Commentary Magazine


Topic: Singapore

Sovereign Wealth Funds

Brian Williams of NBC asked the Democrats a substantive and a provocative question about sovereign wealth funds — giant pools of money controlled and managed by foreign governments like China, Singapore, and Gulf oil states — investing in American companies like Merrill Lynch and Citigroup. This issue will be a rallying point for the protectionist left and right this campaign season. John Edwards and Hillary Clinton gave a lot of boiler point about more transparency and the need to do something. Barack Obama, clearly knowing nothing about the topic, talked about alternative energy.

But the U.S. attitude toward sovereign wealth funds is going to be the most important test of American acceptance of globalization. By this fall, there will be many more companies that get their funding from government investment funds from the Gulf State, Singapore, and China. Irwin Stelzer has made the best case for being wary about having a foreign government holding the purse strings of American businesses. But the fact is, these funds are going to be the most important engine of finance and growth capital in a global economy whether we like it or not. As a political matter, this is probably a losing issue for free traders. Yet all those politicians who want to deter foreign financial investment in American companies have to tell us what Citi, and Merrill, and all the other cash-strapped companies should do when they need to find new sources of capital if they can’t get access to these pools of wealth.

Singapore Plays with Fire

I had a strong sense of trouble lurking beneath the surface when a Singaporean colleague recently wrote me about the growing numbers of Chinese from the People’s Republic who are coming to Singapore. The reason: to fill jobs left vacant as native born Singaporeans continue to emigrate at what is perhaps the second highest rate in the world (an estimated 26.11 per thousand, second only to East Timor.)

Singapore is a small but strategically situated country of great prosperity (per capita income is over $20,000). It’s surrounded by perhaps 300 million mostly Muslim Malays and Indonesians. The Chinese and the Muslim peoples have never gotten on very well. The danger for Singapore is that the Malaysians and Indonesians could come to perceive Singapore as a cat’s paw for China. That would lead to disaster for the island state–yet it appears to be the direction in which Singapore is moving.

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Hotline to Nobody

Defense Secretary Robert Gates is now in Seoul, after completing two days of meetings in Beijing during the first stop of a three-nation tour (he also will be visiting Japan before heading home). In China, Gates traded compliments with Chinese leaders, issued correct statements on the need for dialogue, and toured the Forbidden City, the imperial palace at the north end of Tiananmen Square. It was Gates’s first trip to the country since succeeding Donald Rumsfeld as Pentagon chief, and senior U.S. officials marked the event by reporting modest progress on a range of secondary issues. The Chinese, for example, promised to provide more cooperation on accounting for American prisoners taken during the Korean War.

Both sides also announced the planned establishment of a military hotline between Washington and Beijing “at an early date.” The initiative was announced during Hu Jintao’s summit in Washington last April and has been the subject of periodic re-announcements ever since, such as one this June when Gates was in Singapore. Despite the apparent signs of progress, the Chinese have been dragging their feet over technical issues. The United States has sought to establish such a hotline for more than five years. Yet the critical issue now is not how such a link will be established. It is whether the Chinese wish to engage the United States in substantive discussions at all—or whether they wish merely to sip tea and waste our time.

There is reason to believe that when we call, no one will answer the phone. (There was, remember, nobody taking Washington’s calls during the Hainan reconnaissance plane incident in April 2001.) The issue is as much about the ability of the Chinese government to make decisions in the middle of crisis as it is about the state of relations between the two countries.

But there’s a more fundamental reason why the phone may not be of much use during the next confrontation. At the same time that Gates was talking with Chinese officials this week, Premier Wen Jiabao was in Moscow talking with President Vladimir Putin about their countries’ “friendship for generations.” While the American defense secretary was arguing about the technicalities of telecommunications lines, Moscow and Beijing were putting together the alliance that will challenge the international community for a lifetime. It seems they have been communicating just fine without a hotline.

Balancing Act

On Saturday, the leaders of the United States, Australia, and Japan met in Sydney to discuss security policy. President Bush, Prime Minster John Howard, and Prime Minister Shinzo Abe were careful in their first trilateral meeting not to rile Beijing. “As far as China is concerned, the three leaders shared the same recognition that it’s important to have a positive engagement with China,” said Mitsuo Sakaba, a Japanese Foreign Ministry spokesman. Added Charles Morrison of the East-West Center in Honolulu, “They have bent over backwards to try to make sure that starting up their own dialogue does not upset China.”

Why should these nations be so apologetic? The Chinese, after all, do not hesitate to stand up for themselves. Beijing, in the last few months, sent diplomatic protests to the United States, Japan, Australia, and India, asking each of them for an explanation of their growing cooperation. The four participants in the new “quadrilateral dialogue” met in May to discuss strengthening their relationship. Last week, the navies of these four nations (plus Singapore) conducted five days of exercises in the Bay of Bengal—the first such joint exercise in the history of the five nations. The Chinese look south and east and see their neighbors trying to contain them.

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The Autocrats Strike Back

The jailing yesterday for three weeks of Dr. Chee Soon Juan, leader of the Singapore Democratic Party (SDP), which international media have reported and their American counterparts have largely ignored, is in fact very bad news for the future of freedom and democracy.

We regularly hear (in particular with respect to China) that only affluent and well-educated populations are capable of handling free expression responsibly, or are to be trusted with the power of the ballot. Poorer and less well-lettered people must be led toward stability and a modicum of prosperity by a benign and well-informed, if autocratic, leadership. Singapore’s roughly 4.5 million people already rank as among the best educated (literacy is nearly 93 percent and universal among those over age 15) and wealthiest (per capita GDP at $31,400) in the world. Yet Singapore, while possessing the forms of democracy, is in fact a tightly-held family autocracy.

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Alien Investors

The last I heard of Lawrence Summers, he was performing somersaults as president of Harvard, trying to ingratiate himself with the faculty he had offended by, among other things, frankly discussing some ideas–taboo in academia–about the linkages between sex and success.

The somersaults were to no avail. Summers’s tenure as president came to an abrupt end last year and he returned to his post teaching economics as the Charles W. Eliot university professor. This was Harvard’s loss and our gain, for whatever one made of his ridiculous efforts to back away from his own thoughtful if provocative words, he is back in the public eye not as an administrator of an impossible faculty but as an economist with his finger on a number of vital issues.

One such issue is the accumulation of capital reserves and sovereign wealth funds (SWFs) in the developing world. Governments ruling industrializing countries are sitting on huge and growing piles of cash. They need to park this money somewhere. Increasingly, as Summers is not alone in pointing out, they are shopping abroad and “are now accumulating various kinds of stakes in what were once purely private companies.”

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Dept. of Walking and Chewing Gum

President Bush has reportedly cancelled his September 5 meeting with leaders of ASEAN, the Association of Southeast Asian Nations. The conclave was to mark the 30th anniversary of the opening official ties between the United States and this grouping of ten Asian nations. The cancellation comes a personal blow to Lee Hsien Loong, Singapore’s prime minister, who arranged Bush’s attendance. (The island republic is a staunch American ally, one of the few remaining ones in the region.)

The President’s slight, which is keenly felt in Asia, was made worse by news that Condoleezza Rice will probably skip an ASEAN ministerial meeting next month. It is reported that the President and the secretary of state are staying close to home because of Iraq.

Arguments about whether we should stay in Iraq almost always focus on democratization, terrorism, and American resolve. Unless the subject is Afghanistan, we rarely talk about how this conflict is diverting the Bush administration’s attention from other parts of the planet. Even if the United States can prevail in Iraq, the President’s legacy will be clouded if he loses Asia to China. Whatever happens in the future, East Asia and the subcontinent now contain more than half the world’s population. In this area we find six of the world’s ten most populous states—including the largest democracy, the largest autocracy, and the largest Muslim society—and most of its vital economies, which account for almost a quarter of global gross domestic product.

If Washington cannot conduct an Asian and an Iraq policy at the same time—and so far the signs of its being able to do so are not good—we may need to broaden the definition of “American resolve” to include maintaining our presence in the far east.

Warships for China?

Defense Secretary Robert Gates expressed optimism about our military relations with Beijing at the recently concluded Shangri-La Dialogue, the preeminent security conference in Asia. American efforts could be complimentary to, not competitive with, those of China, he said at the Singapore conclave. Gates listed the areas where China and America share security interests, such as terrorism, proliferation, and energy security. But he left one major issue off the list—the construction of large warships.

This is particularly disturbing in light of the remarks made by Admiral Timothy Keating in Beijing last month. Keating, the commander of U.S. forces in the Pacific, said he found his host country’s ambition to build an aircraft carrier “understandable.” After talks with China’s navy chief, Admiral Wu Shengli, Keating offered to help the Chinese build a carrier “to the degree that they seek and the degree that we’re capable.”

Will the Chinese seek to build a carrier? Without a doubt. They have been contemplating the prospect for decades, going so far as to purchase the hulks of one Australian and three Soviet carriers for purposes of reverse-engineering. Recently, Chinese military representatives have been touring international air shows to find strike planes that can be launched at sea. And the U.S. is, of course, capable of helping them build carriers. The only thing that prevents Keating from handing over the plans to the Nimitz is American legislation: a Tiananmen-era ban on military exports to China, as well as a strict limit, enacted later, on military exchanges.

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Beyond Japan’s “Peace Constitution”

On Monday, Japan’s Diet enacted a law establishing procedures for national referenda on amendments to the country’s constitution. On Tuesday, China publicly complained. This is not really surprising: for many Asians, Japan’s constitutional arrangements have long been a matter of international concern.

Japan’s “peace constitution” was imposed in 1946 by General Douglas MacArthur, the so-called “second emperor.” In article nine of that document the Japanese people “forever” renounced both “war” and “the threat or use of force as a means of settling international disputes.” They also promised “never” to maintain “land, sea, and air forces, as well as other war potential.”

But article nine has not been enforced for decades. Tokyo now maintains approximately 240,000 soldiers, sailors, and pilots supported by the world’s fifth-largest military budget. Article nine today is narrowly interpreted as a ban on participation in “collective self-defense,” but even that prohibition has been eroded. Japan sent minesweepers to the Persian Gulf in 1991, an Aegis destroyer to the Indian Ocean in 2002 to support U.S. operations, and, most notably, a contingent of troops to Iraq in 2004. The Iraq deployment was the first time Japan has sent ground troops to a war zone since the end of World War II. And, unlike Japan’s 1992 mission in Cambodia and later peacekeeping efforts, the soldiers sent to Iraq operated outside a UN framework.

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¡Viva la Inmigración!

The New York Times reports that an anti-immigrant backlash is building among Republican primary voters in Iowa. There is room to doubt how significant this trend is, since the two most anti-immigrant candidates in the Republican field are Tom Tancredo and Duncan Hunter, who are struggling to register in single digits, while the early leaders, Rudy Giuliani and John McCain, are both fairly pro-immigrant. But there is no question that, even if it remains a minority sentiment, there is a substantial nativist, even xenophobic, wing in the Republican party.

As it happens, I was in Miami yesterday and got a chance to observe diversity in action. I loved it. What a booming, vibrant city! I reveled in the Latin and Caribbean accents, the variety of foods, the multiplicity of cultures. My lasting taste of Miami was a terrific Cuban sandwich, espresso, and guava pastry at a Cuban coffee shop at the airport. Beats Hardees hollow.

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Boot and Hanson, Final Round: Fixing Our Mistakes

Dear Max,

I wouldn’t necessarily conflate being more aggressive with being more brutal. We can patrol more, embed more advisors, shoot and arrest more insurgents, all without being gratuitously cruel or needlessly overbearing to civilian sensibilities.

Here is what I think happened in Iraq after April 2003. Bolstered by a 70-percent approval rating, and still smarting from all the prewar hysteria from the Left, the Bush administration felt that it could run out the clock, so to speak.

Thus, each time a challenge arose—looting, the Fallujah outbreak, the Sadr uprising—their idea was to finesse the crisis as much as possible. They were afraid to squander the capital of hard-won public support through (unneeded?) escalation, escalation that would increase casualties and only encourage further domestic and international condemnation of the war.

As a result of this policy, public support vanished anyway, in dribs and drabs, each time we did not react strongly and decisively enough to a provocation. The administration thought, apparently, that using more aggressive tactics would only further incite the growing anti-war movement and that the good news of progress in reconstruction would only continue to be ignored by a biased media.

And so with a whimper rather than a bang, our complacency and over-sensitive attention to perceived public opinion made us ever less aggressive and ever more attuned to “force protection”—at precisely the time more and more offensive operations were needed to break the insurgency and win back public opinion.

Now we must shatter that complacency and do in nine months what textbooks warn takes years. It is still not too late; history might still record as a considerable military achievement the removal of Saddam and the creation of a constitutional government in Iraq. The President and the military believe they can pull it off, while the opposition (whose proposals to withdraw are not matched by votes to reduce budget appropriations) remains, to say the least, doubtful. But the American public’s patience will, apparently, tolerate this final effort.

I am tired of reading the latest declarations of moral outrage from politicians and pundits blaming Rumsfeld, Bush, Cheney, Franks, Sanchez, Casey, Abizaid, etc., for “their” three-year-long occupation that ruined “our” perfect three-week war. What happened in Iraq pales when compared to the horrifying mistakes our government and military made in the Civil War, in World War I and World War II, in Korea and Vietnam. What would this generation of politicians and journalists have said after Cold Harbor and the Battle of the Wilderness, after the two-year-long nightmare of the fall of France, after our World War II losses in the Atlantic, after the debacle in Greece, after the surrenders at Singapore and Tobruk? One can only imagine.

All that matters now is correcting our mistakes, countering the defeatists, and defeating the insurgents. We have to keep firmly in mind the correct notion that a functional democracy in Iraq would be the worst nightmare of jihadists the world over, of Iran, Syria, and the royal Gulf “moderates.” Allowing Iraq to devolve into the Lebanon of the 1980’s or the Afghanistan of the 1990’s, on the other hand, would restore al Qaeda’s lost sanctuary and provide a new base of operations for Iranian-backed terrorists. To paraphrase one commentator, such a failure would inflict “1,000 Mogadishus”-worth of damage on the reputation of the U.S. military and on a nascent and necessary U.S. Middle East policy, a policy seeking to transcend the dangerous (and cynical) “realism” of the past.

Best,
Victor

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