Friday, April 19

Creating certainty amidst uncertainty


UNCERTAINTY characterises our world today. Leaders of authoritarian regimes can make decisions that can transform domestic and regional landscapes – as seen in Russia and recently Saudi Arabia – and in democracies, electorates have enabled unprecedented decisions or styles of leadership: from Brexit, the triumph of Donald Trump, the success of populists hitherto on the political fringes, or demands for autonomy or secession.

Underlying these decisions is discontent: perceived imbalances of wealth and power (whether across national borders or ethnic and religious lines), a lack of economic opportunities (particularly if available in the past), a supposed loss of sovereignty, or a failure to manage issues seen to be causing these problems, such as migration or the erosion of societal norms.

Many are attracted by alternatives, even if they might not be deemed rational by academics, the political class or the educated elite. Such disapproval makes them even more attractive, and convictions are heightened through social media and confirmation bias. Sometimes these alternatives present themselves electorally: other times they will be more violent or revolutionary, and perhaps imbued with religious justifications.

Another take on the world says, “we have been bullied by other powers for centuries, and now that we are coming to possess our own wealth and might, it is time that we reclaim our premier place in the world, led by a strong leader”.

The intended benefits of China’s Belt and Road Initiative seem clear: new transport infrastructure in the form of roads, railways, ports and airports that will amplify connectivity, spurring the development of entire new cities and economies that will bring prosperity and opportunity to those along the route.

Some pretend there are no risks. Others question who the real economic beneficiaries will be, in terms of the contracts that get signed and in terms of the workers who will carry out the labour. And others still ask questions of sovereignty and of rule of law.

Will the process respect transparent tendering processes, or will rules be bent in exchange for massive investments to politically compromised leaders? Will national governments be able to enforce their laws, or will exemptions be made in geopolitical trade-offs involving uninhabited islands and the riches under their territorial waters?

These are questions of interest not just to idealists who care about transparency and the rule of law, but to the business community as well. Hong Kong provides the best advertisement for the combination of economic freedom, respect for property rights and rule of law. Indeed, the confidence inspired by Hong Kong’s legal, accounting and banking systems have provided the springboard for so many Chinese economic endeavours, 20 years after the handover from British to Chinese rule under the One Country, Two Systems principle.

But in Malaysia and Asean too the effects of historical geopolitics continue to matter. Today, mention the East Coast Rail Link or Tun Razak Exchange and some will suggest economic imperialism. And while Asean has enabled better connectivity and lower barriers to benefit millions, the persecution of the Rohingya shows that we have our own regional uncertainties to overcome too.  When we reflect on recent diplomacy based on the personal relationships between leaders with apparently no contemplation of human rights, the frailty of once worthwhile agendas becomes painfully clear.

As the multitude of opportunities comes forth, their sustainability from an institutional perspective is key. Will new business agreements bring confidence into the system, or will they distort the process by which future agreements will be made? Will collusions with politicians or political parties enable the erosion of a country’s human rights, or will fair competition accelerate the intellectual growth and freedom of a spending middle class?

In a world where authoritarianism is in vogue, it may be tempting to conclude that the cost of doing business is the relinquishing of democratic principles.

But as Hong Kong shows, the only sustainable way to create durable capitalism (even in a ‘socialist’ system) is to also create trusted institutions; where power derives from explicit laws created by legitimate representatives; where officeholders serve according to established rules and clear limits; and where reforms are made possible with the consent of the people.

The Belt and Road Initiative has the promise of delivering better lives for millions, including my compatriots. I hope this building of economic ties and the proliferation of affluent, educated societies will emphasise the need for good governance and ethical business practices if the creation of further opportunities is to remain sustainable. These are the things that create certainty in a world of uncertainty.

This is edited from the writer’s speech at the 9th World Chinese Economic Summit in Hong Kong on Nov 14.

Tunku Zain Al-Abidin is founding president of Ideas.