- Leviathan as capitalist
- ARGUMENT: How Maliki ruined Iraq
- Unable to heal Malaysia, some leaders stick to just hurting
- Rafizi: UiTM’s silence on expose is proof
Posted: 20 Jun 2014 04:58 AM PDT
State capitalism continues to defy expectations of its demise
IT IS now 25 years since Francis Fukuyama published "The End of History?" and ignited a firestorm of debate. Today there are many reasons for thinking that he was wrong about the universal triumph of liberalism and markets, from democracy's failure in the Middle East to the revival of religious fundamentalism. But one of the most surprising reasons is the continuing power of the state as an economic actor: far from retiring from the business battlefield in 1989, the state merely regrouped for another advance.
Survey the battlefield today and you can see state capitalism almost everywhere. In China companies in which the state is a majority shareholder account for 60% of stockmarket capitalisation. In Russia and Brazil companies in which the state has either a majority or a significant minority stake account for 30-40% of capitalisation. Even in such bastions of economic orthodoxy as Sweden and the Netherlands state-owned enterprises (SOEs) account for 5% of market capitalisation. The Chinese and Russian governments show little sign of wanting to surrender control of the commanding heights of the economy. Privatisation seems to have ground to a halt in Brazil and in India (though its new government may revive it). There has been talk of the French government taking a stake in Alstom or part of its business—adding to the stakes it and Germany hold in Airbus and the one France recently took in Peugeot.
What should one make of the revival of state capitalism? Opinions vary wildly. Some praise it as a superior form of capitalism while others treat it as a mere way-station on the road to proper capitalism. One of its most ardent proponents, Vladimir Putin of Russia, somehow keeps a straight face when claiming there is no state capitalism in his country. Some see SOEs as money pits whereas others think they are pretty good investments: Morgan Stanley, a bank, reckons that, together, shares in listed SOEs in Europe, the Middle East, Africa and Latin America did better than stockmarkets as a whole between 2001 and 2012.
"Reinventing State Capitalism", a new book by Aldo Musacchio of Harvard Business School and Sergio Lazzarini of Insper, a Brazilian university, sheds fresh light on the question. It notes that the old model of Leviathan-as-entrepreneur, in which the state owned companies outright and ran them by ministerial diktat, was largely swept aside by the privatisation wave of the 1980s and 1990s, when governments realised that they could make money out of their companies rather than constantly bailing them out. But instead of swimming off into the blue ocean Leviathan reappeared in three disguises—as a majority or minority shareholder and as an indirect investor.
In the first form, which is particularly popular in China, the state submits an SOE to the governance standards and investor scrutiny that come with a stockmarket listing while retaining the bulk of the shares. In the second, which accounts for about half of SOEs, the state retains just enough influence, through its minority stake, to swing some important decisions. In the third, the state seeks to invest in companies—including ones not previously government-linked—through public development banks (of which there are currently 286 in 117 countries), sovereign-wealth funds, pension funds and other vehicles. For instance, India's Life Insurance Corporation is the largest stockmarket investor in the country, with about $50 billion invested as of September 2011.
How successful has Leviathan been in these new incarnations? Messrs Musacchio and Lazzarini go out of their way to be fair. They point out that new-style SOEs more closely resemble true private-sector firms than old-fashioned nationalised industries: they are run by businesspeople not political hacks, and no longer have bloated workforces. The authors argue that good governance can overcome the classic problems of state ownership: Statoil of Norway is one of the world's best-run firms. And they observe that Leviathan can also bring benefits to the private sector: for example, it can provide long-term investment in countries that have shallow or dysfunctional capital markets.
But the authors nevertheless produce a lot of evidence that the new Leviathan retains some of the old one's weaknesses. This is especially clear in Brazil, where two successive presidents from the Workers' Party (PT), Luiz Inácio Lula da Silva and Dilma Rousseff, have trampled on other shareholders' rights in the name of the national interest. The government leant on Petrobras, the national oil company, to withdraw plans to raise the price of petrol in line with world prices. It engineered the removal of Roger Agnelli as boss of Vale, a privatised mining giant in which the national development bank, the BNDES, still owns a chunk, because it did not like his emphasis on exporting iron ore to China instead of building steel mills at home. This rise in interventionism has come just as the BNDES is losing itsraison d'être because of the deepening of domestic capital markets. Messrs Musacchio and Lazzarini demonstrate that under the PT the bank has got into the habit of lending money to already successful businesses that could easily have raised it from the markets—companies that, by the by, are also generous contributors to political campaigns.
The importance of timing
The implication of all this is not so much that Mr Fukuyama was wrong about the market in 1989 but that he was premature. The development of state capitalism over subsequent years has undoubtedly been extraordinary. But there are good reasons for still hoping that it is a way-station to a more fully private economy, not a new form of capitalism. The best SOEs have demonstrated that they can thrive without the guiding hand of the state—and the worst have proved that, however many market disciplines you impose upon them, they will still find a way of turning state capitalism into its ugly sister, crony capitalism.
Posted: 20 Jun 2014 04:37 AM PDT
Not long ago, stability and security in Iraq seemed possible. Maliki’s corruption shattered any hope of that.
When Mosul fell to the Islamic State of Iraq and al-Sham (ISIS) on June 10, most Iraqis were, like the rest of the world, shocked. When two other cities fell days later with minimal resistance from the Iraqi security forces, the response was horror. How in just a matter of days could a cancerous, extremist organization defeat Iraq’s U.S.-trained security forces, which count more than 1 million personnel in their ranks and have received close to $100 billion in funding since 2006?
The truth is, nothing is surprising about the developments in Iraq right now. Nor was any of this inevitable.
Four years ago, Iraq finally had relatively good security, a generous state budget, and positive relations among the country’s various ethnic and religious communities after years of chaos following the U.S.-led invasion in 2003. But Iraq’s political elites squandered this opportunity. Their corruption and hunger for power distracted them from emerging crises — like the rise of ISIS — and laid the groundwork for what is now taking place.
By 2008, al Qaeda-affiliated militias and death squads no longer swarmed the country from Samarra to Mosul as they had just two years before. U.S. officials, state security services, tribal forces, and some armed groups had forged an agreement to work together against the most extreme groups terrorizing Iraq’s population. The major roads in those areas were lined with the flags of the Awakening Councils, and local fighters had decided to protect ordinary Iraqis from al Qaeda. In time, the Iraqi military was deployed in all major cities and set up checkpoints every few miles.
Although unemployment, corruption, and failing public services were still major problems, ordinary Iraqis in the areas that had been dominated by al Qaeda still breathed a collective sigh of relief. They could go back to work, resume their studies, and relax outdoors without the constant ring of gunfire in the background. Families took their children to the river, where they swam and picnicked, while young men made regular trips to Kirkuk or Baghdad to stock up on local Iraqi beer.
There was also at this time a consensus that the Iraqi Army consisted of honorable, patriotic soldiers who treated local people with respect. The public had grown hostile toward al Qaeda and other insurgent groups and was siding with the state and its army. The atmosphere in small towns like Tikrit was relaxed, and people casually mixed with soldiers and police, exchanging jokes and pleasantries.
It was a new atmosphere and it was full of promise. Iraqis were demanding more from their politicians than mere survival. Prime Minister Nouri al-Maliki established a new political alliance, the State of Law alliance, which campaigned on a platform of re-establishing strong state institutions, reducing corruption, and providing adequate services to the people. The Iraqiya alliance, another large and newly formed coalition, backed a similar platform. The tantalizing prospects of establishing a new political environment and creating a stable state seemed within reach.
It never happened. Rather than consolidating these gains, several factors began working against Iraq’s national cohesion as early as 2010. Maliki’s government used “de-Baathification” laws, introduced to keep members of Saddam Hussein’s regime out of government, to target his opponents — but not his many allies, who also had been senior members of the Baath Party. The 2010 government formation process turned out to be yet another opportunity for politicians of all stripes to grant themselves senior positions which they could use to plunder the state. When tens of thousands of Iraqis took to the streets in February 2011 to protestcorruption, they were branded terrorists and were attacked and beaten by security forces and hired thugs. Dozens were killed and thousands arrested and tortured until the protests fizzled. Meanwhile, though terrorist groups were not operating as openly as before, hundreds of civilians continued to be killed every month, particularly in Baghdad, denying Iraqis in many parts of the country even a brief period of normalcy.
At that time, Maliki began referring to himself publicly as Iraq’s preeminent military leader. When the 2010 electoral results did not conform to his expectations, he demanded a recount in his “capacity as commander in chief.” When he forced senior anti-corruption officials from their positions, he once again inappropriately invoked his military credentials. He called officers on their mobile phones to demand specific actions or that individuals be arrested, circumventing the chain of command. After the new government was formed in November 2010, he refused to appoint ministers of the interior and of defense, preferring to occupy both positions himself. He appointed senior military commanders directly, instead of seeking parliamentary approval as required by the constitution.
There was also much talk about the prime minister’s special forces, including the Baghdad Operations Command. Groups of young men were arrested in waves, often in the middle of the night, and would be whisked to secret jails, often never to be seen again. Former Army officers, members of the Awakening, activists who complained too much about corruption, devout Iraqis who prayed a little too often at their local mosques — all were targeted. Many were never charged with crimes or brought before a judge. Under the pretext of trying to stop the regular explosions that blighted Baghdad, these individuals were subjected to severe abuse.
By 2012, the atmosphere in Tikrit had changed. Joking with the police and the Army had ended. Tikritis were desperately looking for detained relatives, but information was almost impossible to obtain even for the best-connected. The relationship of trust that the Army had built with the general population was ruined by the special forces’ activities.
Then there was the corruption. The security sector, which had an annual budget greater than the budgets for education, health, and the environment combined, was subject to minimal oversight. Soldiers were enrolled and paid monthly salaries without reporting for duty. Overpriced and faulty equipment was procured using the laxest standards. Training sessions were financed on paper but never took place in practice. Appointments were politicized. Officers close to the prime minister’s office who failed to investigate leads on terrorist attacks were almost never held accountable for their actions. Even the most grotesque failures, including the military’s passivity in the face of regular attacks against Christians in Nineveh over a period of years, went unpunished. Morale among the rank and file was low, and there was very little desire to take risks on behalf of political elites who were viewed as wildly corrupt.
Against this backdrop, many of the armed gangs that had terrorized local populations from 2005 to 2007 now saw their opportunity to re-emerge. They still could not operate in broad daylight, but they understood that the security forces could be manipulated, and they identified the weakest link in each institution. Those officers who could most easily be bribed or who were willing to participate in illegal activities were brought on board; those who could be intimidated were threatened; and those who were most likely to interfere with their operations were targeted in their homes, to terrify their families.
By 2012, armed groups were once again mounting organized and coordinated attacks against major institutions in broad daylight. With time, the attacks became so frequent that several officers were targeted daily in Tikrit alone. A clear trend was developing, and nothing was done to address it. The city was suddenly too dangerous even for a short family visit, and ordinary people were once again locking themselves indoors.
The gust that eventually blew the security sector’s house of cards away came from the conflict in Syria, which had given al Qaeda a new lease on life. Shortly after Syria’s civil war began in 2011, the al Qaeda-affiliated fighters who had been forced to stop their operations in Iraq in 2008 remobilized and rebranded themselves as ISIS. They remained particularly active in Mosul, where they ran an incredible racketeering operation and continued to hit government forces hard.
When ISIS escalated with a full-on assault on Mosul this month, all of the Iraqi state’s pathologies came together in a perfect storm of corruption and incompetence. This left the city virtually defenseless. People in Mosul and soldiers have told me that a consensus has formed over the past few days that members of the military’s rank and file were ordered to abandon their posts either shortly before or at the start of ISIS’s assault. There is still significant mystery as to why the withdrawal took place at all. Rumors have been circulating. The most outlandish accusation is currently being made by Maliki and his allies, who haveaccused the Kurdistan Regional Government of colluding with ISIS against the Iraqi state.
The incompetence of the Iraqi security forces was further underscored in the days that followed the fall of Mosul. As the jihadists began to advance, residents in Tikrit, around 130 miles south, expected that ISIS would overrun their city at any moment. Anyone who has been to Tikrit knows that it would be extremely easy to fend off an invasion by ISIS gunmen, because there is essentially a single highway that runs through the city center. All that would have been needed to protect the city would have been to position a few armored vehicles with limited air support along the highway. Yet there was no reaction from Baghdad, which is just a two-hour drive away. Tikrit was seized in a couple of hours, and hundreds of Army recruits were taken hostage. Having been abandoned by their government, many of those individuals appear to have been executed.
The failures of Iraq’s governing class — and the U.S. occupation forces — to create even a single stable national institution will haunt the country for years to come. On the day Tikrit fell, Iraq suddenly changed: Violent government-backed militias were suddenly allowed to operate openly in Baghdad and Baquba, manning checkpoints and organizing security without any oversight. Senior Iranian military commanders landed in Baghdad to help organize the city’s defense. Finally, in an effort to rally his base against ISIS, Maliki called for volunteers to take up arms against the militants and extremists — ignoring the fact that the military’s problem was never a lack of manpower.
It was the clearest admission of failure possible. Maliki micromanaged the security forces for years, and in the end he didn’t even trust them, choosing instead to let foreign-backed militias and untrained volunteers defend the capital. Meanwhile, one week after Tikrit’s fall, Baghdad had done nothing to free it from ISIS, abandoning its citizens to their fate and allowing the militants to reinforce their positions free from interference.
The United States has made it clear that Washington now views Maliki’s government as part of the problem. “Iraqi leaders must rise above their differences and come together [to forge] a political plan for Iraq’s future,” President Barack Obama said in a press conference on Thursday. Secretary of State John Kerry is being dispatched to the Middle East to help bring about political reconciliation between Iraq’s factions. But the damage that the prime minister and his cronies have inflicted on Iraq cannot be undone. The end result of Iraq’s unending series of unforced errors will almost certainly be yet more flattened cities, hundreds of thousands more displaced, and yet more damage to its people’s sense of community. What solution could there be to prevent this tragedy, if the Iraqi political class will not admit to the smallest of errors?
Posted: 20 Jun 2014 04:19 AM PDT
Malaysians are a forgiving and easy lot – and therein lies a major problem.
Rubbish, drivel and lies are shovelled at us regularly by everyone from the Prime Minister downwards. There is little attempt to sound intelligent, competent or honest.
Take Deputy Prime Minister Tan Sri Muhyiddin Yassin’s written reply in Parliament to a question on the controversial seminar on Christian-bashing at UiTM on May 6.
He said that it was an intellectual brainstorming session that should be viewed positively. According to him, the seminar on Allah and Christology was an academic programme to explain issues related to the use of the word Allah by non-Muslims.
“There were academic discussions and explanations on the pros and cons of the matter which were conducted harmoniously, in line with intellectual culture at institutions of higher learning.
“The facts and discussions in the seminar should be viewed positively as a form of intellectual brainstorming,” said Muhyiddin in reply to PKR’s Penampang MP Darell Leiking.
Facts. Discussions. Intellectual. Brainstorming.
All powerful words. Sadly, they were largely absent from the hate-mongering session at UiTM, the alma mater of none other than Datuk Ibrahim Ali.
In keeping with the bogus nature of the session, among the main speakers were a bogus Catholic priest and a bogus nun.
There is no record of Insan LS Mokoginta as a priest, said the Bishops Conference of Indonesia executive secretary Father Edy Purwanto.
But this small gap in his resume did not stop him for laying into Christians. Among the pearls of wisdom from the snake-oil salesman was this:
“Every Jesus follower should enter Islam. If not, it would be a betrayal to Jesus.”
There is also no record of Irena Handono as a nun. She spent a short time in a convent as a novice but misrepresented herself as a former nun.
Her contribution to intellectual discourse: “We shouldn’t wish Merry Christmas because it means that Jesus is reborn.”
And what about that other “intellectual” lecturer Masyud SM who said that the “Christian gospel is a fake gospel.”
The May 6 event was not an academic exercise, it was a hate-mongering session dressed up like a seminar. It was aimed at demonising Christians and Christianity and the speakers trotted out had as much intellectual heft or credibility as lint.
Muhyddin is being dishonest by trying to put a coat of respectability on this slam-fest. If the roles were reversed, would he have been so magnanimous.
Say a few non-Muslim non-governmental organisations organised a seminar and brought in some bogus speakers who then proceeded to tear into Islam, would Muhyiddin and the storm-troopers have accepted that initiative as an intellectual exercise.
We don’t believe so. They would have rioted.
In Malaysia, when we talk about each other’s religion, we must use words that heal, not hurt each other. That session on May 6 was designed to demonise and denigrate Christians and Christianity.
Muhyiddin’s written reply just continues the hurt. And to think, this man is the Deputy Prime Minister of Malaysia.
Posted: 20 Jun 2014 04:19 AM PDT
Universiti Teknologi Mara’s (UiTM) reply to allegations about overblown costs in privatised campus constructions is proof that the claims of abuse have merit, said PKR.
Pandan MP Rafizi Ramli in a statement today said that UiTM management’s reply in not denying the allegations of cronyism but only addressing the merits of private finance initiative (PFI), is in fact an affirmation.
‘UiTM’s media statement last night represents the first official response in a week after my expose…
“However, the UiTM management has not at all denied my expose regarding who the Umno cronies who are behind the concessions are.
"(In doing so), UiTM's management has in fact helped confirm that the facts regarding the cronies behind the concession companies and the increase in the cost that been brought up by me is true," said Rafizi, who is PKR's director of strategy.
Rafizi Ramli last Thursday alleged while the original cost for six UiTM campuses was only RM1.8 billion, the government will end up forking RM8.6 billion for all the six campuses after signing concession agreements to have private firms construct and manage them.
He noted that all the university could explain was that the PFI that the outsourcing entails would financially benefit UiTM.
Rafizi said the argument was flawed and listed a number of problems with UiTM’s reply.
‘No tender, lopsided contracts’
He said UiTM's implementation of the private finance initiative (PFI) was flawed because it was awarded through direct negotiations instead of open tenders, and the awarding of contracts to inexperienced companies that seemed only to have been set up to clinch the contracts.
"The crony companies involved do not have experience in handling a big project. This will cause many problems like facilities not built according to specifications and improper maintenance during the execution of the project" said Rafizi.
He said it would also be a burden to the rakyat in the long run because of the allegedly lopsided deals, just as was Selangor’s experience with several other projects that Pakatan had been saddled with from the previous Umno government.
"Through this privatisation, the cost of construction has bloated to RM8.6 billion instead of the original cost of only RM1.8 billion."
He said the rental that has to be paid by the university to the concessionaires this year alone has surpassed 14 percent of the allocated budget.
"When completed, the rental that has to be paid by UiTM to the concessionaire will be their biggest financial burden annually," he said.
Rafizi warned this may eventually force UiTM to have to cut costs in various areas including sizing down their staff, cutbacks on upgrading of facilities and increasing student's accommodation rent.
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