Global Trends by Martin Khor

Monday 22 August 2011

The battle for Merdeka continues

Fifty four years after Merdeka, Malaysia like other developing countries is still fighting for full independence, in a globalised world which has grown more complex and crisis-laden.

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The Merdeka season is a good time to ponder over what independence means to Malaysia and the other developing countries that are still battling to overcome the disadvantages that the colonial era brought.

The problems of governance in a developing country, 54 years after Independence, are still as complex or even more so when compared to the immediate post-colonial days.

In that first phase of independence, the developing countries were preoccupied with domestic battles – how to install domestic political processes, and how to chart new economic strategies to get out of the shadow of colonial influence.

Most countries tried to shake loose from the control of foreign-owned mining and plantation companies, banks and shops, by boosting their domestic public and private enterprises.  They would, however, remain over-dependent on a few export commodities for a long time.

In the social sphere, there was the monumental battle to provide jobs, build up housing, schools, and health systems, and reduce poverty.

Today, many developing countries like Malaysia have succeeded, to a significant extent, to break the foreign-ownership grip on the economy, to build their own domestic companies and banks, and to diversify from commodities to resource-based processing, to manufacturing and construction of houses and hotels.

While some countries remain poor and dependent on foreign aid, other middle-income countries have broken through into the development sphere.  Indeed, countries like Malaysia are now worried about being stuck in the “middle-income trap”.

They are no longer so competitive in the labour-intensive industries like textiles and electronics assembly because lower-wage countries have entered the scene, yet they find it difficult to break through into higher value-added sectors and activities, and thus upgrade their economic status.

While the colonial grip on their economies has loosened, the middle developing countries are now caught in the complex web of global inter-dependence, in which they have become significant players but are still not able to call the shots, nor yet to equitably participate in decision-making.

The dependence of immediate post-colonialism is now replaced with the inter-dependence that comes with globalization.   In good times, the country soars with the world economy.

But in bad times, the domestic economy is at the mercy of rapidly falling exports and foreign-capital outflows, as the 1998-99 Asian crisis and the 2008-2009 “global great recession” showed.

With the United States and Europe caught in a deflationary situation, the next few years will be another great challenge. Will the middle developing countries sink with the major players, or break free to chart their own course?

The answer will probably be in between.  But “decoupling” from the crisis in the rich countries can properly be achieved only if there are vision and action plans, including for national economic restructuring and greater regional collaboration.

Intense inter-dependence is also evident in the physical world, where the environment worldwide is collapsing because the pursuit for economic growth did not take into account resource depletion and pollution.

The science of climate change and the recent radiation from damaged nuclear plants both reveal that emissions in one part of the world affect health and life in other parts.

Global solutions are thus necessary, but negotiations to find them are bogged down by basic issues of North-South equity and the need for balance between the imperative for environmental protection and the immediate needs for development.

International negotiations are also stuck in the area of economics.  The World Trade Organisation’s Doha talks have stalled because of the unreasonable demands made by major developed countries on the big developing countries.

Despite the G20 Summits, the world is further away today from global solutions to the financial crisis than in 2008-9 when concerted actions were agreed to, to stimulate a recovery.

It appears that the US, Europe and Japan, all former colonial countries, are now afraid that their mastery over the global economy is being challenged by China, India and some other developing countries -- Asean included.

The middle developing countries like Malaysia are no longer one-sidedly dependent on their former colonial masters.  But in the web of an inter-dependent and globalised world, they are still in the mode of responding to initiatives and policies of the major developed countries, or to the unfolding situation.

They do not yet have the power or confidence to initiate and coordinate their policies and take the initiative to put forward solutions to global problems.  But they now have the growing capacity to do so, if only they organize themselves better, and find the intellect, skills and methods to move ahead.

Fifty four years after Merdeka, the world is still an imbalanced one, and our country is building more stepping stones towards full independence.  It must join other developing countries to get a full voice and a fair share in the benefits of the global economy.

In this complex globalised but still imbalanced world, the developing countries’ battle for independence continues.