Tigers in New Zealand? The Role of Asian Investment in the Economy
R D Cremer and B Ramasamy
Institute of Policy Studies and Asia 200 Foundation, $18.00, ISBN 0 908935 03 x
New Zealand and ASEAN: The Strategic and Economic Outlook
Terence O’Brien and Sir Frank Holmes
Institute of Policy Studies, $15.00,
ISBN 0 908935 02 1
New Zealand and ASEAN: A Critical View of the Relationship
Institute of Policy Studies, $18.00,
ISBN 0 908935 03 x
The Political Economy of Social Control in Singapore
Macmillan, $52.95, ISBN 0 333 65728 4
The defining characteristic of Asian-Pacific salience in world affairs, indeed one of the decisive developments of this century, has been economic dynamism. The Asian “tigers” have grown thrice as fast as the OECD economies in the 1980-90s. Between 1960 and 1990, the east Asian economies produced the fastest rise in incomes for the biggest number of peoples in human history.
The boom economies of Asia also possess the greatest future growth prospects. Through the twin combination of expanding populations and rising disposable incomes, Asia is the world’s fastest growing consumer market. The demographic balance sheet is being changed by growing populations, ascending life expectancy and declining infant mortality rates. Long-term forecasts issued by the OECD predict that the Asia-Pacific’s share of world economic product will rise from one-quarter in 1990 to one-third in 2010 and one-half in 2040. Throughout the arc of countries from Indonesia to South Korea (the present currency crises notwithstanding), there is optimism that life will continue to get better and a willingness to work hard in order to ensure that it does.
New Zealand is perched precariously on the edge of that dynamic region. There is a double implication of this: our advanced “western” lifestyle is not sustainable without a competitive trading position, so that domestic economic reforms are not separable from external trade policies; and while our past may have lain in Europe, our future lies in the Asia-Pacific. We live in the Asia-Pacific, must survive economically and strategically in the Asia-Pacific and must define our international role at least in part through the Asia-Pacific. We are not Asians by race or culture. We are Asian geopolitically and economically.
New Zealand does not belong to a powerful regional bloc. Since the 1980s successive governments have tried to move the economy away from protected to regionally and globally competitive orientations. Convinced that a successful revolution in economic management has brought about economic gains that are structural and durable rather than cyclical and transient, New Zealand has grown into a confident, proud, determined and competitive, if still small, economic partner for Australia and Asia-Pacific countries. Trading lifelines stretch across the world, making it imperative to remain engaged with the rest of the world.
Many people have still not freed themselves of historical baggage. The old stereotypes of political backwardness and economic poverty are yet to be replaced by a general appreciation of the adaptability, dynamism and diversity of Asia-Pacific. New Zealand is now locked into the Asian economic grid. Countries that were formerly aid recipients have become major trading partners and sources of investment, technology and tourists. Asia is our biggest export market and the gap with other markets is getting wider. Cabinet ministers continue to lead delegations to Asian capital markets in search of more investment.
Closer involvement with Asia may well be desirable, inevitable and irreversible. The books under review help to explain why the process will be neither easy nor smooth. Mutual adjustments and accommodation will be required. All four attempt to describe Asia in different ways and from different vantage points. The Cremer and Ramasamy monograph shows the merits of scholarship presented in accessible style and format; the O’Brien and Holmes essays demonstrate the advantages of sometimes departing from scholarly analyses; the Vasil volume underscores the need for and benefits of rigorous scholarship; the Tremewan book confirms that sophisticated scholarship can still produce a fundamentally flawed result.
Are the Asian tigers predators and New Zealand their helpless prey? Cremer and Ramasamy explore this question with respect to Asian investment in New Zealand. Their monograph is a model of accessibility of economic and trade debates to the interested but non-specialist reader. The questions they pose and the answers they provide are vital to New Zealand’s prosperity and wellbeing and I hope their analysis will be widely read. In recent times far too many people have rushed to pronounce on economic matters while proudly proclaiming ignorance of economics.
Cremer and Ramasamy explain the impact of investment on the national economy in today’s globalised world. They describe how New Zealand is linked to the regional and world economy and why investment from capital-surplus Asia is important to us. Our domestic savings rate is simply not enough to sustain a viable rate of growth. New Zealand is an attractive destination for international capital because of its stable polity and liberal economy. Trade and investment are interlinked elements in the global economy; we cannot focus on exports while closing off our own markets to foreign traders and capital. Integration and interdependence have contributed greatly to rising living standards around the world. The price of fortress New Zealand will be a lower standard of living and a higher social deficit.
Cremer and Ramasamy note two little appreciated but important facts: New Zealand investment in Asia is higher than the other way round; and both are small in comparison to regional and global capital flows. Opposition to Asian investment reflects ignorance and inchoate fears of loss of political-cum-economic sovereignty, and of being swamped by untrustworthy Asians. The facts are that only 2% of the country’s firms are foreign-owned; only 0.5% are Asian-owned; and about one-third of all jobs are directly or indirectly related to the foreign-owned firms.
Economic relations with other countries of course entail much more than just investment flows. North Asia (China, Taiwan, Japan and South Korea) has emerged as a major economic partner. But the range of relations New Zealand has with South-east Asia is far broader, not the least because of old Commonwealth connections.
The pamphlet by O’Brien and Holmes is two discrete essays. They are both the length of an article. This poses some problems. Neither is a substantial discussion of the important relationships. Holmes offers a menu or wishlist of further consolidation and deepening of the economic relationship, including linkages between CER (the closer economic relationship free trade agreement with Australia) and the ASEAN Free Trade Area (AFTA).
There is little to quarrel with in the general prescriptions for complementary unilateral, bilateral, regional and global strategies of economic and trade reforms. They must also be coherent and consistent. Holmes warns us against closed regionalism and is a proponent of enhanced cooperation, facilitation and liberalisation of trade and investment under APEC (Asia-Pacific Economic Cooperation) and WTO (World Trade Organisation) auspices. There are brief references to “concerted unilateral liberalisation” where uniform target dates are set for free trade but the pace and sequence of liberalisation is left to individual countries; and “competitive liberalisation” by regional arrangements in the Americas and across the Pacific and the Atlantic. Unfortunately, Holmes simply lacks the space to develop his arguments or rebut the counter-arguments, for example, for targeted industry policy or reciprocity of trade concessions.
Holmes and O’Brien agree that ASEAN’s political cohesion and growing economic strength have given the organisation disproportionate international influence. They also agree that New Zealand is viewed by ASEAN as a friendly, reliable and constructive diplomatic partner. We lack the resources that Australia can bring to bear on negotiations with ASEAN. But we are less prone to lecture or preach and more attuned to the ASEAN way of consultation and consensus based on collegiality, personal contact and informal networking.
On the other hand, as ASEAN has grown in weight and stature, it has less time and inclination to focus on New Zealand. This increases the importance of acting in concert with Australia. Yet, as O’Brien notes, “in style, judgment and ambition”, New Zealand is also distinct from Australia. Indeed, at times ASEAN officials use New Zealand as the channel to communicate concerns and complaints to Canberra.
O’Brien’s essay ranges far and wide. That is its strength, in that he has much of interest to say. But it is also the major weakness of his essay, in that it lacks the clear focus of an article. Thus he asserts that New Zealand should support China’s entry into the WTO. But he is neither able to develop this argument nor show its relevance to the relationship between New Zealand and ASEAN. It is similarly frustrating that someone of his experience, ability and intelligence is denied the opportunity to elucidate a number of other propositions which strike one as open to debate. Has ASEAN shown unanimity in reaction to Chinese assertiveness in the Spratlys (p6)? Do United States exports to South-east (not east) Asia exceed those to Latin America and the Middle East combined (p7)?
O’Brien also fails to draw any conclusions on the run-down state of our defence force in constricting our ability to remain engaged with the defence forces of the region. Where for two centuries New Zealand fought against its geographic reality in seeking security from Asia in the defence, trade and immigration spheres, it now seeks security in Asia through cooperative security and economic arrangements. Can this be sustained without a significant upgrade of our defence forces?
O’Brien and Holmes make some effort at balance and judiciousness. The same cannot be said of the Vasil volume which is critical solely of the New Zealand end of the ASEAN-New Zealand relationship. It contains a series of statements by Vasil based on a series of interviews with unnamed senior ASEAN officials. The concluding section consists of a dozen recommendations, some of which are of the more obvious variety than others (for example, “we should try to maintain our positive image”: recommendation 8). Others are more contentious, except that Vasil shies away from the logic of contention: can the New Zealand media be reined in other than by censorship and control? Vasil is liberal in using words like prejudices, ignorance and arrogance in describing New Zealand views of ASEAN. Yet his own lengthy quotes from ASEAN officials provide ample evidence of similar attitudes towards New Zealand. Remarkably, even within a slim volume, some quotations are repeated. (pp26-27, p62)
Nor does Vasil explore apparent contradictions and inconsistencies. ASEAN officials make a point of praising New Zealand in comparison to Australia as a dialogue partner (pp14-16); Vasil prescribes joint Australia-
New Zealand dialogue status in ASEAN (p62) (in which the New Zealand identity would surely be submerged). ASEAN officials underline New Zealand’s positive image compared with Australia’s (pp8-9); Vasil recommends that
New Zealand should match Australia’s commitment and intentions. (p61) New Zealand is described by one ASEAN official as lacking market size and potential to be of interest to ASEAN, while another admonishes New Zealand for thinking it is too small an economy to be of interest to ASEAN. (p27, p31) Assertions abound, without being backed by figures or sources. We are told that “there is far more ASEAN investment in New Zealand” than the other way round, and hence the prescription for a more balanced relationship. (pp30, 61) Cremer and Ramasamy inform us (p1) that in 1995 Asian investment in New Zealand was $694 million, compared to New Zealand investment in
Asia of $816 million.
Yet the need for Vasil’s apparently trite observations is demonstrated by the Tremewan book. Vasil comments that New Zealand attitudes are “based on a notion of belonging to a different, superior and civilised world”. (p37) Tremewan’s analysis of Singapore seems to be based on this notion. Where Vasil has nothing critical to say of ASEAN, Tremewan cannot find anything good in Singapore that does not have a sinister underlay.
Social control is inherent in any society, political control in any polity. That the Singapore government can be obsessive, paranoid, petty-minded and prone to authoritarian tendencies is not in serious dispute. But Tremewan fails to contextualise Singapore’s sensitivity in terms either of the history of coercion in western societies during the
industrial revolution or of continuing third world poverty, say in nearby South Asia or of its own history, location
and volatile racial mix. The result is a seriously unbalanced book.
Many analysts have tried to locate the prosperity of east Asia in cultural (Confucian values), institutional (strong/authoritarian governments) or policy framework (realistic exchange rates, deregulated labour markets, open trade and investment regimes) explanations. Tremewan explains Singapore’s success by locating its rulers as the pliant tool of international capital. He refers always to the “PAP-state” (PAP being the governing People’s Action Party).
Tremewan has neither empathy nor sympathy for his subject. He employs quasi-Marxist language and analytic categories that were fashionable in a bygone era. The provision of public housing that ordinary workers can actually afford becomes a subtle instrument of dislocating them from communal roots, forcing them into “working class barracks” and making them dependent on the state so that they can be more efficiently controlled. The much-admired system of compulsory savings through the Central Provident Fund (CPF) is a means of enforcing state dependency and buying worker loyalty by delaying payments of part of their wages. A system of universal education becomes a means of perpetuating and reproducing class inequalities through the principle of meritocracy. Where I find a remarkable absence of racial tension in a multi-ethnic society, Tremewan discovers a public policy of “pitting Singaporeans of different linguistic and ethnic backgrounds against each other”. (pxii) And the apparent contentment of the masses is merely confirmation of how successful the government has been in institutionalising social control!
The concept of “repressive-responsive political systems” developed by Harold Crouch of the Australian National University is a more satisfying analytic prism through which to view ASEAN countries than Tremewan’s pandering to western prejudices about Singapore. As his next research project Tremewan should spend some time in the slums of Bombay and Calcutta. He might gain better insights into the degrading and dehumanising effects of Asiatic poverty from which Singapore has been lifted and into the social bases of contentment of its workers. He might even understand why Singapore can be said to have done rather better in promoting the human rights of its citizens than a supposedly liberal democratic country like India.
The Alice in Wonderland feel of Tremewan’s book is so unbelievable that it can best be conveyed in his own words. Read the book only if you are into this sort of stuff:
—The CPF “contribution by the employer is a state tax taken from the value generated by the workers themselves in production”. (p53)
—“The lower classes were forced into public housing ostensibly to improve their standard of housing but also to isolate them from political mobilisation”. (p70)
—A 70% approval rating for public housing and the government “can be seen to sustain the central argument of this study: public housing has enhanced the PAP-state’s powers of social control for the purposes of political hegemony and the development of capitalism in Singapore”. (p72)
—“The education system was fulfilling the political function of ensuring that all citizens were subject to the [social class] sorting process by extending access to state education” (p95) [translation: Singapore has achieved near-universal literacy].
—“Working class non-cooperation has been evident in low educational achievement”. (p149)
—“The main form of political struggle has not been a form of dissent but a form of cooperation: the generalised struggle to rise out of one’s class”. (p151)
—“Crime can also be seen as a form of non-cooperation and, in this sense, a political response”. (p216)
—“The working class assists in enforcing its own submission through its conscription into the military” (p222).
A question for Tremewan: if it wasn’t for Singapore’s economic miracle, social cohesion and political stability, would the academic and publishing world have had much time for a book like this on a country of under 3 million people?
All three of the Institute of Policy Studies books are by Wellington-based authors. Some sound scholarship and knowledge can be found in New Zealand universities other than Victoria. Tremewan is from Auckland University. One can only wish he will read and ponder on the advice offered by O’Brien and Vasil about learning from as well as about Asia, on the different cultural traditions underpinning governance in different countries and on the need for some humility among westerners commenting on Asia. In turn, some ASEAN leaders could learn from New Zealand about domestic civil society and extra-regional consensual diplomacy.
Professor Ramesh Thakur is head of the Peace Research Centre at the Australian National University. He was formerly Professor of International Relations and Director of Asian Studies at the University of Otago.