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Wednesday, July 15, 2015

BRICS and SCO: Seizing the Eruasian moment


While the West is distracted by the Gulf region and Ukraine, moves are afoot in parts of Asia and Europe to empower emerging regions in the future

IF there is still any doubt that Russia and China are cultivating their global presence together, events in recent days come as a timely antidote.

The five emerging BRICS economies of Brazil, Russia, India, China and South Africa, spanning nearly as many continents, had their seventh summit in Ufa, south-western Russia on Thursday.

Any lingering uncertainty over Moscow-Beijing relations would also have been dispelled by the fact that the BRICS summit was held back-to-back with the 15th Shanghai Cooperation Organisation (SCO) summit on Friday.

The SCO is an association of six countries – Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan – and prime movers China and Russia, which also happen to be dominant. Its summit this time saw a growth in membership with the inclusion of India and Pakistan.

The BRICS countries have certain shared concerns and objectives, such as national development and international commerce that need not conform to the strictures of the Washington Consensus.

Strictures imposed by the Bretton Woods institutions, the World Bank and the International Monetary Fund (IMF), have bled already anaemic economies and destabilised countries in the developing world on the basis of ideological prescriptions.

At the same time, these Western-dominated financial institutions failed to give emerging economies, epitomised by China, their rightful voice according to their global economic importance. Thus a cash-rich China has had to evolve financial institutions of its own.

Such multilateral efforts are best done together with like-minded nations. So besides BRICS, SCO countries that span Eurasia – with a collective focus on Central Asia and now also South Asia – have come together to develop alternative funding agencies.

In addition to the Beijing Consensus of rapid growth that is politically conscious, defined and directed, there is now the “Shanghai Spirit” of mutual respect, trust, benefit and consultation with equality.

These values broadly mirror the Five Principles of Peaceful Coexistence adopted by China and India (Panchsheel Treaty) two generations ago.

But even as SCO membership sees steady growth, it is clear enough that its main drivers and those of BRICS are China and Russia. By dint of sheer size and capacity, particularly those of China, Beijing and Moscow have come to lead the rest.

The way Washington has managed to alienate China and Russia at the same time has helped develop their partnership. Following years of US criticism of both countries, the US navy chief lately branded Russia as the greatest threat while presidential hopeful Hillary Clinton accused China of hacking US sites.

Russia and China were thus prodded by the US to work more closely together. US foreign policy is often said to be defined by domestic interests, or perceived interests, and this is seldom more true than when a presidential election campaign approaches.

However, improving relations between China and Russia are not thanks solely to US posturing. Moscow and Beijing are not without common interests of their own.

On Thursday, Russian Foreign Minister Sergei Lavrov rallied member countries of both BRICS and the SCO to fight terrorism together. International terrorism today is a clear and present danger, a substantive threat and a common scourge requiring close cooperation particularly among neighbouring countries.

While BRICS’s terms of reference are more economic, the SCO’s are broader and more strategic. Within BRICS, member nations have formed a Business Council and formulated an Economic Partnership Strategy. Key sectors are manufacturing and infrastructure besides clean energy and agriculture.

But the star attraction at Ufa was the launch of the New Development Bank (NDB), also known as the BRICS bank, with an initial capital of US$100bil (RM378.2bil).

To be based in Shanghai with its first president in India’s K.V. Kamath, the NDB would be raising funds locally and internationally. It is set to issue its first loans next April. This is among four new financial institutions championed by China, the others being the Asian Infrastructure Investment Bank, the Silk Road Fund and the SCO’s Development Bank.

In the SCO context, member countries had made strides in the energy, telecommunications and transportation sectors. Now such gains needed to be affirmed while also developing opportunities in agriculture. Russia places a special priority on the Eurasian Economic Union (EAEU), which also covers Armenia, Belarus, Kazakhstan and Kyrgyzstan, with Russia dominant. China has prioritised its Silk Road Economic Belt initiatives linking Asia with Europe.

Working together, the EAEU and the Silk Road projects would be promoted jointly by the SCO. The proposed financial institutions, to which China would be contributing the most, would finance these and other related projects.

The fortunes of BRICS economies however have dipped in recent months. The Ufa summit did not deny the current challenges but chose to emphasise the positives.

Although numbering just five countries, the BRICS group had contributed half of the world’s economic growth over the past decade and produced 20% of total global output. No less than IMF findings show that until 2030 at least, BRICS growth would outperform developed and other emerging economies.

For Russia, the plans and initiatives have a more immediate tactical purpose – to alleviate economic pressures brought on by Western sanctions against its moves in Ukraine.

For China, the longer-term strategic purpose covers efforts to facilitate more trade, expedite internationalisation of the renminbi and generally build and solidify China’s global stature.

In investing massively in the new financial institutions however, Beijing will be competing against the IMF, the World Bank and the Asian Development Bank.

In doing so it will have to be more borrower-friendly, minus the strictures so synonymous with the Western-run rivals. The official word is that these new lending agencies are not going to challenge the Bretton Woods institutions, but the practical effect is nonetheless to offer borrowers more choice.

To substantiate the claim that the new institutions will neither rival nor replace the older ones, China is also calling for more open international accountability of the IMF and the World Bank. Somehow that may still not come as comforting news to Western power brokers.

But after all the platitudes and hurrah in Ufa, there are now the realities to contend with.

Strategic analysts prefer to gauge the viability of regional institutions based on the common interests shared among member states. In this respect, the future of BRICS may seem less promising than the SCO’s. Precisely because of the broad spread of the BRICS countries, there is little they have in common besides an affinity with alternative modes of development.

Their economic growth has been significant, but achieved independently of other BRICS nations and – except for China – with little support from (integration with) other countries in their respective regions.

The obvious question arises as to how sustainable can BRICS as an entity be. The fortunes of international associations depend on more than goodwill and bravado.

The SCO by comparison holds more prospects for success. By comprising a contiguous region that includes Eurasia and a substantial chunk of the Asian land mass, cross-border concerns are shared and can be attended to jointly.

Furthermore, practical projects like the Silk Road Economic Belt and the EAEU require constant attention, commitment and contributions from the 60 countries and regions that are involved.

This may mean more obligations to begin with, but consistent maintenance will ensure better management and success.
Bunn Nagara
By Bunn Nagara Behind the headlines

> Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.

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Chinese President Xi Jinping (C, front) poses for a group photo with the delegates attending

 Asian voice carries greater weight now

Council slow to act on Botak Hill which is to be patched up soon

An eyesore: Mitigation works being carried out to restore the cleared slopes of Bukit Relau.
An eyesore: Mitigation works being carried out to restore the cleared slopes of Bukit Relau.

Council slow to act on Botak Hill

GEORGE TOWN: The Penang Island City Council has come under fire for taking such a long time to tackle the illegal hill clearing at Bukit Relau.

Bayan Baru PKR MP Sim Tze Tzin (pcs left) said it should not have taken so long to carry out mitigation work at the 22.89ha site which became known as Botak Hill after it was cleared.

“When the issue broke out in 2013, I called a senior council officer who told me that it would be settled within six months.

“But after two years, the problem is still not settled.

“This is not rocket science. What is so difficult?” he told a press conference yesterday in Sungai Dua near here.

Sim said someone should be held responsible for the delay and urged the state to find the culprit.

“The person has to be punished as this has to do with accountability.

“If you cannot do the job, then resign to let other people do it,” he said.

Sim was commenting on the latest news report which stated that the mitigation work being carried out by General Accomplishment Sdn Bhd was scheduled to be completed by October. - The Star 15/7/15

Botak Hill to be patched up soon

GEORGE TOWN: Mitigation works on Bukit Relau, infamously known as Botak Hill after a section of its top slope was cleared in 2013, is scheduled to be completed by October.

The Penang Island City Council (MBPP) said the mitigation works started in April and was expected to be completed in six months.

The council said it had endorsed the Erosion and Sedimentation Control Plan (ESCP) and slope strengthening design to mitigate landslips and pollution caused by mud flow based on the proposal by the geotechnical consultant appointed by General Accomplish-ment Sdn Bhd which owns the cleared site.

MBPP said the mitigation plan was vetted by the state’s Hillside Geotechnical Advisory Panel chairman Dr Gue See Sew.

General Accomplishment was fined RM30,000 by a Sessions Court here in July 2013 after a represen-tative pleaded guilty on behalf of the company to clearing the 22.89ha site between April 24 and May 8 the same year without obtaining written approval from then Penang Municipal Council (MPPP).

The offence under Section 70 A of the Street, Drainage and Buildings Act 1974 carries a maximum five-year imprisonment or maximum RM50,000 fine, or both.

MBPP said in a statement yesterday that the mitigation measures include the building of a few catchment and sedimentation ponds along the access route to the site, cutting the slope to reduce its steepness and covering the exposed slope with vegetation.

The council said the works also involved the building of cascading drains along the access route to dissipate the energy of surface runoff and mitigate soil erosion.

Several residents living nearby had earlier this month raised their concern after seeing earthworks being done at the site.

MBPP said the land cutting was done to allow access for heavy vehicles and to carry out rock blasting.

It said huge boulders needed to be removed to ensure a safe route and for the mitigation works to proceed, adding that the rock blasting was approved by the Minerals and Geoscience Depart-ment and police.

MBPP said it would continue to monitor the works to ensure that it was carried out in accordance with the approved mitigation plan.

It said grass had been planted on the access route to prevent erosion and that more plants could now be seen on the cleared slope. The Star 14/7/15

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Thursday, July 9, 2015

1MDB probe gains momentum, a sensitive time for PM and Umno


PETALING JAYA: The probe into claims that funds were channelled into the personal accounts of Prime Minister Datuk Seri Najib Tun Razak heated up when the task force investigating the matter froze six bank accounts and said it was looking into 17 others.

The Wall Street Journal (WSJ) meanwhile revealed documents that it claimed were the basis of its controversial story.

The freeze on the six accounts was issued on Monday, according to a statement issued jointly by Attorney-General Tan Sri Abdul Gani Patail, Bank Negara Malaysia governor Tan Sri Zeti Akhtar Aziz, Inspector-General of Police Tan Sri Khalid Abu Bakar and Malaysian Anti-Corruption Commission chief commissioner Tan Sri Abu Kassim Mohamed.

“Several documents over the issue of non-compliance with Bank Negara’s rules and procedures have also been seized,” it read.

“As the investigations are still under way, we appeal to all parties to give their fullest cooperation to complete the probe.”

It is learnt that the 17 accounts belonged to various companies and individuals.



While neither the banks involved nor the holders of the accounts were named, several portals claimed they had received confirmation that three of the accounts belonged to Najib.

Hours after the statement was released, WSJ uploaded nine documents on its claim that US$700mil (RM2.6bil) were channelled into three personal accounts of Najib.

The nine documents comprised three flow charts, three remittance forms, two credit transfer notices and a letter of authorisation by Nik Faisal Ariff Kamil, the former chief investment officer of 1Malaysia Development Bhd (1MDB).

However, Najib’s name appeared only in the flow charts. It was not in any of the banking documents in which the last few digits of the account numbers were blanked out.

A banker said it was normal that entire bank account numbers were not made public for fear that the accounts could be hacked.

“What is important is the codes in the documents are correct,” said the banker.

The charts detail funds flowing from SRC International Sdn Bhd, a company that used to be under 1MDB but was subsequently taken over by the Finance Ministry in 2012, into personal accounts supposedly belonging to Najib.

According to the charts, the funds flowed into AmPrivate Banking in AmBank Islamic and the beneficiary, it claimed, was Najib.

Based on one chart, the funds flowed out of SRC International’s account in AmBank Islamic into Gandingan Mentari Sdn Bhd, also in Ambank Islamic.

Subsequently, the money was transferred to Ihsan Perdana Sdn Bhd, whose account is in Affin Bank. From there, the funds were moved to AmPrivate Banking in AmBank Islamic.

There were three accounts under AmPrivate Banking in AmBank Islamic supposedly belonging to Najib. The last few digits of the accounts were blanked out.

The Prime Minister’s name was not to be found in any remittance transfer forms from Affin Bank to AmBank Islamic.

The total amount transferred from Affin Bank to AmBank Islamic was RM42mil and the transactions were done in three tranches.

There were two transactions on Dec 26, 2014 and one on Feb 9, 2015. The reasons for the transfer of funds by Ihsan Perdana to the AmPrivate Banking account were stated as CSR programmes.

Najib’s name is also not visible in the two credit transfer notices from Wells Fargo Bank in the United States to the AmPrivate Banking account under AmBank Islamic.

But a banker said it was normal for the beneficiary’s name to be left out of remittance forms or credit transfer notices.
“The identity of the beneficiary does not need to appear if it is a familiar name. The banks only need the necessary codes and account numbers,” said the banker.

The funds from Well Fargo amounted to US$681mil and were transferred in two tranches, on March 21 and March 25, 2013, according to the documents.

The transaction order came from Tanore Finance Corp in British Virgin Island.

The funds were transferred to AmPrivate Banking account in AmBank Islamic under the Swift Output Code of Single Customer Credit Transfer.

“A Single Customer Credit Transfer means the account is held by an individual,” said the banker. - The Star

Sensitive time for PM and Umno



DATUK Seri Najib Tun Razak has been out and about every day since the start of the fasting month.

He has been seen at a number of Ramadan bazaars, he has been the VIP guest at various buka puasa functions and he has joined the congregation for evening prayers after the breaking of fast.

The fasting month is a test for all Muslims and even more so for the Prime Minister given the issues surrounding him.

The 1MDB issue has snowballed into a political monster for his administration and he is fighting what could be the biggest battle of his political career.

Allegations in The Wall Street Journal (WSJ) that billions of ringgit went into what is believed to be his personal bank account are still reverberating among the financial and political circles.

Najib has responded to the report, calling it wild allegations and insisting that he has never taken funds for personal gain. It was not quite the explanation or answer that people were expecting and it has raised more questions than provided answers.

But many in Umno are prepared to give him the benefit of the doubt even though they are unsure what to make of it.

Najib has a lot of support in his party and up until the recent allegations, he was said to have won over some 75% of the 191 Umno division heads.

They want to rally around him but they need clear answers in order to defend him.

Najib has made it very clear that he intends to sue WSJ and his lawyers are preparing a case to be filed soon against Dow Jones, the publisher of WSJ, in the United States. That is the way to go to clear his name.

The pressure mounted yesterday when four of the country’s top regulators and law enforcers issued a joint statement, saying that the special task force probing 1MDB had frozen six bank accounts related to the case.

The affected bank accounts were not identified but the signatories comprised the Attorney-General, Bank Negara Governor, Inspector-General of Police and the MACC chief.

It was unprecedented and it was a sign that the investigations had become more serious and complicated. The snowball has grown bigger.

Najib’s deputy Tan Sri Muhyiddin Yassin has added to the pressure. He had asked the authorities to look into the WSJ allegations and Umno vice-president Datuk Seri Shafie Apdal has joined in.

Their move confirms the political divide in the party that the Umno crowd has been talking about.

Umno politicians also noticed that Tun Dr Mahathir Mohamad has been rather restrained after months of relentless attacks and it could mean two things.

One, he feels that he has achieved his desired objective – he has got Najib up against the wall.

Two, Dr Mahathir might have realised that in his determination to remove the head of the house, the entire house may come down too.

His campaign against Pak Lah contributed to the 2008 political tsunami and his attacks against Najib has damaged Umno even more.

A group of Umno supreme council members met Najib at his official residence on Sunday night. It was very hush-hush and none of those who attended picked up or returned the calls of reporters, let alone spoke about what transpired.

The speculation is that the meeting was probably not about declaring support for the boss, otherwise they would not be so secretive.

The group was there to seek answers about what Najib plans to do and where he intends to go from here.

This is a very sensitive time for Umno and especially for Muhyiddin. He played a leading role in Tun Abdullah Ahmad Badawi’s exit and he is again in the spotlight.

It is doubly sensitive for Muhyiddin this time around because he is an interested party.

Muhyiddin is being extra cautious because he understands the powers of incumbency and is aware of what the Prime Minister could do to those who are not with him.

Moreover, Najib’s tentacles in the party go back a long way and whoever wants to take him on has to consider the repercussions from his hardcore supporters.

By Joceline  Tan Analysis The Star

Related stories:

Go out and explain 1MDB issue, Umno leaders told
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Call to probe how WSJ obtained private banking documents
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