Wednesday, January 23, 2019

Gota: The American Solution

20 January, 2019

Who will be our presidential candidate? This is the question on the minds of the rank and file of the Sri Lanka Podujana Peramuna (SLPP), or ‘Pohottuwa’ party, that has, since the recent constitutional crisis quietly shed its earlier moniker ‘the Joint Opposition’.

It is no secret that many senior leaders of the movement whose last names, not least the residents of No. 117 Wijeyarama Mawatha, are wary of nominating a candidate who cannot be relied upon to use the Executive Presidency as a vehicle to restore former President Mahinda Rajapaksa to his throne.

The idea of a candidate with his own ‘sunlight’ or ‘erudite path’ blazing his own trail and leaving the former President in the lurch has long perturbed members of the former first family as well as Pohottuwa heavyweights such as Kumara Welgama and Vasudeva Nanayakkara.

Last Saturday, when former Defence Secretary Gotabaya Rajapaksa said that he was ready to contest a presidential election to thunderous uproar from his supporters amongst the ultra-right wing of the Pohottuwa alliance, the rest of the party reacted with little more than the most deferential and respectful glances of “I warned you” directed at the former President.

Gotabaya Rajapaksa repeated his eagerness to contest the Presidency with the chuckle and grin he typically reserves to celebrate the murder of Lasantha Wickrematunge, as he was leaving the Permanent High Court where he faces charges of pilfering tens of millions of taxpayer rupees.

His detractors have found some solace in Article 91 (1) (d) (xiii) of the Constitution, which bars any person from being elected to Parliament or the Presidency “if he is a citizen of Sri Lanka who is also a citizen of any other country.”

The former Defence Secretary, after all, is a proud and unashamed citizen and passport holder of the United States of America, and has been, for over 16 years. Lt. Col. Gotabaya Rajapaksa was serving in the Gajaba Regiment of the Sri Lanka Army during the breakout of “Eelam War II” and the massacre of over 700 police officers by the LTTE Eastern cadres led by Karuna Amman in June 1990.

As the violence escalated, in 1991, he applied for permanent residency in the United States, and petitioned the army for early retirement, ostensibly to allow him to travel to the United States and obtain permanent residency in that country. After being granted early retirement from the army, Rajapaksa did not, however, travel immediately to the United States.

Instead, he joined the private sector in Colombo, working in the Information Technology fields for employers including Gamini Wickremasinghe’s Informatics Group and the Capital Maharaja Organisation. After moving to the United States, Rajapaksa took up residence in the eastern suburbs of Los Angeles, California. After several years of odd jobs, sweat and toil, the former army officer realized his ‘American Dream’ on January 31, 2003, when he was granted citizenship by the United States of America.

Persons who are granted citizenship of the USA do so, among other considerations, by swearing the following oath: “I hereby declare, on oath, that I absolutely and entirely renounce and abjure all allegiance and fidelity to any foreign prince, potentate, state, or sovereignty, of whom or which I have heretofore been a subject or citizen; that I will support and defend the Constitution and laws of the United States of America against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I will bear arms on behalf of the United States when required by the law; that I will perform noncombatant service in the Armed Forces of the United States when required by the law; that I will perform work of national importance under civilian direction when required by the law; and that I take this obligation freely, without any mental reservation or purpose of evasion; so help me God.”

Through this oath, Rajapaksa renounced and abjured all allegiance and fidelity he may have once had to the Republic of Sri Lanka, in pursuit of greener pastures. In sworn testimony he gave before Mount Lavinia District Court Judge R.A.D.G.C. Ranawaka in 2010, Judge Ranawaka pointedly asked Rajapaksa whether, during his period of US citizenship, his fidelity was indeed to the United States of America.

“According to the law, that may have been so,” the Defence Secretary testified. “But in my heart I loved Sri Lanka,” he confessed. Rajapaksa also told Judge Ranawaka that he sought to retire from the army “specifically because of the prospect of obtaining this Green Card.”

Gotabaya Rajapaksa returned to Sri Lanka in mid-2005 to support his brother’s winning Presidential campaign. On December 13, 2005, through gazette notification 1423/4, President Mahinda Rajapaksa appointed his brother Gotabaya Rajapaksa as Secretary to the Ministry of Defence, effective November 24, 2005. At this time Rajapaksa was still a citizen of the United States of America, and not a citizen of Sri Lanka. Gazetted under Rajapaksa’s Ministry was the Department of Immigration and Emigration, which administered matters relating to dual citizenship.

‘Dual citizenship’ is the process under the Citizenship Act that allows for those who have given up their citizenship of Sri Lanka or intend to do so to become citizens of another country, to regain Sri Lankan citizenship at the discretion of the Government. Dual citizenship certificates, when issued, are signed by the line minister and ministry secretary.

For the first time in Sri Lanka’s history, in 2006, the Ministry Secretary signing dual citizenship certificates on behalf of the State, Gotabaya Rajapaksa, was himself a citizen of another country, the United States of America. It was indeed during Rajapaksa’s tenure as Defence Secretary that he himself was granted dual citizenship, although it remains unclear whether or not the Secretary indeed signed his own dual citizenship certificate, setting yet another record.

Indeed, the former Defence Secretary is seeking to add another record to his belt by becoming the first foreign citizen to become Sri Lanka’s Head of State. It is this ambition that has been stymied by Article 91 (1)(d) (xiii) of the Constitution, which was enacted by the 19th Amendment to the Constitution in July 2015. All political parties in Parliament supported the 19th Amendment, passed under Speaker Chamal Rajapaksa, with only a handful of MPs voting against or abstaining from voting.

The former Defence Secretary has been coy on the issue of his American citizenship over the last year, signalling to confidants variously that he has revoked it, is in the process of revoking it, or is about to begin the process of revoking it.

In fact, the process of renouncing US citizenship is far simpler than the Presidential aspirant would have many believe. The US State Department has a handful of forms that need to be filled out and submitted to complete the process. The first is form DS-4079, which is a ‘Request for determination of possible loss of United States citizenship’, which must be signed and submitted to a consular officer at an American Embassy. According to official US government estimates stated on the form itself, a DS-4079 should take no more than 15 minutes to fill out.

Then, DS-4080 is an “Oath of renunciation of nationality of the United States”. It requires the aspirant to swear as follows: “I desire and hereby make a formal renunciation of my U.S. nationality, as provided by section 349(a)(5) of the Immigration and Nationality Act of 1952, as amended, and pursuant thereto, I hereby absolutely and entirely renounce my United States nationality together with all rights and privileges and all duties and allegiance and fidelity thereunto pertaining. I make this renunciation intentionally, voluntarily, and of my own free will, free of any duress or undue influence.”

DS-4081 is a “Statement of understanding concerning the consequences and ramifications of renunciation or relinquishment of U.S. nationality”. Once these three forms have been submitted to a consular officer, that officer and a supervisor fill out form DS-4082, which is a witness statement documenting and certifying the request by a US citizen to renounce their nationality.

After the forms are processed and the renunciation is complete, the embassy would issue a certificate in the form of DS-4083, which is a “Certificate of loss of nationality of the United States.”

Ever since Rajapaksa returned to Sri Lanka from the United States after the February 2018 Local Government elections eleven months ago, his proponents in what was then the ‘Joint Opposition’ teased the public with claims that the former Defence Secretary has “begun the process” of renouncing his US citizenship. UPFA MP Wimal Weerawansa echoed this claim in a public address just this last week.

Be that as it may, there is no evidence to date that Gotabaya Rajapaksa has even filled out and submitted the first of the three forms required by the US government, the DS-4079, that would in fact begin the process of renouncing his US citizenship. At least for the time being, the former Defence Secretary appears to have too many higher priorities to justify the 15 minute ‘estimated burden’ that it would take to fill out this form. Unless, that is, his plans are of a completely different nature entirely.

Sri Lanka seeks regional bailout as balance of payments crisis looms

Colombo looks to India and China for financial assistance and renegotiates with IMF

Sri Lanka is in dire straits as the debt-strapped country confronts a looming balance of payment crisis. © Reuters

MARWAAN MACAN-MARKAR, Asia regional correspondent-JANUARY 21, 2019 15:01 JST

COLOMBO -- Sri Lanka is turning to key Asian allies for a financial lifeline as a balance of payment crisis looms over the debt-strapped South Asian island. It is in discussions with India and China in a desperate effort to meet unprecedented foreign debt obligations.

The Reserve Bank of India agreed earlier this month to provide a $400 million currency swap facility to the Central Bank of Sri Lanka. "The RBI's very rapid and timely assistance will serve to boost investor confidence by supporting Sri Lanka to maintain an adequate level of external reserves," CBSL said in a statement.

The Bank of China is meanwhile reported to have offered a $300 million loan.

On Thursday, Indrajit Coomaraswamy, the governor of Sri Lanka's Central Bank, told a public forum in Colombo that both the RBI and the Bank of China are considering plans to scale up their respective offers to $1 billion each. "Sri Lanka's friends, the two regional giants, have stepped up to support us in this time when we were pushed into a rather difficult corner," he told the meeting hosted by the Ceylon Chamber of Commerce.

Sri Lanka's foreign exchange reserves were down to $6.9 billion at the end of last year, when investors were spooked by political turmoil that brought down the island nation's ratings.

Last week, CBSL revealed that Sri Lanka has paid back a $1 billion international sovereign bond by dipping into foreign exchange reserves after attempts to raise funds from the international bond market failed. There is a record debt of $ 5.9 billion that must be met by the end of 2019, and foreign reserves will be severely depleted if Sri Lanka has to carry on in this way.

The $87 billion economy is saddled with unprecedented debt. Banking sources in Colombo estimate maturing loans between 2019 and 2022 to be around $20.9 billion.

China is emerging as Sri Lanka's lender of last resort. Bank of China opened an office in Colombo last year, and financial industry insiders here told the Nikkei Asian Review that China offered to help when Sri Lanka tried to raise dollars from international capital markets. "They once offered to buy an entire sovereign bond issue because they have so much cash," one source said. "But that was declined in the interest of diversity."

Chinese banks have financed a number of major infrastructure projects in recent years. Verite Research, a Colombo-based think tank, estimates that China accounts for nearly 15% of Sri Lanka's external debt, which was estimated to be around $53.1 billion at the end of 2018. The largest part of the country's foreign loan portfolio is in dollar-denominated international sovereign bonds, estimated to be nearly 50%, followed by debts to Japan, the Asian Development Bank and the World Bank.

The Science And Myth Of Aji-no-moto

By Tharosa Missaka Rajaratne –JANUARY 23, 2019

Tharosa Missaka Rajaratne

Commonly called food myths such as “chocolate is an aphrodisiac”, “garlic induces fever when kept under one’s armpit” and many other are heard from every corner of the world since the beginning of the human order. But along with scientific advancement, human kind learned to scientifically explain some of these phenomena. However, controversies prevail among the commoner either due to extreme social beliefs or complexity of scientific explanations to those phenomena. Extreme social beliefs are often caused by hoaxes which pass down from generations. For instance, many Sri Lankans tend to believe that and foreign foodstuffs are unhealthy and thus their consumption cause cancer, infertility, and bone decay etc. Most of these beliefs lack scientific evidence or explanations and are strictly based on either hypothetical or isolated incidents which everyone claims as “thus have I heard”. Monosodium glutamate (MSG), better known as ‘Aji-no-moto’, has confronted with tremendously discussed culinary myths. Unlike other countries do, Sri Lanka generally perceives completely different beliefs about MSG. In the recent past, MSG gained attention in Sri Lankan media after revelation of alleged usage of it as an effective substitute to the notorious herbicide Glyphosate which was banned from importing. This raised alarm in the country that MSG is not only carcinogenic, as previously claimed, but also is extremely toxic and thus it causes bone decay, cancer etc. This social perception encouraged examination of scientific literature of MSG. This review thus intends to distinguish science from myths of MSG.

HISTORY OF MSG AND AJI-NO-MOTO:

During the early 1900s, Kikunae Ikeda, a Professor of Chemistry at the Tokyo Imperial University of Japan, conducted a series of tests on a popular seaweed known as Kombu (Laminaria japonica), an ingredient of many Japanese cuisine, after noticing that whenever Kombu was assimilated with the Japanese broth Dashi it produces savory-like taste, which did not fit into any of the scientifically described basic tastes at that time: sweet, sour, salty, or bitter. Moreover, he learnt that the addition of Kombu would likely enhance the overall flavor of the broth, and thus named this new unknown class of flavor as “Umami”, which translates roughly into ‘savory’ in Japanese. This new class of flavor is now widely accepted as the fifth taste.

The flavor enhancing component was determined to be the Glutamate ion and was extracted as its Single Sodium salt Monosodium Glutamate (MSG). His aims were to extract the flavor-causing compound as a stable solid, and also to commercialize the process, which resulted in the establishment of the popular brand “Aji-no-moto” (味の素) in 1917. The word Aji-no-moto gives a compound meaning derived from each Chinese character: Aji – Taste, no – of, Moto – Essence. And so the literal meaning is “essence of taste.” Yet the contextual meaning of Moto also refers to refining and enhancing. Therefore, the meaning of Aji-no-moto could also be identified as “Refiner of Taste” or “Taste Refiner.” Starting from a production of mere 4.7 tons in Japan in 1910 and continuously increasing into multi-million ton, multinational production of MSG as of now since the establishment, Ajinomoto Co. has secured themselves as the tycoon in the MSG industry and acquired an undisputed monopoly in branding to the extent that MSG to be colloquially recognized as Ajinomoto among the commoner. Three methods have been employed to produce MSG throughout its history; Hydrolysis of vegetable proteins with Hydrochloric Acid (1909-1962), Chemical Synthesis with acrylonitrile (1962-1973), and Bacterial Fermentation (Current Method). The fermentation process is much similar to that of any other ordinary yogurt or vinegar making method and the ingredients used are generally tapioca, sugar beets, sugar cane, and molasses. Upon the production of MSG in a commercially feasible stage, MSG was available to be purchased conveniently more than ever and was used extensively in the East and South Eastern cuisines like Chinese, Korean, and Japanese.

MSG AND CHINESE RESTAURANT SYNDROME:

The inception of social discontent towards the usage of MSG emerged in 1968, after a paper was published in the New England Journal of Medicine by Robert Ho Man Kwok in which he described a list of symptoms he experienced after eating at Chinese Restaurants. His symptoms included “numbness at the back of the neck, gradually radiating to both arms and the back, general weakness and palpitation” (Kwok, 1968). Furthermore, he suggested various possible causes for the aforementioned symptoms, of which the usage of alcohol, salt, and MSG in cooking were prominent. Since the symptoms developed mainly via Chinese restaurants, the author coined the complex of symptoms as Chinese Restaurant Syndrome (CRS). Since then, numerous self-limited and isolated incidents relating to CRS started to appear in the society alongside Kwok’s paper, and MSG was mainly focused and often blamed to be the cause of CRS.

The list of symptoms has since then been updated adding to it more symptoms such as headache, flushing, muscle tightness, and asthma attacks etc. The scientists have been conducting an array of tests to verify the role of MSG as a causative of CRS but they have made no conceivable explanation so far. Sodium Glutamate: A Safety Assessment (Food Standards Australia New Zealand, 2003) is a scientific assessment report that presents in-depth analyses of Kinetic and metabolic activity of MSG and scientific reviews of previously conducted experiments on MSG and CRS. These tests have been conducted as double blind placebo controlled experiments (DBPC) to minimize experimental bias since most of the participants were self-identified as MSG sensitive. Notable studies of this sort include Tarasoff and Kelly (1993), Yang et al (1997), and Geha et al (2000). Almost all the studies have failed to show any broad statistical correlation of MSG as CRS causative because many participants failed to produce consistent observations (symptoms) to each relevant test (the MSG containing test), showing that the MSG is very unlikely to have a correlation with CRS symptoms among the participants. It also should be noted that while the average consumption of MSG in the United Kingdom is 0.59 g/day and extreme consumption (Consumers of the 97.5th percentile) is 2.33 g/day (United Kingdom – Rhodes et al, 1991)), some of these tests conducted have administered extreme doses of MSG such as 6 g (Altman et al, 1994), 7.6 g (Germano et al, 1991), 18.5 g (Wilkin, 1986), 147.0 g (Bazzano et al, 1970) per day to the participants, which are very unlikely to be have ingested in practical customary levels even at extreme occasions, have shown that the symptoms were irreproducible with consistency.

Tuesday, January 22, 2019

Israel intends to persecute Palestinians, rights groups say

Israel has killed nearly 200 Palestinians during Great March of Return protests.Mohammed ZaanounActiveStills

Maureen Clare Murphy Rights and Accountability 21 January 2019

Israel is persecuting Palestinians – a crime against humanity – a Palestinian human rights group and an American law center state in a report submitted to UN investigators earlier this month.

“Israeli occupation policies and practices, including the now 11-year-closure of Gaza, that actively deny Palestinians the right to self-determination collectively amount to persecution, a crime against humanity under international law,” the submission to the UN commission of inquiry into Israel’s use of lethal force against Gaza protesters states.

The 57-page submission was authored by Defense for Children International Palestine and the Human Rights and Gender Justice Law Clinic at the City University of New York School of Law.

The commission of inquiry was established by the UN Human Rights Council in May last year following the massacre of more than 60 protesters in Gaza in a single day that month. More than 180 Palestinians have been killed during Great March of Return protests since their launch on 30 March 2018.

Israel declared that it would not cooperate with the commission of inquiry and the US, which was one of only two countries who voted against its formation, withdrew from the UN body in protest.

The panel of independent human rights experts is due to present its findings to the Human Rights Council in March.

War crimes against children

Since 2007, Defense for Children International Palestine has documented the deaths of more than 1,000 Palestinian children “as a direct result of Israeli military offensives, incursions, and explosive remnants of war,” including the three major assaults on Gaza over the past decade.

More than 35 children have been killed during Great March of Return protests, most recently Abd al-Raouf Salha, 13, who was struck in the head by a tear gas canister fired by a soldier during protests east of Jabaliya in northern Gaza on 11 January. He died of his injuries three days later.

View image on Twitter

Defense for Children@DCIPalestine

Around 4 pm on January 11, Abdel Raouf Salha, 13, was struck in the head by an Israeli-fired tear gas canister in Jabalia, North Gaza. He was 150 meters from the Gaza perimeter fence. He sustained skull fractures and severe brain trauma. He died around 5 pm on January 14.

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9:39 AM - Jan 16, 2019

At least 16 additional children in Gaza were permanently disabled last year due to Israeli military actions, according to Defense for Children International Palestine.

“In the overwhelming majority of cases, [Defense for Children International Palestine] was able to confirm children did not present any imminent, mortal threat or threat of serious injury at the time Israeli forces resorted to the intentional use of lethal force against them,” the submission to the UN inquiry states.

“Critically, Israeli forces’ repeated use of intentional lethal force against civilian protesters resulting in the killing or maiming of children where they posed no imminent threat to life amounts to war crimes.”

There are no reports of protesters shooting at or wounding, let along killing, Israeli soldiers, the rights group and law center add: “No Israel civilians have been killed or injured as a result of the demonstrations and no member of the Israeli forces has been killed by persons participating in the protests.”

Israel’s use of lethal force against unarmed protesters, killing nearly 200 and injuring thousands more, fails to satisfy strict tests of necessity and proportionality required under international law.

The predictable outcome of Israel’s use of live fire against unarmed protesters satisfies the elements for the crime of murder under the Rome Statute, Defense for Children International Palestine and the CUNY law school clinic argue.

The Rome Statute is the founding treaty which spells out the international crimes subject to the jurisdiction of the International Criminal Court at The Hague.

The situation in the occupied West Bank and Gaza Strip has been under preliminary examination by the International Criminal Court since 2015. Its chief prosecutor issued an unprecedented warning to Israeli leaders last year that they may face trial for the killings of unarmed protesters in Gaza.

“Intent to persecute”

Israeli leaders have stated that snipers are authorized to use lethal force against demonstrators, further indicating that the open fire orders are in furtherance of state policy.

“Criminal liability applies to both the individual Israeli forces who have targeted and killed civilian protesters without justification, and their civilian superiors and military commanders,” the submission to the UN inquiry states.

Public statements by Israeli officials also “illustrate the intent to persecute a group of people,” the submission adds.

“The Israeli Defense Forces Twitter account as well as the public statements made by high ranking government officials consistently describe the civilian population of Gaza as ‘terrorists’ deserving of their punishment.”

Israel’s military and political leadership have sought from the beginning to portray the Great March of Return as a Hamas stunt exploiting civilian protests as a cover for “terror” activities which pose an existential threat to Israeli communities near the Gaza boundary.

Israel seeks to obscure the reality that the Great March of Return is a popular mobilization that includes the participation and leadership of Palestinians of all political stripes who seek an end to the siege and to exercise their right to return to lands just over Gaza’s boundary with Israel from which their families were expelled 70 years ago.

“Such statements illustrate discriminatory speech that aims to create the narrative that the protesters are all terrorists and thus it is justified to kill them,” the report submitted to the UN commission of inquiry states.

“These statements must be understood in the context of operational policies and government practices that have caused, and continue to cause, and indeed, are intended to cause, the severe denial of fundamental rights to Palestinian civilian[s].”

Is the World Prepared for the Next Financial Crisis?

New regulations and reforms have helped, but major threats still loom.

Traders work on the floor of the New York Stock Exchange after the closing bell on Sept. 29, 2008. At the time, the Dow recorded its biggest closing drop in history, falling 777 points. (Spencer Platt/Getty Images)

BY CHRISTINE LAGARDE-22 January 2019

The world in 2019 is still reckoning with the legacy of the global financial crisis, which is hardly surprising given its scale and lasting impact. Ten years on from the Lehman Brothers collapse, one question about the financial system keeps coming up: Are we safer than we were in 2008? The short answer is yes—but not safe enough. While there has been marked progress, more needs to be done, including keeping pace with potential new risks from a rapidly evolving financial landscape.

First, the progress. Banks have bigger and better capital buffers and more liquidity. Countries have taken steps to address systemic risks posed by institutions seen as too big to fail. Regulation and supervision have been strengthened; many countries have stepped up their focus on monitoring financial stability, and many now also conduct regular stress tests to check banks’ health. A substantial portion of trading in over-the-counter derivatives has shifted to safer central clearing systems.

For its part, the International Monetary Fund (IMF) has improved its ability to analyze and monitor sources of systemic risk. It has partnered with national authorities to help them identify potential trouble spots, such as excessive consumer or corporate debt; develop tools to curb risks; and strengthen analysis of their financial systems.

What about areas where progress has been inadequate or where new risks have emerged?
Let’s start with debt. Globally, nonfinancial debt ballooned to a record $182 trillion in 2017—224 percent of global GDP, an increase of almost 60 percent over 2007. In the United States, investor demand for debt issued by highly leveraged companies has led to worryingly loose underwriting standards, increasing the risk of default by weaker borrowers. In emerging markets, public debt is at levels last seen during the 1980s debt crisis. And if recent trends continue, many low-income countries will face unsustainable debt burdens.

[2019 could be a defining moment for U.S. trade policy, Douglas Irwin writes.]

Nonbank finance, also known as shadow banking because it takes place beyond the perimeter of traditional bank regulation, is another source of risk. Regulators must develop and deploy new tools to address it, particularly in those emerging markets where it has expanded rapidly.

At the same time, new challenges have emerged, including the danger of cyberattacks on banks and stock exchanges. Financial innovation and technology hold out the promise of better, cheaper, and more accessible services but also pose risks for consumers, investors, and the economy’s overall financial stability—risks that are not always easy to understand or anticipate.

And for all the progress to strengthen the financial sector, the revamped architecture remains untested. If financial conditions were to tighten sharply—for example, via unexpectedly higher interest rates or a sharp drop in asset prices—this could expose areas of vulnerability that have built up during a decade of record-low interest rates. In the last year, we have already seen some investors pull money out of emerging markets in response to a stronger dollar, rising U.S. interest rates, and trade tensions. IMF calculations show that with an abrupt tightening, there is a chance—albeit a small one—that capital outflows from these economies (excluding China) could reach $100 billion. That would broadly match outflows during the financial crisis.

Looking at the economic context, there are several sources of risk that could shake investor sentiment. Global growth, while still strong, is leveling off. Support is waning for the open, rules-based international system that has fueled global prosperity, and trade tensions could escalate.
Uncertainty about fiscal policy in Europe is reviving worries about the self-reinforcing nexus of government and bank debt that shook the eurozone in the first years of this decade. Finally, central banks must navigate the end of an unprecedented monetary experiment. In the United States, the Federal Reserve may need to raise interest rates higher than currently anticipated if tax cuts combined with fiscal stimulus fuel faster-than-expected inflation.

So how should policymakers respond? First, they must complete financial regulatory reforms and, just as important, resist pressure to roll them back. Bank capital should be raised even further in places where buffers remain low. “Too big to fail” remains a problem as banks grow larger and more complex. More progress is needed on procedures for resolving, or winding down, failing banks, especially those that are active across borders. Regulators should encourage banks with weak business models and high levels of nonperforming loans to clean up their balance sheets.

[The world’s authoritarians are on the march—and the West helped pave the way, Robert Kagan writes.]

Second, policymakers should rebuild their fiscal and monetary arsenals, which were weakened as they contended with the 2008 crisis and its aftermath. Doing so will require reducing budget deficits and gradually bringing interest rates back to normal levels as economic conditions permit.

Governments should also work together to reduce excessive global imbalances in a way that supports sustainable growth. Flexible exchange rates can help absorb shocks. Steps to boost lagging productivity would counter demographic headwinds and raise growth, which in turn would support efforts to bolster fiscal and monetary room for maneuver.

Finally, as we consider the lessons of the crisis and the path forward, we must also recognize and confront more profound, longer-term risks to financial—and social—stability. Climate change is one that threatens all of us, low-income countries in particular. Advanced economies must ensure that prosperity is more widely shared, by dealing with rising inequality and stagnant wage growth. All countries need to educate and train workers for automation and the fast-changing workplace of the future.

Many of the measures that might make the world safer than it was before the last crisis depend on international cooperation—on matters of trade and finance but also on a number of global public-good problems, including the environment and refugees. The stakes are just as high as they were in 2008.

This article originally appeared in the Winter 2019 issue of Foreign Policy magazine.

Could Vietnam’s political clamp down threaten its economic growth?

000_1AY3SB-940x580 — Vietnam's Prime Minister Nguyen Xuan Phuc (R) and his Russia's counterpart Dmitry Medvedev (L) review an honor guard during a welcoming ceremony at the Presidential palace in Hanoi, Vietnam, 19 November 2018. Medvedev is on an official visit to Vietnam from 18 to 19 November 2018. Source: Minh Hoang/Pool/AFP

By East Asia Forum | 22nd January 2019

VIETNAM has been on average the most rapidly growing economy in Southeast Asia for more than a decade. Its economic growth of 6 to 7 percent a year over the past half-decade rivals that of China and its exports are worth just over the total value of its GDP.

Anything from Nike sportswear to Samsung smartphones are manufactured in this hub of ASEAN global production networks.

As the United States has put the screws on trade with China, Vietnam has benefited from increased interest from multinational investors as an alternative location for low-cost production.

Thirty years ago, Vietnam was one of the poorest countries in the world. Last year, its per capita GDP at current exchange rates was just over US$2,500. Vietnam appears to be headed rapidly towards achieving middle-income levels.

SEE ALSO: North Korea seeks to model Vietnam’s economic development

Three main factors account for the rapid turnaround in Vietnam’s economic fortunes.

It has embraced international trade liberalisation with enthusiasm. It brought down barriers to trade after its commitment to membership of the Association of Southeast Asian Nations (Asean) group in 1995, gained accession to the World Trade Organisation (WTO) in 2007 and signed on to free trade agreements along the way, most recently the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11).

It’s complemented foreign trade liberalisation with domestic reforms through deregulation and lowering the cost of doing business. And it has invested heavily in human and physical capital, predominantly through public investments.

(L-R) Singapore’s foreign minister Vivian Balakrishnan, Thailand’s foreign minister Don Ramudwinai, Japan’s foreign minister Taro Kono, Brunei’s second minister of foreign affairs and trade Erywan Yusof and Vietnam’s foreign minister Pham Binh Minh pose for photographs during the Association of Southeast Asian Nations (ASEAN) – Japan Ministerial Meeting in Singapore on August 2, 2018. Source: Mohd Rasfan/AFP

While the country continues as a one-party state under the political control of the Vietnam Communist Party, economic liberalisation and reform has effected a remarkable social and political transformation that has lifted social welfare.

But economic liberalisation chafes against political control and the continuing heavy presence of the state-owned enterprise sector has been a fertile ground for corrupt officials in their dealings that intersect with the market.

Last year, a number of high-profile officials were charged with fraud connected to the state-owned PetroVietnam Construction Joint Stock Corporation and Sacom, Ocean and Vietnam Construction banks. PetroVietnam’s chief executive officer was sentenced to death and fellow executive Trinh Xuan Thanh was sentenced to double life terms in prison.

SEE ALSO: What the next Trump-Kim Summit could end up costing Vietnam

A full-fledged anti-corruption campaign reached into the highest-level of the party-state apparatus.

In January 2018, Dinh La Thang became the first member of the Party’s Politburo to be sentenced to prison in decades and Truong Minh Tuan, Minister of Information and Communications, was dismissed.

Bui Van Thanh, a deputy minister in the Ministry of Public Security, and Dinh Ngoc He, chairman of the military’s Thai Son Joint Stock Company, were arrested. Party officials in Da Nang and Ho Chi Minh cities and other provincial officials were also caught in the web.

Until a few years back, Vietnam seemed to have lost its revolutionary spirit and moral principles, and the ruling elite had begun to look more like a mafia organisation, skimming off a substantial fraction of the surpluses from Vietnam’s economic growth for private benefit.

Dinh La Thang (L), former politburo member and former Vietnam’s National Oil Company PVN (PetroVietnam), is escorted by policemen to the courtroom at Hanoi People’s Courthouse on January 8, 2018. Source: Vietnam News Agency / AFP

But since 2016, Nguyen Phu Trong has consolidated command of the Party, foiling Nguyen Tan Dung’s bid to supplant him as general secretary, and was installed concurrently as president when Tran Dai Quang died last September. Trong, an avuncular-looking political theoretician, has ratcheted up the anti-corruption campaign and doubled down against political liberalism.

In East Asia Forum’s (EAF) lead essay this week, David Brown, observes that “the public, initially sceptical that the party-state’s campaign against corruption would endure, has been impressed as indictments piled up against a long list of senior officials and businessmen.”

“Trong is the first leader in a long time to make headway toward restoring the party’s image” says Brown.

“Two years ago, the Vietnam Communist Party endorsed a list of 27 deviations, including not only ‘opportunism’ but also the notion that the Vietnamese party-state could ever evolve into a pluralist democracy. A soft purge of tainted cadres is well underway.”

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All this might sound familiar. The quest for political and moral purity, married to the consolidation of political power, alongside achieving prosperity through an open, market-based economy is what Vietnam’s big neighbour under President Xi Jinping is also struggling with, though Xi is more geopolitically exposed than Trong in Vietnam.

They are, of course, very different characters, but it is not much of a stretch to see Xi’s dream of “making China strong again” as the flipside of Trong’s “saving Vietnam from moral decay.”

The more telling comparison will be of how the struggle to restore the integrity of the Party in both China and Vietnam affects economic outcomes over time.

Certainly, political retrogression would appear to impose higher costs on an economy like China’s on the cusp of transition from middle income to advanced economy standing than on an economy such as that of Vietnam’s that is still catching up on the way to middle-income status.

Chinese President Xi Jinping (C) and Vietnam’s Communist Party Secretary General Nguyen Phu Trong (R) wave during a welcoming ceremony at the presidential palace in Hanoi on November 12, 2017. Source: Hoang Dinh Nam/Pool/AFP

Middle-income countries are defined by their distance from the global technology frontier and their ability to upgrade, catch up and innovate is important for closing that distance.

Above all, to reach the frontier, countries need to be open to ideas and have institutions that allow for more complex interactions across the domestic economy and across the world. That includes good governance characterised by decentralised economic decision-making.

So while Vietnam’s economy continues to burn along, it’s unlikely to continue to without further lifting the heavy burden of state-owned enterprises and the state. That’s the dilemma, at a different stage, for China too.

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Governance systems and institutions suited to growth and development differ vastly at different stages of development.

Those considered second-best practice such as industrial policy or quick fixes through market suppression that substitute for functioning markets may serve developing countries well enough and Asian countries demonstrate that this has certainly been true during the process of catch-up growth.

The existence of economic rents, while inefficient in theory, may stimulate entrepreneurship, investment and exports in countries at lower levels of development.

Yet these institutional and political systems may prove a substantial burden as a country tries to move further up the income and technology ladder. How Vietnam’s current political clamp down affects its investment environment and the vigour of its economic growth over time is, therefore, an open question.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

This article is republished from East Asia Forum under a Creative Commons license.