Heterodox view on free trade

Thanks to Vasiliki to pointing out work of Professor Ha-Joon Chang.

http://www.prospectmagazine.co.uk/magazine/ha-joon-chang-23-things-capitalism-review/#.UzTd6GfNtLM: He points out that Britain, the first country to industrialise, as well as the US, Germany and Japan, all became leading industrial powers by various forms of protectionism—only to adopt and preach free trade when they were confident that their carefully nurtured industries could prevail over foreign competition. “Most of the rich countries did not use such policies when they were developing countries themselves, while these policies have slowed down growth and increased income inequality in the developing countries in the last three decades. Few countries have become rich through free-trade, free-market policies and few ever will.”... The idea that small entrepreneurs are the source of modern economic growth is another neoliberal myth of the 1990s that Chang rebuts. Poor countries have far more self-employed people than rich ones. “The collective ability to build and manage effective organizations and institutions is now far more important than the drives or even the talents of a nation’s individual members in determining its prosperity.”.... Chang hopes to return a field dominated until recently by the narrow schools of New Classicism and New -Keynesianism to its origins in historically informed and context-sensitive “political economy.” But that may be too much to hope for. The great depression of the 1930s was far more severe than the great recession of the present is likely to be, and yet the pre-Keynesian economics that failed both to anticipate and to ameliorate that depression not only survived the 1930s but -triumphed in the universities and policies of the last quarter of the 20th century. While the guild of academic economists may continue to ignore maverick economic thinkers like Chang, the future of the world economy may depend on whether the rest of us pay attention....

http://www.prospectmagazine.co.uk/magazine/ha-joon-chang-protectionism-free-trade/#.UzTd4WfNtLM: Moreover, the “1930s: never again” story assumes that protectionism is always bad. But this is not true either. Unlike in finance, where things can be speedily re-arranged, the real economy takes time to adjust. Producers must build new factories, and invest in new technologies. Workers must acquire new skills and find new jobs. When big adjustments are needed, temporary protectionism helps to create the breathing space for companies and workers to reinvent themselves.... There are other good reasons to consider limited measures to protect domestic economies. Textbook trade theory says that making countries more and more specialised is an unquestionable good. But this isn’t always true. Britain, for instance, probably over-specialised in finance over the last few decades, while neglecting manufacturing. The international division of labour should be balanced against the need for a broadly based economy, capable of protecting countries and their people against shocks to a particular industry. Voters in advanced countries, meanwhile, might well be willing to swap a little more job stability for slightly more expensive goods in their shops..... Such mild protectionism can be explicitly time limited. Indeed, evidence after the 1970s oil shocks shows that countries like Japan and Sweden that had specific and time-bound protectionism bounced back more quickly than others, like the US, where measures were hidden but more pervasive. The danger today is that we will pretend to believe in free trade, while practising protectionism by other names—just recall Peter Mandelson’s £2.5bn auto industry rescue: “not a bailout,” he said, but a “greening” initiative.... The reality is that free trade has never worked very well, especially for developing countries, but it is going to malfunction even more in the coming years. Rather than trying to nurse this ailing sacred cow back to health, we should slaughter it—and concentrate our energy on designing a new system of international trade that pragmatically mixes free trade and protectionism....

Khor Reports talk on palm oil industry of Indonesia and Malaysia

I am giving a talk to a group of senior executives from Europe. Outline of talk is shown in photo above. Morning of 27 March 2014, Penang.

Three papers in process and research schedule

Just to update readers that I have in process three papers for academic / think-tank publications.

a) I have just sent in to the editors at Kajian Malaysia on a special issue for GE13 on the political-economy of Felda. The final draft is in, tidying up queries requested by the reviewers and on few items missed in formatting.

b) To ISEAS, I submitted the draft of a paper on Malaysia stakeholder views on the Singapore-Johor integration policy (Iskandar Malaysia project).

c) Earlier, I had reviewed on a co-author paper led by Professor Terence Gomez that incorporates segments of my work on Malaysia-China investment ties.

Research and drafting continues on a paper on the frontier palm oil development in Malaysia-Indonesia as well as my book draft on the recent political-economy of palm oil. I also have a powerpoint to put together on the Malaysia-Indonesia palm oil sector and its key players.

Khor Yu Leng giving a seminar at Institute of China Studies, University of Malaya

07 March 2014 | Friday 

3.00 - 5.00 pm

Seminar Room

Institute of China Studies

Fifth Floor of Za'ba Library Building

University of Malaya

 

Abstract

China is Malaysia’s top trading partner but China’s FDI in Malaysia lags in relative terms. China and Malaysia have jointly established the Malaysia-China Kuantan Industrial Park (MCKIP) and Qinzhou Industrial Park (QIP) to further boost bilateral trade and investment. Investment promoters see Malaysia as a country for China to reach markets within country-of-origin rules; and the state of Pahang where the MCKIP is planned will likely be selected as the gateway for bringing investment and jobs into the Malaysia Eastern Corridor, which covers an economically lagging area on the peninsula. Sources indicate that the industrial park projects are linked to two significant land deals. The first may relate to the QIP land swap arrangement for land in the Binhai township. The second, at the MCKIP, is said to include the conversion of some state-controlled land for the use of the industrial park. Country data indicates a large imbalance in FDI flows with the broad conclusion that Malaysia OFDI flows to China exceeds the reverse by a factor of five to eight times or even more. However these statistics may still misrepresent the picture since many Malaysian tycoons use Hong Kong as a base for their investments into China. To begin to correct this imbalance, Malaysia will quickly need to draw in China OFDI equivalent at least to what it has received in recent years from Germany. Such a rapid transformation in Malaysia-China investment outcomes is unlikely without more significant investment drivers in place. The relatively small size of the MCKIP (just over a tenth of the size of its twin project in Qinzhou) is suggestive of a continued imbalance in Malaysia-China foreign investments.

 

About the speaker

Khor Yu Leng is a political economist and graduate of Oxford University and the London School of Economics. First working in the financial sector, she is now an independent analyst, working on customized research and qualitative analysis reports for global corporate clients. She is a specialist in market research, resource-based industries, frontier markets, sustainability and risk. Yu Leng was Visiting Research Fellow at the Institute of Southeast Asian Studies, Singapore for 2013. “ISEAS Perspective: The Significance of China-Malaysia Industrial Parks“ was issued 17 Jun 2013 and she is currently working on a co-author academic article on Malaysia-China investment ties. Yu Leng has been interviewed or cited by international media including the Financial Times, Bloomberg, Wall Street Journal, BBC News and Al Jazeera. 

 

ALL ARE WELCOME

*As the Institute of China Studies is located in a library building, seminar participants are advised not to bring in any briefcases or bags to avoid possible delay caused by the usual necessary library bag checks, or having to leave the bags or briefcases outside the library entrance. Please come in through the main entrance of the Za’ba Library. Also, please refrain from parking outside a parking bay to avoid having your vehicle clamped by campus security. (In case of serious parking problem, please call our office for assistance: 03-79565663, 03-79561695 or 03-79588173) Please do not hesitate to contact us for enquiries and to confirm your attendance.

Chapter in ISEAS Perspective Selections 2012-2013

My piece on Malaysia-China Industrial Parks is in book, "ISEAS Perspective Selections 2012-2013." I did a briefing on it at Parlimen Malaysia to PR MP and guests, a while back. Have been invited by researchers at Universiti Malaya to do same in early March.

Link to the article: http://khoryuleng.blogspot.com/2013/07/khor-yu-leng-for-iseas-perspectives.html

ISEAS Perspectives: The Tough Task of Narrowing Malaysia’s Fiscal Deficit by Khor Yu Leng

Here's is my review of key risks in Malaysia's fiscal situation and the likely problems in addressing them. These include concerns about patronage affecting the bond market.

You can find the report here: http://tinyurl.com/obze3e4 and of course please visit here for more: http://www.iseas.edu.sg/

As Visiting Research Fellow at ISEAS

I've been just over 9 months as Visiting Research Fellow at the Institute of Southeast Asian Studies, Singapore. 3 more months to go for my assignment there. My works list below.

Work done:

1. Struggle for Sustainability in the palm oil industry shows results - ISEAS Perspective. March 2013.

2. The Sabah-Sulu Crisis Threatens the Palm Oil Supply Chain - ISEAS Perspective. March 2013.

3. Malaysia-China Industrial parks briefing paper. April 2013.

4. Malaysia-China Industrial parks - ISEAS Perspective. May 2013.

5. Singapore-Johor Integration - policy and politics. Prelim review July 2013 (for Sijori Book).

6. Malaysia's Fiscal Titanic - for upcoming ISEAS Perspective. Draft dated Sept 2013 under review edit by ISEAS at present.



Work in progress:

1. Power and Politics of Palm Oil. Draft targeted end Nov 2013 (for ISEAS consideration)

2. Singapore-Johor integration policy and politics. Draft due Nov 2013 (for Sijori Book).

3. Palm Oil: developing the East Kalimantan frontier (due date, to be confirmed).


I also had a few media interviews resulting from the ISEAS position:
1. Don't expect problem to go away in next few months: Experts, The Straits Times, 27 April 2013
2. Oil palm a lucrative crop for Indonesia, Malaysia, The Straits Times, 26 June 2013
3. Infographic: From plantation to product, Palm oil companies are being blamed for the haze from land being cleared by burning
4. Hard work finding eco-palm oil goods, The Straits Times, 16 July 2013
5. Live interview for BBC News
(and missed a few spots with Channel News Asia)