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Saturday, May 21, 2011

“God’s Country: The New Zealand Factor”





 
Michael Tobias Green Conversations 

Aoraki/Mount Cook is the tallest mountain in N...
Image via Wikipedia

New Zealand may well be the most desirable tourist destination in the world. It is certainly among the most beautiful island nations on the planet, its biodiversity magnificent in every respect. New Zealand’s artistic and scientific communities are remarkable; the nation’s politics a model of true democracy in action. In fact, there are so many wonderful things to say about the country that my co-author Jane Gray Morrison and I were hesitant, in our newly-released Dancing Star Foundation book, God’s Country: The New Zealand Factor, to lavish too many superlatives on a country that might find it difficult to live up to our shared belief in, and love of, this particular nation, her people and her wildlife.

With just over 4 million human occupants, approximately 80 endemic bird species (including those sea birds which visit and breed there), three native bats and countless marine mammals, but no snakes or other predators in the normal sense (other than Man himself), New Zealand – for some 80 million years – has enjoyed relative tranquility.

Then things started to change. Settlers from England, Norway and elsewhere brought cows and sheep and dogs and (inadvertently) mice and rats. Possums were deliberately introduced in the early 1800s for the purposes of hunting and a fur trade (a tragically omnipresent fact today: possums kill native biodiversity). The result of this misstep in many decades past: conservation in New Zealand has meant, in many guises, killing: the killing of bio-invasives. Not just the “eradication” of possums, but the killing of three introduced members of the Mustelid family, namely, stoats, weasels, and ferrets, whose rapacious hunger for native birds (along with that similar hunger on the part of three species of rats, feral cats, dogs, and mice) has exerted horrific impacts upon native species who for millions of years had no concept of fear and are, today, sitting ducks.

This is where immuno-contraception for predators (that might necessitate genetically modified organisms) has become a major public and scientific debate as in few countries. Where human rights versus animal rights has taken on dimensions that countries like the United States can scarcely identify with, given the fact North American birds and other mammals co-evolved with native predators, whether coyote, bobcat, mountain lion, rattle snake or wolverine. Such creatures never existed in New Zealand. The country’s native birds, like the Kiwi, after whom the resident locals have nick-named themselves, never had to worry about being eaten and thus, in a few cases, gave up the need of flight, saving their energy, and becoming ground dwellers (Kiwi and Kakapo, for example, not to mention the numerous species of now extinct Moa as well as a giant penguin nearly the size of the equally giant penguin fossils found recently just South of Lima, Peru).



New Zealand has been called a “capital of extinctions” as a result of the human introduction of those aforementioned non-native mammalian predators. A pet dog once devastated an entire penguin rookery in a single evening on the South Island a few years ago. In addition, there are thousands of invasive plant species, like Darwin’s Barberry or Chilean Fireweed, in addition to non-native wasps that compete for tree sap with native parrots -the two sub-species called Kaka, or Nestor meridionalis.

New Zealand is unique in a myriad of ways, not just because parrots and penguins live side by side, but in the fact that much of her foreign exchange income comes from the sale of animals, shipped live or dead, as well as animal by-products like wool and dairy products. An inordinate amount of New Zealand land has been given over to pasturage for grazing farm animals, a percentage much higher than in the majority of all other nations.

For these, and countless other reasons, New Zealand is truly a template for the study of human nature and ecology. The country probably has more scientists, artists, intellectuals and environmentalists per square kilometer than any other political entity in the world. Her farmers are among the most hardworking, well-read, witty and generous of any. And her history is one that is inextricably tied to the arts, science and exploration. Mark Twain did stand-up comedy in Dunedin after going bankrupt in Connecticut; visits by Charles Darwin, Captain Cook and the great painter William Hodges, as well as (allegedly) Medieval Chinese mariners. Not to mention the original settlers, the glorious Maori and Maorori indigenous cultures.
New Zealand was also the first nation in the world to give women their rights back; to suggest that Antarctica be declared a World Park; and to make itself the first nuclear free nation.

New Zealanders who read of such superlatives will yawn, or exhibit knee-jerk reactions of one sort or another, as should be expected. They share something of a conspiratorial secret (the reason most Kiwi college students who explore the world upon graduation typically return to New Zealand: they know they are living in one of the best countries on earth). Indeed, for most of the world, this is a democracy that represents what a human paradise must look like.

Which is why my co-author, Jane Gray Morrison and I chose New Zealand as a fitting example of a test-case for what the country has exported by way of a welcoming (though somewhat debated) mantra, namely, “Clean, Green New Zealand.” Could it be true?

To find out more about the dialectics of this tourism slogan, and all of the “Middle Earth” glories that the “Lord of the Rings” locations made globally manifest, we suggest a visit to New Zealand. She can certainly use your tourist dollar revenues right now, especially in Christchurch, following one of the worst natural disasters in the nation’s history, nearly three months ago on February 22nd, Tuesday, at 12:51 pm, the 6.3 devastating earthquake.

Notwithstanding that tragedy, there is no better place to examine what a human paradise might, could, or should mean in the 21st century.

Copyright Michael Charles Tobias, 2011

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The ‘trilemma’ of capital controls




What Are We To Do By Tan Sri Lin See-Yan

MY last column examined principles underlying the international monetary system (IMS) as we know it today. I also explained why the IMS isn't working. Today, I want to dwell on one of these principles, namely, the free international movement of goods, services & capital. We have since come a long way in freeing the movement of goods and services.

As a result, currencies of many emerging nations are today readily convertible for current transactions of the balance of payments (BOP). Unfortunately, failure at the Doha Round to further liberalise trade is a setback. Convertibility on capital transactions remains an issue.

First, some history: in the intermediate years after WWII, controls on capital movements were common. Unlike today's controls, directed at slowing down massive inflows of capital, these post-war controls mainly aimed at slowing down outflows. After the UK lifted exchange controls under Margaret Thatcher in 1979, more governments have come to allow freer movement of money into and out of their economies.


Developed countries led by the US blame China’s policy for tightly controlling its currency value, driving “capital into economies with freer exchanges.

While increasing free capital flows can help spur economic growth by enabling more productive investment, the growing volume of inflows into emerging nations has raised concerns. Today, capital controls refer to taxes or other administrative measures meant to regulate those flows.

Exchange control directly violates one of the precepts upon which the IMS is predicated: the world economy relies primarily upon decentralised decision making by billions of individuals and businesses responding to market forces. Government, to be sure, is responsible for influencing these market forces consistent with national objectives, but always without attempting to direct and interfere with individual transactions.

The Bretton Woods accord set up the IMS in 1945 based on this principle and changes made over the years have kept faith with it. Of course, as a matter of practical expediency, in the transition to free capital movements, countries in (what IMF calls) fundamental BOP disequilibrium, that is, with persistent payment imbalances, could temporarily impose exchange controls (previously called Article XIV nations) to enable them to better adjust under IMF supervision.

The French connection

Ironically, it was French socialists who brought global financial liberalisation home to the IMF. According to Harvard's Rawi Abdelal, when capital flight forced socialist French President Mitterand to abort his programme in 1983, it set in motion developments that ultimately enshrined free capital movements as a global objective. And this started first in the European Union in late 1980s, then on to the Organisation for Economic Co-operation and Development (OECD) and eventually, at the IMF under French socialist CEO M.Camdessus (Governor, Bank of France under Mitterand). It was again a French socialist, recently resigned CEO Dominique Strauss-Kahn (now in a New York prison) who distanced the IMF from its long-standing tenet on free capital movements. Speaking in Asia in January 2011, he said: “Capital controls can also play a role, particularly where the surge in capital flows is expected to be temporary or where exchange rate over-shoot is a real danger As long as it's temporary, it may be the only way.”



The trilemma'

Capital will go where it finds the best returns. In the past year, it has been Asia and also Latin America. Recipients of large capital inflows have begun to fret about their impact and on how to “manage” them. Indeed, emerging markets states seek some measure of protection against the new flows of cheap and easy money generated in the US, Europe & Japan. The massive inflows (estimated by the IMF at over US$1 trillion in '11, against a high of US$1.3 trillion in '07) have raised the chances of trade and currency conflicts. A long list of emerging nations from Indonesia, Thailand, South Korea, Taiwan, Philippines, India China to Turkey to Chile, Mexico and Brazil have already imposed capital controls, motivated simply to curb “hot money” that threatens to distort their economies, drive up demand and exert undue pressure on their currencies, and pose dangers of asset bubbles.

In China, besides monetary moves, exporters are allowed to hold more US$ offshore a negative capital control to keep foreign monies out, rather than a loosening of capital controls. Malaysia this week announced more liberal capital measures to promote large investments abroad. In South Korea, a levy was imposed on foreign currency debt held by banks while in Brazil, the tax on capital inflows was tripled to 6%. Indonesia set a minimum one-month holding period for investors of its bonds and India imposed a capital gains tax on all stock trades.

Nations face an economic choice: often 2 out of 3 (trilemma): fixed exchange rate, freedom to set monetary policy and free flow of capital. Having all 3 is impossible; only any 2 of the 3. The US has long had free capital flows and the right to set monetary policy. So, it is forced to live with currency fluctuations. The same orthodoxy is imposed by IMF on the world. The case of Japan in the late 1980s (Plaza'86 and Louvre'87) is classic. However, the IMF faces problems imposing it on China which prefers to give up free flow of capital; it likes very much for China to be like the US.

Smoke but do not inhale'

Notwithstanding the blaring narrative about peaking in global growth, sovereign debt risks in Europe, fiscal austerity, and “unusually uncertain” outlook for the US economy, many emerging nations continue to be saddled with massive capital inflows, if left unchecked could make some of them self-destruct. While these factors are worrisome, fortunately many of them have built-up enough “fat”. Consider their massive foreign reserves totalling more than US$7 trillion, exceeding 10% of global GDP. These reserves will be used as emerging nations move gradually to adjust to face the structurally impaired consumer demand in the west. This reminds me of FT's Martin Wolf who observed that emerging markets “smoke but do not inhale” global capital. While emerging nations welcome capital inflows (smoke it), it is concerned about speculation, quick exit and reversals, and large net inflows (inhaling is bad for health). This is reflected in their preference to intervene in the forex markets and to recycle the monies (through current BOP accounts and capital flows) into foreign exchange reserves.

Preventing capital inflows from reaching the real economy has been their best insurance against the impact of rising currencies on competiveness, inflation and stroking domestic demand.

Conventional wisdom has it that a nation's reserves are adequate if they are (i) equivalent to 3 months' imports, and (ii) equal to or exceed short-term debt. Most emerging nations easily pass these rules of thumb. China's reserves (at US$3.15 trillion) far exceeded its short-term debt. The reserves to debt ratio of Russia, India and Brazil also points to large excesses. Saudi Arabia and Algeria have reserves that cover more than 2-years imports; Brazil, a year and India, 9-months. Their robust financial health augurs well for the future.

After successfully weathering one of the worst financial crises in history, growth in 2011 and 2012 will slacken saving less and spending more. This policy switch comes at a time when emerging nations recognise that future growth rests in their own hands, and not on the fortunes (or lack of it) of the much indebted west. Although forced to “smoke” massive inflows (including collateral smoke), they should heed Prof Stigliz's (Nobel laureate in economics 2001) advice: “Now that the IMF has blessed such interventions (exchange control) should be a key part of any system to ensure financial stability; resorting to them only as a last resort is a recipe for continued instability it is best if countries use a portfolio of them as management tools.”

Controls stir debate

In Hong Kong, at its 1997 annual meetings, the IMF tried to push deep into capital market liberalisation. The timing was bad as the East Asia crisis was just brewing. The crisis exploded soon enough in a region of high savings with little need for more capital inflows. The crisis showed that free and unfettered markets are “neither efficient nor stable” (Stigliz). Studies have shown that capital controls have helped small nations (e.g. Iceland) to manage. The far reaching surge of cheap and loose money from the US, Europe and Japan into emerging markets loomed so large that even finance ministers and central bank governors who are ideologically adverse to intervention, now believe they have no choice but do so. Hence, the change of stance at the IMF.

At its April meetings, IMF's “guidelines” on managing capital inflows was rebuffed by most emerging nations as an attempt to restrain them, rather than help. As a result, they were delayed for further study. The IMF's recent reversal of its long standing opposition to limits on free capital flows was based on the compelling need by emerging markets to curb surging inflows, which they recognise can fuel asset bubbles and inflation (e.g. China, India and Brazil), and hurt exporters by driving currency value higher.

IMF wanted nations to use exchange controls as a last resort, after they had used other tools including interest rates, currency values and fiscal adjustments. But emerging nations objected vehemently viewing the proposals as hamstringing their policies. Brazil's finance minister called capital controls, “self-defence” measures. Ironically, some major advanced countries, most responsible for the global crisis and have yet to resolve their own problems, are most eager to prescribe “codes of conduct to the rest of the world, including countries that have become over-burdened by the spill-over effects of policies adopted by them.”

Who's to blame?

The controversy is centred on “blame.” Emerging nations blame the US “as a fountain of excess cheap capital because it is holding short-term interest rates near zero and pumping money into the economy by buying government bonds.” Developed countries led by the US blame China's policy for tightly controlling its currency value, driving “capital into economies with freer exchanges.” IMF has a tough-sell to establish a shared understanding around the use of capital controls. It tries to create a “comfort zone” which nobody wants because there is nothing comforting about being judged negatively at the Fund's annual review if they did not follow the rules.

Nations need all the tools at their disposal to prevent financial crises and mitigate massive capital flows. Controls may not always be the first-best response, but they are easy to understand and implement, and have a strong “announcement” impact.

There are of course many pitfalls to controls. Most important is the danger from a self-feeding system of continuing tightening of controls. There is Prof. Cohen's Iron Law of Economic Controls: “to be effective, controls must reproduce at a rate faster than that at which means are found for avoiding them.” Moreover, a partial system of controls would readily breakdown as funds flowed through uncontrolled channels spurred by fear of still further controls.

In the end, a complete system of controls is required. Any policy of attempting to “muddle through” via adopting certain controls only reduces and distorts the volume of international trade and investment. Controls can breed revival of a brand of mercantilism which cannot be for the global good.

Any shake-up of conventional wisdom and comfortable modes of behaviour is bound to pose a challenge.
J.M.Keynes once said “what used to be heresy (restrictions on capital flows) is now endorsed as orthodoxy.” That happened in 1945 at the dawn of the Bretton Woods era. More than 65 years later, it is ironical that we need a similar shift in mindset to effectively meet the challenge.

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

Friday, May 20, 2011

PKR ordered by ROS to show cause or faces deregistration





PKR all riled up over ROS show-cause letter threatening to de-register party

 By MAZWIN NIK ANIS, The Star

PETALING JAYA: PKR is crying foul over a show-cause letter from the Registrar of Societies (ROS) asking the party to state "satisfactory reasons" why it should not be de-registered for violating Article 32.2.1 of the party's constitution.

Party secretary-general Saifuddin Nasution Ismail, who claimed Thursday that such a regulation did not exist, said PKR had received the letter from the ROS, signed by registrar Datuk Abdul Rahman Othman, dated May 9.

He said the ROS claimed PKR had intentionally violated its constitution by sacking Rajagopal Andaikkalam on April 1 and April 27 in 2009, without the matter being brought up or investigated by the party's discplinary board.

Saifuddin alleged there was bad intention on ROS' part in sending the show-cause letter because the party could not have violated an article in its constitution which did not even exist.

He said there were 33 Articles in the PKR constitution and Article 32 read that if there was any dispute in the interpretation of the constitution, what was interpreted by its leadership council would be deemed correct and final.

Meanwhile, Abdul Rahman said the letter was issued according to ROS procedure and that PKR was given the opportunity to explain its position.

"When the ROS issues the notice, according to the Societies Act 1966, the party concerned is required to reply within the time specified, using the same channel, instead of using the media channel because this is considered improper," he said.

He said the notice was according to Sub-Section (2), Section 13, Societies Act 1966, whereby PKR was given until June 9 to give satisfactory reasons why the party's registration should not be revoked.



 ROS asks PKR to show cause

PETALING JAYA: PKR is crying foul over a show cause letter issued by the Registrar of Societies (ROS) on why the party should not be deregistered for violating the party's constitution.

The party received the letter from the ROS, signed by its registrar Datuk Abdul Rahman Othman dated May 9, asking the party to state “satisfactory reasons” as to why it should not be deregistered for violating Article 32.2.1 of the party's constitution.

The ROS claimed that PKR had intentionally violated its constitution by sacking one Rajagopal Andaikkalam on April 1 and April 27 in 2009 without the matter being brought up or investigated by the party's discplinary board. It has been given until June 9 to respond.

PKR secretary-general Saifuddin Nasution Ismail alleged there was bad intention on the part of the ROS in issuing the show cause letter because the party could not have violated an article which did not exist in its constitution.

He said there were 33 articles in the PKR constitution and Article 32 read that if there was any dispute in the interpretation of the constitution, what was interpreted by its leadership council would be deemed correct and final.

“Even the name of the alleged member whom we had sacked is wrong. We took action against Jayagopal Andaikkalam and the leadership council made the decision on April 26, 2009 and not on the dates claimed by the ROS,” he told a press conference, adding a reply had been sent to the ROS yesterday.

Saifuddin said PKR had sacked Jayagopal for taking part in the Bukit Selambau by-election in 2009 with the intention of contesting against the party's candidate.

Meanwhile, Abdul Rahman said the letter was issued according to ROS' procedure and that PKR was given the opportunity to explain its position.

In an immediate response, Jayagopal said the party should face the music for contravening Article 32.2.1 of its constitution.

“Any amendment to the party constitution does not give the party immunity against discrepancies committed prior to the amendment,” he said.

-The Star May 20, 2011