Structural issues including education are holding Malaysia back

KUALA LUMPUR: Malaysia is facing several long-term structural issues in its economy that needs to quickly adjust in accordance with the new realities of the global economy.

This was the conclusion of a panel discussion by representatives of three leading rating agencies – Standard & Poor’s Ratings Services (S&P), Moody’s Investors Service and Fitch Ratings – during Malaysia’s Economic Update 2015 forum on “Outside-In Perspective: Economic Outlook for Malaysia” held here.

The agencies said that while the fundamentals of the country, including the financials, were good, the country needed to address several issues that would hold it back in the long-term.

S&P’s associate director of sovereign and international public finance ratings Phua Yee Farn said that one of the issues that needed to be quickly addressed was the state of education in the country.

“As discussed earlier (in the forum) by Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar on the education system here, this is something that is very fundamental to improving the level of output and productivity.

“The affirmative action policy has been around for decades and we think that it will continue to be in place here. However, this will continue to cause the brain drain to other countries. The brilliant ones are paid very well and are choosing to go somewhere else,” Phua said.

He, however, also acknowledged that the Government had made some efforts to try and reverse this situation, adding, however, that it would “not be easy”.

“The education system has to go through some structural reforms before we can see the next leap to a real high-income economy,” Phua said.

Meanwhile, Fitch Ratings’ managing director and global head of sovereign and supranational ratings James McCormack said that being stuck in the “middle-income trap” was something that should be of concern to Malaysia.

“While we are all preoccupied with China and the growth picture there now, the reality is that there is a transformation going on there now from an investment-led, export-oriented economy to a consumption-led, domestic-demand economy.

“Asia, in general, has leveraged off the previous export growth model tremendously. Even if the growth rate may be lower in China, but (structurally) it is a different kind of growth that will be taking place there,” McCormack said.

“It is not one where the rest of Asia can simply feed intermediate products into an export machine that will eventually end up in Europe and the United States. China is already supplying more of these inputs domestically so that trade is actually slowly disappearing,” he added.

He noted that the economies that were more geared to the new consumption model in China were the ones that would benefit from this new economic model there.

“This, however, seems to be more evident in north Asia such as in Taiwan, Japan and South Korea than it is in South-East Asia. These countries in north Asia are heavily invested in China and have companies that are directly selling to Chinese consumers. This is an economic model that is less prevalent in South-East Asia,” he said.

“This is why I worry about Malaysia and South-East Asia being caught in this middle-income trap because the higher value-added products are in north Asia, while the lower end lies in the lower-income countries.

“Because the income levels are moving up here in Malaysia and this is where you get competition from both the top and bottom. this is what the middle income trap is about – getting squeezed in the middle,” he pointed out.

McCormack’s views were also shared by Moody’s vice-president/senior analyst of sovereign risk group Christian de Guzman, who added that Malaysia needed to attract more high-value investments.

By DANIEL KHOO The Star/Asia News Network

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China-US new type of major power relations: positive narratives needed to help turn negative tide

Illustration: Liu Rui/GT

New type of great power relations

Xi Jinping's upcoming visit to the US comes amid the two sides' pledge to push for a "new type of great power relations." Though tensions come part and parcel of ties between great powers, China and the US have vowed to navigate those dangerous waters through dialogue.

http://t.cn/RyJMfbB

China-US are on way to a new type of major power relations



Recently, worries have been heard in the Western academia and strategic circles on China's development direction, foreign policy changes and thus the possible deterioration of China-US relations.

Two catchy phrases are mostly used to describe the current situation, the "Thucydides's Trap" and "tipping point."

The "Thucydides's Trap," which means a rising power generates fear in an established power that it ultimately leads to a war between the two, is not persuasive to describe the possible prospect of nowadays China-US relations. On the one hand, it neglects significant changes of the external environment. In addition, the theory hardly explains the peaceful transition of power in history.

On the other hand, the "Thucydides's Trap" puts too much blame on the threat of the rising country, missing the possibility that the established country could be more comfortable in launching a preemptive war.

"Tipping point" is another phrase that has caused a round of discussion about China-US relations in both countries. David Lampton, a senior China scholar, delivered a speech in May, worrying that China-US relations were approaching "a tipping point." After that, some US politicians and scholars followed the suit and expressed worries about bilateral relations. Even in China, people began to write articles, discussing how to avoid a hot war with the US.

Paying too much attention on the two phrases will exaggerate the competitive sides of the two countries and are not helpful for China-US relations. It will lead people to imagine more difficulties and feel frustrated about the relations.

We should adopt positive narrative about China-US relations and concentrate more on cooperation rather than competition.

It is a good chance for the two countries to strengthen the positive and grand narrative about bilateral relations during the upcoming state visit paid by Chinese President Xi Jinping to the US. A new type of major power relationship in general is a useful guideline and positive narrative for the future development of bilateral ties.

Meanwhile, the two countries should inject more concrete contents into the idea by narrowing divergences and expanding cooperation. China-US relations are the most important and complex bilateral relations in the world. It is impossible for the two countries to shun competition, but strengthening bilateral cooperation still forms the major part of the relations.

China and the US need each other. Although some US scholars and politicians argued that the US government should change its grand strategy toward China, namely balancing China's rise, the fact is that the US needs China's cooperation on a bunch of issues ranging from bilateral issues to global governance such as climate change.

Xi's visit will provide a great opportunity to facilitate cooperation between the two countries. The communication between the two leaders will first of all enhance the strategic mutual trust and ensure the relations on the right track. Numerous highlights might pop up during Xi's visit.

On cyber security, the two may reach some fundamental consensus like promising not to attack each other's key infrastructure, regulating their own actions and forming basic norms.

On economic cooperation, as the top two economies in the world, the countries should express their willingness to lead the global economic development.

On climate change, the countries may carry on the momentum and release another joint announcement to accumulate more dynamism for the upcoming Paris Climate Conference.

In addition, Xi might share his experience of China's development path to disperse US misunderstandings about China's domestic policies and interact with the US public, offering a solid foundation of the bilateral relations.

By Sun Chenghao Source:Global Times

The author is an assistant research fellow at the Institute of American Studies, China Institutes of Contemporary International Relations. opinion@globaltimes.com.cn

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China's Long March-6 new carrier rocket succeeds in carrying 20 satellites to space

A new model of China's carrier rocket Long March-6 carrying 20 micro-satellites blasts off from the launch pad at 7:01 a.m. from the Taiyuan Satellite Launch Center in north China's Shanxi Province, Sept. 20, 2015. The new carrier rocket will be mainly used for the launch of micro-satellites and the 20 micro-satellites will be used for space tests. (Xinhua/Yan Yan) 

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China successfully launched a new model of carrier rocket, Long March-6, at 7:01 a.m. Sunday from the Taiyuan Satellite Launch Center in north China's Shanxi Province.

The rocket carried 20 micro-satellites into the space for space tests.

The new rocket, fueled by liquid propellant made of liquid oxygen and kerosene, is China's first carrier rocket that uses fuel free of toxicity and pollution, said Gao Xinhui, an official at China Aerospace Science and Technology Corporation.

"Using such propellant can cut costs by a great margin," he said.

Zhang Weidong, designer-in-chief at the Shanghai Academy of Spaceflight Technology with the China Aerospace Science and Technology Corporation, said the new rocket also "reformed the way carrier rockets are tested and launched in China."

"Loading, testing and positioning were finished when the Long March-6 rocket was at a horizontal position, before it was lifted to an upright position for launching," he said.

"We believe it will greatly boost the competitiveness of Chinese carrier rockets in the international market. The new model will also significantly improve our abilitiy to access space," said Zhang.

The launch on Sunday has tested the feasibility and accuracy of the rocket's design as well as other new technologies. The new carrier rocket will be mainly used for the launch of micro-satellites.

The rocket is the 210th mission by the Long March rocket family. In 1970, a Long March-1 rocket sent China's first satellite, Dong Fang Hong 1, or "the East is Red", into Earth orbit. - Xinhua

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China launches new carrier rocket with 20 satellites