This post is at least a year old. Some of the links in this post may no longer work correctly.
The recent financial tsunami coming out from Wall Street has caused investors some rather anxious days and nights. The worst part is that the worst part has yet to come.
How did this mess come about? Words like “corruption”, “greed”, “excesses”, “abuse” are freely thrown about to describe corporate behaviour that’s been the cause of the upheaval.
Presidential candidates Mr Barack Obama and Mr John McCain are decrying the unbridled dealing and wheeling that go on behind the immaculate facade of the giant marbled buildings that people mistake for financial forthrightness, strength and security.
But these are the same corporate bigwigs who, year after year, lavish praise on the PAP system without attempting to see its autocratic downside. Their views are channeled through surveys and reports conducted by organisations like the IMD, PERC, World Bank, etc that Mr Lee Kuan Yew cites with unstinting pride.
But why are these organisations so enamoured with the PAP system? The simple answer is that it serves their interests. These conglomerates are given generous tax breaks, assured that local workers do not belong to independent trade unions, and told that their businesses have a say in determining the wage levels of the locals through the National Wages Council.
It’s corporate heaven.
And corporate representatives respond by heaping the PAP with accolade after accolade: naming Singapore one of the freest economies in the world, best place in which to do business, best place for expatriates to live in and so on, never mind that Singaporeans have little say in these and other matters that affect them.
But are these assessments an accurate reflection of the reality in Singapore? Undoubtedly some of them are. But before we jump to embrace them as the truth, whole truth and nothing but, let’s take a closer look at one of the most reknowned organisations, the World Bank, and how it acquitted itself in a less-than-honourable manner vis-a-vis Indonesia during the Suharto years. The account below is an excerpt from Dr Chee Soon Juan’s latest book A Nation Cheated:
Even the World Bank, in a self-flagellating report, admitted to being erroneous about Indonesia during the Suharto years. The Bank had spent $25 billion in development projects over 30 years during which the population living beneath the poverty line shrank from 60 percent to less than 11 percent in about 15 years since 1970, or so it claimed. It actively promoted Indonesia under Suharto “as one of the great success stories.”
But with everything that has happened since the 1997 Asian financial crisis, the report now concludes that the World Bank’s assessment was wrong because it paid “too little attention to a sick banking system and Suharto’s refusal to reform the legal system and open up the political system.”
The report also concluded that the Bank knew of many problems but did not want to offend Suharto’s Government. In fact the Indonesian Government was using World Bank assessments as weapons against criticism of its undemocratic practices. Even when the crisis had begun, the Bank was saying that the economic fundamentals in Indonesia were sound.
But what about the poverty-reduction that Suharto had claimed that he had brought about? Statistics are often at the mercy of their purveyor. No one had questioned the Indonesian Government when it defined poverty in Indonesia as the amount of rupiah needed to enable the poor to survive on the international norm of 2,000 calories per day.
This measure was problematic because the amount of rupiah was only about half of the US$1 that was accepted internationally as the minimum needed a day for a person to stay above the poverty line. Using its own definition of poverty, Suharto was able to tell the world that it had reduced the number of poor in Indonesia to just 30 million.
But a Northwestern University professor who was a US Agency for International Development (USAID) consultant in Jakarta in 1989 said that the World Bank had shown that the number was actually 60 million. After some wrangling between it and the Indonesian regime, the Bank caved and agreed to Suharto’s 30 million.
The USAID professor said that this was a “collusive effort” and that the number of 30 million was “a lie”. Nevertheless, the number was used over and over by Indonesia to hoodwink the international community that it had done wonders to reduce poverty in the country. Wall Street Journal wrote that the “Indonesia Government was able to strut about poverty-eradication successes, and move on to grander projects such as building infrastructure.”
(A Nation Cheated is available at Kinokuniya Bookstores and Select Books at the Tanglin Shopping Centre.)
Take a look at these points again:
1. The World bank actively promoted Indonesia under Suharto “as one of the great success stories.”
2. World Bank’s assessment was wrong because it paid “too little attention to a sick banking system and Suharto’s refusal to reform the legal system and open up the political system.”
3. The report also concluded that the Bank knew of many problems but did not want to offend Suharto’s Government.
4. In fact the Indonesian Government was using World Bank assessments as weapons against criticism of its undemocratic practices.
5. The report also concluded that the Bank knew of many problems but did not want to offend Suharto’s Government.
Is there a lesson somewhere in there for us in Singapore? Are the appraisals of the PAP system done by the international corporate sector to be accepted with blind pride? With the turmoil enveloping the corporate financial world it is, perhaps, an opportune moment for Singaporeans to question whether some of the praises that come our way are really that good for us.