Capital Control Classics

With classic timing on my part, I have chosen the very week that governments in industrializing Asia are imposing capital controls to lessen hot money inflows to disappear into the Malaysian rain forest with my little brother. Unfortunately, this update will be little more than a promissory note in lieu of a longer analysis. Look for a more complete discussion of these new control measures this coming Sunday when we reemerge from our forest retreat. By we, I mean my littlest brother Jake, who is visiting Malaysia for the last two weeks of my grant, and I.

But to tantalize you until Sunday, here is a brief rundown of the recent measures. Last October, you’ll recall that I posted about the renewed interest in using capital controls to slow hot money inflows into emerging market economies in the wake of stagnant growth and low investment returns in Western developed economies (South Korea – which strengthened its controls this past Sunday – is classified as a developed economy hence the “Western” qualifier). My post followed close on Brazil’s decision to impose a tax on portfolio investments and closely preceded a decision by Taiwan and China to restrict foreign access to some classifications of bank deposits. The decision to use capital controls to manage the unprecedented scale of capital inflows to these emerging growth champions last fall was followed this past February by the publication of an IMF Working Paper that analyzed the use of limited short-term controls on capital inflows to manage capital flows – and reached favorable a conclusion regarding their past effectiveness. The Asian Development Bank, often a barometer of opinion among Asia’s bank regulators and financial officials, in its most recent Asian Capital Markets Monitor endorsed use of capital controls to manage inflows, specifically in the context of burgeoning flows to Asia.

The latest development is that today the Bank of Indonesia, under the leadership of Acting Governor Darmin Nasution, announced a series of capital control measures designed to discourage short term investment flows in favor of longer term investments. To encourage a shift toward longer term investments, Indonesia has simultaneously imposed a one month holding period on investments in SBIs (Bank of Indonesia issued short term debt certificates), raised the interest rate on bank deposits with the central bank, and issued longer maturity central bank debt securities. These measures both impose modest penalties on short term investments while increasing the options that investors have for longer term investments in Indonesia. One other aspect of the new control measures that has gone largely unremarked in financial coverage so far is Bank of Indonesia’s decision to decrease the permissible net open FX position for domestic banks. Foreign commentators may be less interested these days in foreign exchange rate risks, especially given renewed speculation about a coming appreciation in the yuan which would most likely strengthen other currencies in the region by proxy, but Indonesian regulators have not forgotten that their country was the hardest hit in 1997 by the Asian Financial Crisis which was significantly worsened by high levels of foreign denominated debt circulating in the domestic economy.

Two quick thoughts on these developments in the world of capital controls before we head for the forest:

First, both the recent Bank of Korea and the Bank of Indonesia announcements strengthening controls in their respective countries were framed from a macro-prudential standpoint using the most cautious and conciliatory language. This is a far cry from the “Measures to Regain Monetary Independence” manifesto that Bank Negara released in Sept. 1998, which at the time was as close to a battle cry as you can muster in the language of central banks. This change in tone reflects both the preventive nature of these controls, which absent an actual crisis can more easily claim an aura of rational calm, and how far accepted wisdom on the use of capital controls has come. Central banks no longer have to declare independence from common wisdom in order to consider capital controls as a precautionary measure.

Second, who and where to next? The first question applies to the other emerging markets that are experiencing large inflows of capital. Malaysia has already largely denied that it is considering capital controls, but it is far from the only other emerging market country that has seen massive inflows seeking higher returns. The second question concerns the impact of these controls on investors’ decision calculus. Will these controls encourage longer term investments in the countries in question, motivate investors to go elsewhere, or merely redirect investors to other non-sovereign short-term investments in the country? Most likely, it will be a mixture of all three. But the answer will also depend largely on the institutional capacity of the countries in question to fairly enforce and monitor the controls and on investors’ confidence that controls will continue to be signaled and impose with similar delicacy in the future. Anyone willing to pick favorites on this one?

Ok, it’s off to the forest! More to come on Sunday!

Malaysian Maverick

Yesterday, Universiti Malaya hosted a book lecture and discussion of Barry Wain’s new book** Malaysian Maverick: Mahathir Mohamad in Turbulent Times. The panel of discussants featured Prof. Edmund Terence Gomez, an economist, Prof. Wan Zawawi Ibrahim, an anthropologist, and Dr. Ong Kian Ming, a newly-minted political scientist (also, sadly a Dukie). A special shout-out goes to Ainis for organizing logistics for the event!

Dr. Wain, a former editor of The Asian Wall Street Journal, is a tall, spare man whose lankiness seems perfectly suited to an easy-going charm that, when speaking from a lecturn, skirts the edge of diffidence. I imagine in interviews Dr. Wain’s amiability could put almost any subject at ease. By the end of his lecture he certainly had the crowd charmed – despite their conviction that he knew more than he was letting on! (Prof. Gomez called him on this last one – to raucous effect)

In his lecture, Mr. Wain highlighted some of the new discoveries uncovered as a result of his research – including a shocking secret security arrangement between Mahathir and the United States signed in 1984 when Mahathir was busy rounding the international circuit as the Southeast Asian leader highly critical of the US. He also spoke briefly on Mahathir’s ability to compartmentalize his personal relationships and his politics, partially explaining Mahathir’s ability to politically break with past associates like former Deputy Prime Minister Musa Hitam while remaining friends.

Mr. Wain’s conclusion about Mahathir’s ultimate legacy – the intensification of a money politics that has strangled Malaysia’s near-term economic prospects through an overly intrusive bureaucracy and rampant corruption – perfectly mirrors the pessimistic outlook shared by many of the academics and activists with whom I have talked. His general sentiments seemed to be shared by all of the discussants.

I can only hope that Mr. Wain’s near-term pessimism about Malaysia’s prospects proves misplaced. In the meantime, I’m still trying to get a copy of his book! Kinokuniya claimed to have it “in stock” but not shelved. A trip to Pavilion’s Times bookstore or Borders may be necessary. If only I had acted faster I could have purchased a book at the lecture.

**Really just new to Malaysia. Mr. Wain’s book was released several months ago in Singapore and internationally, only to be held pending review in Port Klang. Mahathir, himself, called for authorities to release the book, despite vocally disagreeing with the work.

Best Taxi Ride Ever

Taxi rides in Malaysia can be extremely entertaining. Over the past nine months, I’ve had some memorable traffic maestros- from a government pensioner who shouted nationalist slogans (“Malaysia Boleh!”) while making impossible, and illegal, u-turns into oncoming traffic to an eighty year-old antique who remembered driving a rickshaw for military officers back before there were taxis and now proudly boosts that his two adult sons are both private drivers, and citizens!, in the United States. But last night’s taxi ride home was probably one of the most surprising, enjoyable, and informative of my entire time in Malaysia!

Last night, Natalie, Bloquis, and I had a relaxing girls’ night out filled with eclectic discussion first over Korean barbecue in Ampang’s little Korea and later in various establishments along Changkat Bukit Bintang. When our evening wound to an end, we parted ways in separate taxi cabs. Normally, hailing a cab late in the evening in the Bukit Bintang area can be an exercise in frustration. I was pleasantly shocked when one sentence in my heavily accented Malay yielded a metered ride back to my apartment. I was even more shocked to find that my cheerful taxicab driver had, in a former life, been a banker at Bank Negara!

The usual pleasantries quickly revealed that my cab driver and I shared a fascination with international banking and Malaysian bank regulation in particular! At first, I was skeptical. I have met a number of civil service pensioners driving taxis – I can’t tell if it is because the pension benefits are less than to be desired or because a lifetime in civil service yields the connections necessary to get a taxi permit – but none who were as knowledgeable as my driver last night. My cabbie knew his stuff!

In an amazingly productive conversation twist, he revealed that Malaysia’s central bank, while exhaustive in its ability to regulate all financial firms of any stripe in Malaysia, is subordinate to Malaysia’s Finance Ministry. In a classic example of mirror imaging, I had assumed that Malaysia’s Central Bank, with its long history of thorough and professional regulation, was also politically independent. The notion of a strong central bank being an independent central bank was so firmly linked in my mind that I had just assumed BNM and the Finance Ministry were on an equal, and independent, footing.

In policy discussions, BNM’s wealth of expertise may very well provide it with de facto independence. Market skittishness over perceived political interference with a central bank also helps ensure that any policy disagreements are kept internal. But according to my taxi driver, statutorily the Finance Ministry can indeed overrule BNM – hence the reason the Finance Minister post is so tightly held. Malaysia’s current Finance Minister moonlights as Prime Minister in his free time. And during the 1997 Financial Crisis, Anwar Ibrahim’s position as Finance Minister was obviously considered a potent springboard for a potential palace coup by his one-time mentor turned opponent former Prime Minister Mahathir.

By the time the taxi pulled up to my apartment complex’s door, our conversation had progressed to a discussion of his time working in Ontario, Canada. The end of the ride came too soon – I was just on the verge of asking him for his impressions of Canada’s banking system, a Krugman favorite, when he alighted at my door.

Malaysia is full of surprises, often of mixed desirability. Last night’s taxi conversation was one of the best surprises of my time here!

Welcome to the Jungle

Taman Negara, the largest national rainforest reserve in Malaysia, was one of the few remaining adventures still on my list of things to experience while in Malaysia. I was almost worried that I wouldn’t have a chance to explore it before my time here was up, until last week when my friend Mark Laabs who is working in Shanghai emailed to arrange an impromptu visit to both Malaysia and the forest. Only a few emails and a long boat ride later we were welcomed to the jungle.

Mark, an accomplished hiker and outdoorsman, made an inadvertent but apt observation while comparing the forests back home to Malaysia’s rainforests. “I prefer hiking in temperate forests; they’re just more comfortable.” Rainforests certainly come with a few more hazards than our familiar deciduous forests back home. Constantly checking socks for leeches can make it hard to appreciate the canopy above. During the day, most of these hazards can be managed. The real challenge comes after dark when some of the more deadly creatures in the forest, vipers and their ilk, come alive for their evening hunt. Thanks to an overzealous commitment to intensity, Mark and I almost had the privilege of experiencing the forest at its most intense – i.e. over night.

Our first morning in Taman Negara, we asked the park rangers to recommend a good trail for a day hike. They recommended Latah Berkoh as a nice out and back that would take about six hours. However, only an hour after setting out, we came to a fork where the signposts revealed we had already gone halfway down the Latah Berkoh trail. At this pace, we figured we could easily hike the Kuala Terenggan loop and be back in time for an evening at one of the river restaurants right outside the park. Pleased with our decision, and that we would be putting more space between us and a loud group of tourists, we set off down the trail. After another hour of hiking we found the second fork on the trail, which should have put us half way around the loop, close to the Kuala Terenggan lodge, and already on our way back to the main camp. Unfortunately, soon after leaving the second fork we discovered two things – that the distances on the sign posts and on our maps were ridiculously inaccurate, to the tune of a couple of kilometers off, and that every time I led we would end up losing the trail. (Here, I blame Mark’s height advantage – tall people have an easier time surveying ahead, totally not a difference in skill . . .) By the time we found the trail after our second time losing it, we were both running behind on time and behind the group of noisy tourists we had passed earlier.

While the noisy group took an ill-advised swim break in some pretty leach filled waters, I chatted with their guide about the remainder of the trail after the lodge. Standing wisely with his socks still on atop a rock just barely jutting out of the water, he informed us that the trail ahead was both more difficult and would take us five hours. At this point, the last thirty minutes of those five hours would be after dark. Our options as we left the tourists in the stream seemed pretty limited – push on at top pace to make it back, spend the night at Kuala Terenggan or hope that somehow we could catch a ride with one of the boats coming down the river.

Our first sight of Kuala Terenggan made the overnight option seem out of the question. Instead of a nicely functioning lodge, the trail spilled out of the forest upon an absolutely shattered building, destroyed in a giant tree fall with no sign of even an attempt at restoration. Fortunately, the next two or three chalets we came across were in much better condition if equally abandoned. It wasn’t until we came to the last two chalets that we found any sign of recent occupancy – a solar panel installation, drying laundry, and a pride of mewling cats. Our second attempt at knocking on the doors of the two occupied chalets finally produced a sleepy-eyed older man who agreed to take us in his boat back to camp. Even scruffy from sleep, he was at that moment one of the most welcome sights in the world.

After a quick smoke break, he piled us into his boat and we set off down the river. On our way through the rapids, just the two of us and our rescuer, we passed scores of boats loaded down with a dozen tourists each. We could tell from their envious waves that they were wondering how the two of us had scored a private trip down the rapids. Instead of a hard night in the forest, we ended up maximizing our time at Taman Negara by doing both an extended hike and the rapids all in the same day – a much better outcome than we deserved after trusting the signs over the advice we received in the morning!!

That night, after our river boat dinner, I slept harder than I have in a long while. If the students in the room next door reformed their midnight drum circle from the night before, I had absolutely no clue. All I know is that I woke up the next morning just in time to enjoy the breakfast buffet that, among other, perhaps more serious hardships, we would have missed if we had spent the night in the forest.

On our last day, after a brief stroll around the canopy walk, we wound up hiking to the top of Bukit Indah (literally “beautiful hill”). After clambering over granite boulders and under fallen trees we emerged from the deeper forest into a thin copse of trees with the most incredible brilliant red bark that looked like sheer slices of crimson parchment but were moist and pulpy to the touch. Looking out from the hill top clearing, we could see wooden boats rounding the river’s curve on their way to the rapids. That restful moment seemed like a perfect time to think about why we hike and why we venture, despite the hazards, into the forest.

For Mark, the answer was reflection, the chance to explore his inner world away from the noise and chaos of the daily press. Mine was a desire to get closer to the incredible intrinsic beauty of the forest. There is an intricacy of design and a fitness of purpose layered within a living breathing freshness that makes the forest both wondrous and stunning. A few ant bites and thorn spikes, and the occasional risk of an overnight stay are more than worth it to experience such vitality firsthand.

To check out photos from the trip, visit Mark’s photo website at http://photos.laabs.net/ under Taman Negara and Kuala Lumpur

KL Expat Launch

Last night, one of my best gal friends in Malaysia, Natalie and I decided to further explore KL’s expat scene by mixing it up at KL Expat Magazine’s launch party hosted by Twenty-One. Between the two of us, one Korean and one American, we cover a pretty good range of expat-ness. We also love speculating about the true nature of the expat community here. Although diverting, our speculations are somewhat starved for material. Most of our interactions with other expats have been through frisbee, the hash, or language classes. These encounters have generally led us to theorize that the expat community is older, predominantly male, and living in either Bangsar or Mount Kiara. But we were excited about the prospect of new fodder (aka data!) for our ruminations.

When we strolled up to Twenty-One there was already a line forming. Before long, the place was packed. This is where in normal party reviews one would write “the dresses were gorgeous and the dancing was hot, hot!” Unfortunately, my immediate impression from being surrounded by expats for the first time in a long time was “oh no! I’m short again!!” The only dresses I could see (yes, they were gorgeous) were the ones on the two towering must-be-models women standing behind me. Rumor has it that there was a dance floor on the other side of those two, but I was beginning to remember the visibility problems that come with no longer being on the tall side of normal.

Natalie and I were surprised by the sheer number of women at the launch. Of course, free cocktails for ladies all night long in a country that taxes alcohol like it’s a sin probably biased the sample. Nonetheless, it was exciting to swap stories with other women and hear what brought them to Malaysia. As for age, there were a number of twenty-somethings in the crowd, but the crush was definitely skewed to the over 35. And lots of people were from out by Bukit Kiara. (Which is a beautiful area for a road run if anyone is interested . . .)

The best part of the night, for me, however came when I was explaining to Alex, the Malaysian manager of MAP, a new arts space in KL, that despite the obvious titulary contradictions North Carolina is still part of the South making me a bonafide Southerner. Without missing a beat or sloshing his beer, he exclaimed “but you don’t sound like my friend from Georgia” and stomped off to find her. Before long he returned with his friend from Atlanta in tow. One sentence in her lovely southern drawl was enough to send shivers of home down my spine. She’d only been here six weeks, but already diplomatically proclaimed Malaysia “interesting” a phrase that prompted a spontaneous look of shared understanding. A short, blue-eyed dirty blond, I can only imagine her experience as a beautiful, tall black woman in Malaysia, but I can sympathize. After a quick hug between Southern gals and a hurried exchange of contact info she returned to her group on the other side of the bar, but it was definitely a highlight of my night.

No anthropologist, I’m new to this whole participant observation thing and cannot come to any conclusions about the social rituals of Malaysia’s expats. All I can say is that the party was fun, the dancing was presumably hot, hot! And the dresses – what I could see of them – were gorgeous.

An Interview with Wisdom

Sitting across from N* in the backseat of his chauffeured car, I realized that my friend is the living embodiment of the Bumiputera business class that Mahathir sought to create. Educated in England, seconded to Wall Street for a time, and a multi-decade veteran of banking in Malaysia, N* brings, to use a word he often employs, a “holistic” view of Malaysia’s economic development. His opinions are always laden with his training as an economist, his experience as a Malaysian banker, and his beliefs as an ardent exponent of world religions filtered through the understanding of a devout Muslim.

Meetings with N* have bookended my research here. When I first came, he cheerfully loaned me a small library’s worth of books and reports on banking and corporate governance in Malaysia. Now that my research is nearing its final stages, I was excited about the chance to return his books and revisit his opinions on the crisis. N*’s perspective is invaluable to my research both because of his intimate acquaintance with Malaysia’s economy and because of his experience with the outside world. Many Malaysians have started conversations by asking “you’re a Christian, right?” Few have had N*’s experience to preface their question with “I know in the States they do not ask about religion . . .”

Conversations with N* take the form of one long exposition. He often stops himself to interject “I am telling you this because . . .” after a particularly lengthy background tangent. Understanding why he chooses to dwell on certain subjects has become a point of pride, a sign of what I have learned and covered in my time here. Of course, some topics like his musings on religion, are still slightly occult to me. And while his take on the differences between East and West is informative, I am increasingly skeptical of pat geographic generalizations. Yet, his observations have always helped knit together the numerous narratives I have heard in my time here.

N* never fails to end our discussions by stressing that at the heart of every economic model are people’s livelihoods, hence the need to add the social and political to any economic perspective. I agree wholeheartedly. Economists must look past assumptions and beautiful mathematical precision to the messy dynamics of a social economic ecosystem. However, if there is one thing that I have learned in my time here in Malaysia it is that you cannot be naïve in how you incorporate these perspectives. So in speaking with N*, I appreciate his wisdom and remember where he is coming from.

The Suburbs That Never Sleep

Two months and ten days left on my grant, a plane ticket sitting in my email box, and oh so many conflicted emotions about leaving and living in KL have inspired me to take note of the random lessons I’ve learned in these soon-to-be-ten-months abroad. Fair warning – readers out there will be subjected to hearing about these lessons. First up, city culture . . .

We define culture as shared characteristics worthy of nations, states, the Continent, and sometimes secessionist regions; but we rarely ever talk about how culture morphs and manifests in different cities. If the dimension of an individual city is too lowly for such a grand concept then we can tag on a “micro-” or call it character. All the same, in my travels, my understanding and experience of a country’s culture has been distilled through the cities and towns I have visited. In each city, these distillations have depended both on the characteristics of its geography and the character of the people living there.

KL will serve as my example. Locals love to tell visitors that KL is a city that never sleeps. And it’s true that you are never far from at least one twenty-four-hour mamak stall where you can grab roti canai and curry at whatever hour your heart desires. But most visitors, usually quartered in hotels downtown or atop malls in newly developed commercial districts, will be dubious of this claim given the ghost towns that the inner city turns in to after working hours. For the longest time, I was convinced that the only life in the city after seven pm was to be found at the mamak stall down the street or in the chain coffee houses in the neighborhood mall. Certainly, the only hours that most of the rowhouse shops in my area were open was for breakfast or for lunch. Then I discovered the suburbs.

In the suburbs it is true that KL never sleeps. Nightmarkets envelop neighborhood roads in rotation every night of the week. Restaurants ply their kitchens well past dark drawing groups of friends and families for noodles or roti deep into the night. And every evening, the massive flow of people who board the trains or flood the highways to go to work in the center city, pour back out again to live it up in the suburbs. Unfortunately, those without access to a car or an extended family owning a car, will find it hard to discover all the delights of the suburbs since many of the best areas – like those in Petaling Jaya – are almost impossible to get to without a car.

So where does this tie in to culture? The flow of life out into the suburbs seems a function of both Malaysia’s family-oriented socializing – you hang out with your siblings or a close group of friends usually from your high school, maybe even primary school – and the racial quasi-segregation of the neighborhoods. There is no need for hangout places in the center of town, at a midpoint between opposite burbs, because most of your social circle is from your own neighborhood. These are by no means phenomenon unique to KL or even to Malaysia, but the concentration of life in the suburbs is both an expression of KL culture and determines a visitor’s experience of it. If you think KL is a sleepy place, you may just be in the middle of it.

A New Fad to Put People on a Diet (But Not a Fad Diet)

aka A New Partnership for Healthcare Cost Control . . .

I was delighted this morning to see this article in the NYTimes about a partnership between UnitedHealth and the YMCA to combat diabetes and heart conditions through a program focused on motivating life style changes. Not only is it a great collaboration; it also provides initial confirmation of a phenomenon I suspected would soon appear after the final passage of healthcare reform that includes a prohibition on denying coverage based on pre-existing conditions. Given that they can no longer avoid paying costly benefits to cover patients with obesity-linked conditions, like type II diabetes, large insurance plans have a new incentive to “exclude” the costs by helping their patients avoid developing these conditions in the first place.

The rapid growth of healthcare costs is a complex issue with a number of causes – a topic expertly explored by David Goldhill in this September 2009 Atlantic article . But in flying back and forth between North Carolina and various parts of Southeast Asia, I couldn’t help but wonder about the large role played by obesity, a condition that, in some people, can be alleviated with lifestyle changes. Why weren’t we seizing the low hanging fruit of obesity control to address rising healthcare costs?

Ok, so weight-loss isn’t exactly easy – as anyone who has tried it will tell you. But, as an economist, I believe strongly that incentives shape our behavior. As someone with a legendary sweet tooth, I also understand how tempting it can be to stray from the nutritional high road. This brings us to an incentive problem with how our current most popular obesity solution – the fad diet – is delivered. A common criticism of fad diets is that they often provide only temporary weight loss through unsustainable drastic changes in behavior. Who actually believed that they could stick to replacing two meals a day with Special K? Fad diets, most of which get their payment up front, don’t have the same long-term incentive to keep people slim that insurance companies do now that they can no longer ration coverage.

Given the high personal and societal costs of obesity, I am excited about what might come out of this new incentive structure for healthcare insurance companies. Hopefully this partnership between UnitedHealth and the YMCA is a sign of more initiatives to come.

Oh and one final YMCA inspired thought . . . Cardio Funk dance class, anyone!?!?

Malaysia’s New Economic Model – Much to Like

The world is changing. Giants are rising in the East and slow recoveries afflict the West. The flows of finance and trade move ever faster. In these changing times, old advantages in language and learning can be squandered within a generation. Competition rules the day. What’s a small, open economy to do?

On March 30th, Malaysia revealed its answer to that very question. Before an audience of international investors, Prime Minister Najib Tun Razak unveiled the initial outline of Malaysia’s much anticipated New Economic Model, the economic strategy behind the 10th Malaysia Plan. The NEM hopes to combat the tight squeeze facing Malaysia – caught competing with both low wage countries like China and Vietnam and high skills countries like Singapore and South Korea.

There’s a lot to get excited about in the NEM – especially the proposed shift to a market based affirmative action defined by need, not by race and the emphasis on simultaneously streamlining government regulations and decentralizing government decision making. If fully implemented, these two moves will spur innovation and increase societal cohesion in Malaysia. Of course, more details on how these reforms are to be implemented would cause even more excitement. But the renewal of Najib’s public commitment to reform is welcome news.

Since independence, and formally since the launch of the New Economic Policy in 1970, Malaysia has had a policy of promoting equality by reducing absolute poverty and transferring wealth from the wealthier Chinese community to the Malay community. Under former Prime Minister Mahathir’s more than two decade rule, redistribution morphed into an all out push to create an elite class of Malay businessmen heading internationally successful government linked corporations (GLCs) in government championed industries.

Unfortunately, while Malaysia’s past growth has done much to wipe out hardcore poverty; research by K.S. Jomo reveals that its affirmative action policies have done more to redistribute wealth at the top than to help Malaysia’s neediest – rural Malays. Targeting affirmative action policies directly at the impoverished, regardless of race, will benefit Malaysia’s neediest while diminishing the frustration felt by Malaysia’s minorities. That is, if these policies are implemented . . .

The hardest sell on implementation will be politicians who ostensibly represent those who would benefit the most i.e. the kampung Malays. Members of Perkasa, a right wing pro-Malay organization, cite the struggles of rural Malays as their raison d’etre . However, making the affirmative action system more direct will make it harder for politicians to dispense patronage. Some of Perkasa’s members could find themselves torn between supporting changes that will help rural Malays, and Malaysia as a whole, and defending a system that keeps its politicians in power.

That the goal is to incorporate the NEM into Malaysia’s 10th development plan should clue you in to the fact that Malaysia likes plans and reports – and that it has plenty of them. Indeed, the New Economic Model is just the latest transformation report following close on the heels of Najib’s 1Malaysia concept launched last April and the release of the Government Transformation Program report earlier this year.

The 1Malaysia concept, an attempt to emphasis unity and national identity over and beyond race in Malaysia, is desperately needed in this increasingly divided and contentious country. Similarly, the GTP, an attempt to reform Malaysia’s sclerotic bureaucracy to deliver on public services, also identifies much needed changes to enable the government to meet the needs of Malaysia’s citizens. But will these changes ever make it off the page and into action?

That’s the big concern swirling around Malaysia’s blogosphere. All signs point to strong headwinds. As the Malaysian Insider points out, Najib has already had to delay creating a goods and services tax and weaning Malaysia off petroleum subsidies. To get out in front of those winds and any efforts by rightwing groups like Perkasa to halt reform, Najib needs to stress that the old affirmative action system of privileges and quotas has stymied economic growth while failing to help Malaysia’s poorest.

The Thriller from Manila

So actually, the title of this post is one of the many official nicknames/tag lines for Manny Pacquiao, current world champion welterweight boxer and Manila’s favorite son. Given that Manny’s a little busy with a host of new endorsements and running for a congressional seat in the Philippines, I figure he won’t mind if I borrow his tag line for this post about the recent Fulbright Conference in Manila.

Southeast Asia, as a region, is so diverse that a single pre-departure orientation session in Washington for Fulbright Scholars headed to the region just doesn’t make sense. To compensate, starting last year, the regional Fulbright commissions have teamed up to host a mid-year research conference that both showcases the research being done and doubles as a meet and greet for all of the scholars.

Spending three full days with so many high achieving people, learning about an incredible array of different research projects, and hearing their stories about confronting everything from traffic snarls to culture shock was like jamming your finger into an electric socket in the middle of a wind tunnel (i.e. simultaneously charged up and blown away!). To give a mere sampling of the variety of the research projects, there were presentations on everything from mass starvation as a war crime in Cambodia to citizen journalism in Thailand to the linguistics of call centers to (and this was a personal favorite) the engineering behind the perpetually freezing indoor temperatures in Southeast Asia.

The conference’s setting, metro Manila, with its bustling sprawl of eleven million people, was also a thrill – in ways both good and bad. Manila makes KL look down right sleepy. The city was equally vibrant and bustling at noon as it was at midnight. Artistic expression forms the lifeblood of Philippine culture – dramatically displayed in the colorful frenetic paintings on the side of Jeepneys or smoothly rendered as a husky refrain of rhythm and blues sung inside a chill cafe. The night scene was equal parts raucous and cordial making it easy to meet and mingle.

Unfortunately, Manila’s hopping cultural scene and fantastic nightlife weren’t the only sources of excitement. Everywhere we went in metro Manila, the city seemed to take its own reputation for dangerousness seriously. I’ve never seen so many security guards, metal detectors, or bomb sniffing dogs. The 24-hour internet café next to our hotel in Malate (one of the seventeen cities that make up metro Manila) even felt it necessary to post a sign warning patrons check their firearms at the door. I suppose such a dangerous reputation isn’t surprising in the capital city of a country whose population has doubled since gaining independence in 1946.

The greatest challenge of visiting Manila, for me, was confronting the visible legacy of America’s brief stint as a traditional colonial power. Learning to live with America’s legacy, both the good and the bad, has been a big part of my education as an American learning to live abroad. Part of this education is accepting that many of the less wonderful parts of our legacy didn’t all start and end with Bush’s eight years in office. The obvious signs of America’s influence in the Philippines – tipping as an institution, driving on the right, the popularity of braces, and basketball being played on every available blacktop square – make our legacy there impossible to ignore. The challenge is discerning America’s impact on the Philippines’ dramatic arc from golden promise in the 1970s to relative stagnation today. Having at one time bought the Philippines from the Spanish, how much are we responsible for their subsequent development, especially considering how institutions created under a colonial power often morph into the institutions of the newly independent government? This is a question I do not have the expertise to answer, but it is still a question that begs contemplation from any American visiting the Philippines.

One of the local TV stations sent a news crew to film the opening ceremony of the conference. Check out the clip here, courtesy of YouTube!