economic crisis by boosting exports to China. However, since last year, slowing demand in China has been putting these countries on the verge of deflation. In China, excessive supplies have held down prices of industrial products, and imports have been falling sharply due to prolonged production adjustments.

     Speaking at the opening of the annual National People's Congress on March 5, Chinese Premier Li Keqiang reported on the government's activities and acknowledged slowing growth by stating that the Chinese economy entered a "new normal." He also said the country would aim to expand its economy in real terms by about 7% in 2015. The new target is lower than the actual growth of 7.7% in 2013 and 7.4% in 2014, underscoring that the era of China's double-digit growth is now a thing of the past. China's imports by value inched up by 0.4% on the year in 2014, marking the lowest growth since 2010. The downtrend continued in 2015, with the January and February figures down by 19.9% and 20.5% on the year, respectively. What China calls the new normal is thus starting to have serious effects on the economies of its neighbors.

     The town of Sepang, in the central Malaysian state of Selangor, is surrounded by palm plantations. Drive on any street in the area for half an hour, and you still find yourself amid palm plantations with trees more than 5 meters tall. When this writer visited a palm farm recently, I saw workers picking up fallen branches as if they had nothing else to do. Loading of fruit onto trucks had been completed in about five minutes. "I've been doing this job for more than 10 years, but right now is the worst," said one worker. He had earned 2,500 ringgit ($678) a month until three years ago, but his income has been declining steadily and now he makes about 1,000 ringgit a month. Palm oil is one of Malaysia's main industries, the backbone of its economy, but it has been hit hard by significant cooling of demand.

     Kelvin Lee is a palm fruit wholesaler in the Sepang area who makes his living buying up palm fruit from small and midsize farms and selling it to a local refinery. He used to own seven trucks but sold two of them last year because of slumping demand. Two years ago, he had no trouble selling 3,000 tons of fruit per month, but the amount he handled continued to shrink until it was only 600 tons in January. "I have heard exports are not going strong, and now I can't even go for a drink," he said.

     Palm oil is drawing attention as a low-cost vegetable oil and production had been expanding in Malaysia and Indonesia. One driving force behind the increased output was exports to China and other emerging economies. However, demand in China, their largest customer, has been falling sharply. In 2014, Malaysia exported 2.84 million tons of palm oil to China, roughly three-quarters of the 3.7 million tons the previous year. In Malaysia's crude palm oil futures market, a global pricing benchmark for palm oil, the price sank below 2,000 ringgit per ton in 2014, less than half the level in 2011. In contrast, the planted area of palm trees totaled 5.4 million hectares at the end of 2014, an increase of 400,000 hectares compared with the end of 2011. Hoping to cash in on strong demand in China, farmers increased their capacity, but the move backfired.

     A car dealership in Kota Kinabalu, a city in eastern Malaysia that relies heavily on the palm oil industry, saw its sales volume of cars fall by about 20% from a year earlier. The manager of the dealership said, "The business will be tough again this year unless palm oil demand makes a recovery."

    About halfway into 2014, Malaysia's exports to China started shifting from year-on-year growth to year-on-year decline. Its overall exports in January were down by 0.6% on the year but its exports to China appear to have fallen much more sharply, by more than 20%. The more heavily countries rely on exports for their economic growth and the higher the percentage of their exports to China, the greater the effects they experience when those exports drop sharply. Some Asian countries, such as South Korea, Malaysia and Thailand, are more vulnerable than others, but Australia is also in dire straits, since more than 30% of its exports are to China.

Dark times for coal

Queensland, in eastern Australia, is known for its production of coal. Moranbah is a large mining town north of Brisbane, the capital of Queensland, but in recent years it has lost its vigor due to sluggish exports of coal to China. At the Drovers Rest Motel, a two-story wooden hotel in the center of the town, the lights in the guest rooms are rarely turned on now, as there are so few guests. Evan Hartley, who has run the place for 14 years, said business has been so slow lately that he was waiting for the hotel to be seized by the bank.

     When the Drovers Rest Motel opened in the early 2000s, Moranbah was a bustling town, thriving on the brisk exports of natural resources to China and other countries. High-wage workers were eager to spend their money there, which boosted housing prices -- up to 1 million Australian dollars ($763,009 at current rates) for a typical home. But the situation has changed completely since the Chinese economy began to sputter in 2013. Many companies have frozen hiring, halting the rise in wages. Anne Baker, the mayor of the Isaac Regional Council, which oversees the region including Moranbah, expressed a sense of urgency, stating that many areas are now faced with an unemployment problem. Consumer spending driven by exports to China has lost steam quickly and housing prices have plunged to the A$200,000 to A$300,000 range.

     Deflationary pressure is not limited to natural resources and products. If corporate earnings deteriorate due to a sharp drop in exports to China, companies have no choice but to reduce hiring and wages. In that case, consumer spending will shrink further and prices of consumer goods will decline as well. South Korea, whose economy is propelled by the manufacturing industry, is now on the verge of falling into this vicious circle. Its exports to China, including Hong Kong, slid by 0.6% on the year to $172.6 billion in 2014.

Chinese Premier Li Keqiang attends a press conference following the close of the National People's Congress in Beijing on March 15. (Photo by Takaki Kashiwabara)

     China is South Korea's biggest trading partner, with its exports to China accounting for about 30% of the total by value. Because of sluggish demand in China, prices of South Korean products took a tumble, and as a result major petrochemical companies LG Chem and Lotte Chemical reported double-digit year-on-year declines in their operating profits for the year ended December 2014. South Korea's leading shipbuilder, Hyundai Heavy Industries, posted its largest operating loss in the year through December 2014, and is fighting a legal battle with its labor union, which is demanding wage increases.

     South Korean companies have been working hard to squeeze out a profit by adjusting their workforce, and consequently the number of nonpermanent employees in the country topped the 6 million mark for the first time in August last year. It means that more than 30% of all workers in South Korea are now nonpermanent employees, and this is why consumers are keeping a tight hold on their purse strings. Lotte Department Store, a major South Korean retailer, is shifting its focus to the opening of outlet malls that sell off its remaining inventory from the opening of new department stores because high-end products, which department stores were good at selling, are not faring well now. In 2014, it opened three stores but all of them are outlet malls. South Korea's consumer price index went up by 0.5% year on year in February, marking the lowest level of growth since the Asian currency crisis in the late 1990s.

Ripple effect

The downward pressure on prices that started with weakening demand in China is spreading quickly around the Asia-Pacific region. China's wholesale price index for February was down by 4.8% on the year, with the size of the fall growing for the seventh straight month. The country's consumer price index has not sunk below the previous year's level yet but has been hovering at an increase of about 1%. Meanwhile, Malaysia's producer price index for January declined by 4.8% from a year before, and Thailand's consumer price index has fallen for the second consecutive month since the start of 2015. If nothing is done about the current situation, disinflation -- a slowing in the rate of increase of general price levels -- might turn into full-blown deflation, with persistent declines in general prices.

     To head off deflation, central banks in the Asia-Pacific region have started to take action. On March 11, the Bank of Thailand cut its benchmark interest rate, the one-day bond repurchase rate, by a quarter of a percentage point to 1.75%. On March 12, the Bank of Korea, South Korea's central bank, reduced its key interest rate by a quarter of a percentage point to an all-time low of 1.75%. The Reserve Bank of Australia made a similar move earlier this year, reducing its key interest rate by 25 basis points to a record low of 2.25% on Feb. 3. However, it would be extremely difficult to stimulate domestic demand and push up prices with these key interest rate cuts alone, as Japan's nearly two-decade struggle with deflation clearly demonstrates.

     After the collapse of Lehman Brothers, many countries experienced economic downturns, but robust demand in China eased the pain somewhat. But now, there is no sign of an emerging economy that could take over the role of China and create strong demand. Countries in the Asia-Pacific region therefore need to find a way to generate demand by themselves, without relying on China.

     "Southeast Asia has remained dependent primarily on export demand and lacked potential to shift to a domestic demand-driven economy," noted Takamoto Suzuki, a senior economist and expert on economic relations between China and Southeast Asia at Marubeni Research Institute. "The region has also depended on foreign companies for innovation and waited for money to pour in from outside. Exporters in the region used to depend on the U.S. and are now reliant on China. They are paying the price for such tendencies."

     India might be the first alternative to come to mind, but the government there may be limited in its ability to act, despite Prime Minister Narendra Modi's promises of stronger public investment. "People may have become overly optimistic about such a prospect," Suzuki said. "India is a democracy and does not have the power to steamroll investment projects as China, which is controlled by the Communist Party, did by spending 4 trillion yuan ($639 billion) to stimulate its economy."

     Resorting to makeshift solutions, such as economic stimulus measures that could snowball budget deficits and consumer debt, would only create new risks. In other words, there is no silver bullet to solving the problem at hand. What the countries in the Asia-Pacific region could do is continue to make small but steady efforts to create demand while clearing away obstacles in trade and investments and making sure not to discourage economic activities in any way. If they become caught up in a deflationary spiral as Japan has experienced, there will be no more economic miracles happening in Asia for a long time.

     Countries in the region also face political risks from deflationary pressure as prices of natural resources such as palm oil and natural rubber head downward. In Thailand, farmers, who constitute half of the population, have played a central role in political unrest. In Indonesia, coal mine workers are protesting layoffs. The downsizing of the coal mining workforce is sure to continue amid the dullness of coal exports in Indonesia, and it could be a trigger of social unrest.

WATARU YOSHIDA, Nikkei staff writerNikkei staff writers Kaori Takahashi, Koichi Kato, Yuji Kuronuma and Yosuke Sato contributed to the stories.

Myanmar's military preserves its autonomy, for now

Myanmar's constitution, under which the current administration of President Thein Sein was created in 2011, has all the characteristics of a modern republic, but regime opponents see the continued autonomy of the army -- and its political role -- as anomalies. The result has been faltering efforts to amend the constitution, many of them aimed at reducing the role of the military before elections are held later this year.

Aung San Suu Kyi speaks in front of a statue of her late father, Gen. Aung San, in his hometown of Natmauk, on Feb. 13. It was the 100th anniversary of his birth. © Reuters

     Despite the army's still-pervasive power, the speed and thoroughness of the transition from military authoritarian rule to a system with most, if not all, the features expected of a "democratic" system have surprised many observers and analysts. They see the transformation in the country as being driven by forces outside the historical experience and understanding of the armed forces leadership. A closer reading of the country's politics since 1988 reveals that the army had a long-term plan to achieve the kind of reforms we are seeing today, laid out far in advance but discounted by most outside observers and political opponents of the military.

Protector of the state

It is in the history of the armed forces and their role in protecting the state from threats to its internal security, territorial integrity and external security that the basis of the transformation can be found. The army, with its roots in the Burma Independence Army founded under Japanese auspices in 1941, sees itself as the protector of the state. Arguing that past interventions were essential to resolve political crises that threatened unity and territorial integrity, the military now sees its role as that of a "balancer," or stabilizing force, in the face of an unknown future. Ensuring the continued viability of the armed forces and the security of its leadership is an ongoing concern for the officer corps.

     The 20 years between the 1990 general election, won by the opposition National League for Democracy led by Aung San Suu Kyi but subsequently annulled by the junta, and the 2010 general election, boycotted by the NLD and won by the military-backed Union Solidarity and Development Party, were spent by the armed forces creating the conditions that enabled the transition from military to constitutional rule.

     The process was organized like a military campaign, with the element of surprise and perpetuation of control the uppermost priorities. The army did a very poor job of explaining its intentions. This made it difficult for the military's opponents, both at home and abroad, to understand its strategy and tactics, especially in the light of its reputation for brutality -- notably in putting down anti-government demonstrations in 1988.

     The army's view of post-independence history is that, on several occasions, it has had to intervene to re-establish political order -- the 1948-52 civil war, the 1958-60 caretaker government, the 1962 coup amid the Cold War and separatist pressures, and the 1988 bankruptcy of the economy. As a result, it argues that it has a duty to continue to serve as a "balance" to ensure the continued stability and effectiveness of the government.

     Until Myanmar's military is assured that the new republican order can function in a manner that does not threaten territorial integrity, security and stability, it will insist on maintaining its autonomous role while developing its capacity to function as a modern professional armed force.

     The army leadership is thus closely scrutinizing the evolving political scene. Only when it feels confident that future elections will result in stable governments that can manage the country's fissiparous politics will it start to relinquish control. The current chorus of demands by students, monks, minority religious leaders, indigenous groups and international nongovernmental organizations for the government to resolve longstanding problems -- as well as the recurrence of armed conflict with ethnic groups seeking autonomy on Myanmar's northern border -- create the kinds of political chaos that previous elected governments attempted to appease. The demands were unacceptable to the army and the result was not peace.

Plausible vs. impossible promises

Given how Myanmar's military leadership understands its role in history, the formation of an acceptable government after the 2015 elections and ongoing efforts to reach a political settlement with numerous ethnic insurgent groups will determine the speed and degree to which the army allows its autonomous role to be undermined or terminated.

     Political party leaders in the brief period of democracy, after the end of British colonial rule in 1948, promised the impossible. In the runup to the 2015 elections, they will have to walk a fine line between what the army will accept and plausible promises to a public that has, perhaps, excessively high expectations.

     If they promise the impossible, the army leadership may decide that the political order is not yet mature enough to allow it to lessen its grip. Only the army can end its own role in Myanmar's politics, and that decision is dependent on its perception of the civilian political elite's ability to manage the future.


Robert Taylor is a visiting professorial research fellow at the Institute of Southeast Asian Studies in Singapore and author of the forthcoming "General Ne Win: A Political Biography."


German Chancellor Merkel's three errors in Japan

When she visited Japan for the first time in seven years earlier this month, German Chancellor Angela Merkel discussed with Prime Minister Shinzo Abe the importance of working for reconciliation with former enemies and questioned his policy of restarting nuclear power plants. After Merkel abruptly brought up the important but sensitive issues, the atmosphere at the talks became noticeably chillier.

"Comfort women"

Following her talk with Abe, the German chancellor said at a press conference on March 9, "I didn't come to Japan to offer any advice, but I can talk about what Germany has been doing" to restore its relations with its former wartime enemies. In fact, she told Abe how Germany has apologized for its wartime past. It was clear that she wanted Japan to mend its ties with China and South Korea, which have been severely damaged because of war-related issues.

     Merkel brought up the issue of the war because she felt compelled by the opinions of many Germans, who think the Japanese government has become quite right-wing. While reporting on Merkel's visit to Japan, Germany's public broadcaster ARD called the government of Abe "right-wing conservative." It sounded as if  the broadcaster equated the Japanese government with a right-wing party that helped the Nazis take power before World War II. In other words, the German media is taking quite a harsh view of Abe's government.

     On the other hand, many Germans are genuinely concerned about the rifts between this country and China and South Korea. Many German politicians worry about the risk of military confrontation in East Asia. Merkel appears to have talked about the war because she genuinely wants to see East Asia remain at peace.

     When the Abe government was formed, however, Germany was more interested in Abenomics, or a set of new economic policy measures implemented by the Japanese government, as it feared that Japan's colossal government deficit might create turmoil in the world's financial markets. When Abe and Merkel met in April last year in Berlin, they talked about the results of Abenomics and hardly discussed the wartime history.

     That began to change last autumn when Japan's row with South Korea took a turn for the worse over so-called wartime comfort women. At the same time, Japan's Asahi Shimbun newspaper came under a tidal wave of criticism from the ruling Liberal Democratic Party and the Japanese public for running stories about comfort women based on a false account of an "eyewitness" who said a large number of those women were summarily rounded up to be forced into prostitution. This fueled concerns in Germany that the freedom of the press is at risk in Japan.

     This prompted Germany to take up the issue of comfort women. Speaking at the Asahi Shimbun's auditorium, Merkel said, "I think [a government] needs to listen to various opinions." Then the German media picked up on this and reported on "Merkel issuing a warning toward Japan."

     Merkel is perceived by the Germans to have done well in Japan on the grounds that she confronted the Abe government, which has fallen out with neighboring countries and is trying to restart nuclear power stations despite public opposition.

     Meanwhile, the bilateral relations appear to have become less friendly. I first went to Germany in the 1970s as a child and in the nearly 40 years since have traveled there regularly. Never before have I experienced a chillier attitude toward Japan. When I was flying back to Berlin on a business trip on March 11, a German university lecturer, whom I had never met, sat next to me on our plane and disparaged Japan. "I feel nauseated when I think of Japan because it's a male-dominated country where the status of women is low," the lecturer said. It is natural to take such a view if you are exposed almost every day to media criticism of Japan.

     While both Japan and Germany do not do much to communicate with each other, the Germans have grown highly critical of the Abe government's fiscal, financial and energy policies as well as its stance on Japan's wartime history. Many other northern European countries share the opinions aired in Germany. Indeed, it is also true that there are many things Japan can learn from Germany, looking at the way Berlin pushes ahead with structural reform to revitalize the economy, improves the government finances and faces up to war crimes the country committed in the past. 

Still, three errors

Merkel's visit to Japan was more conducive to criticism about Japan than friendship. She discussed with Japanese experts her country's policy to end nuclear power generation. She talked about the wartime history when she visited The Asahi Shimbun and met with Abe. She also talked with Katsuya Okada, president of the Democratic Party of Japan, the largest opposition party. Her schedule in Japan was filled with events that could help foment criticism of Japan. Friendship was promoted only when she visited a factory run by a German company and shook hands with the Japanese humanoid robot Asimo.

     Her second mistake was to air direct opinions at a time when Japan and Germany are not on a solidly friendly footing. She probably thought she would make no waves as long as she did not directly criticize Japan in mentioning the wartime past. She probably thought she was politely criticizing Japan without naming and shaming it. So the German government was dismayed when Japan reacted so sensitively to her remarks.

     Her schedule in Japan also showed that she did not understand the sentiment of ordinary Japanese. Britain's Prince William, who visited Japan in late February and early March, traveled to the country's northeastern region, which was ravaged by the earthquake and tsunami four years ago, and warmed the hearts of many Japanese. But Merkel only visited places in and around Tokyo on March 9 and 10 and left Japan a day before March 11, the anniversary of the disaster. A German government official said her schedule was too tight. But if she had delayed her departure by half a day and prayed for the victims, she would have left a better impression in Japan.

Distinct differences

Her third and bigest mistake was to bring up the issue of history, although she was not well prepared for its outcome.

     After meeting with Merkel, DPJ president Okada said that Merkel had urged Japan to resolve the comfort women issue and said that it is important that Japan and South Korea reconcile because the two countries share the same values. The German government began to fear that this remark might embroil Germany in a row between foreign countries, and a German government spokesman denied that Merkel had made the statement. Germany must have known that if it brought up the wartime past, it could be exposed to vitriolic spats between the ruling Japanese political parties and the opposition, as well as among Japan, China and South Korea. Germany was not ready for that conflict.

     Abe is going to travel to Germany in June to attend a Group of Seven summit, after which Merkel will visit Japan again to take part in next year's G-7 summit. Whether the two will discuss the war on these occasions could weigh on relations between Japan and Germany.

     One good thing came out of Merkel's visit to Japan, however. It has become clear how Germany and Japan differ with each other. Until now, Japanese were not aware of these differences. Japan should listen to what Germany has to say, and Germany should do more to improve its diplomatic skills in dealing with Japan. The two countries should promote mutual understanding and compromise to forge closer bilateral ties. SHOGO AKAGAWA, Nikkei staff writer