Targets that ‘shoot back’, realistic battle effects part of SAF’s new urban training

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SINGAPORE: You’re walking down a stony path when the sharp popping sound of gunfire suddenly assails you. A muzzle flashes, and you see a weapon firing at you from behind a tree.

Then a blast roars through the air. You not only hear it, but feel some of its shockwave. Smoke fills the path ahead of you, making it hard to see.

Ducking for cover, you see a human shape shoot at you. You take aim with your firearm and pull the trigger, but nothing happens. The weapon doesn’t work anymore because you are “dead”.

Realistic battlefield effects, targets that shoot back with laser technology, and an enhanced system to track training performance are among the features of the new Murai Urban Battle Circuit.

When this battle circuit opens from April, up to 22,000 soldiers are expected to pass through each year to complete small-unit drill-based training.

Located within the Murai Urban Training Facility, it is one of three battle circuits using enhanced technology set to open this year as the Singapore Armed Forces (SAF) seeks to train soldiers more effectively.

Defence Minister Ng Eng Hen provided updates on SAF’s training capabilities during the Ministry of Defence’s (MINDEF) committee of supply (COS) session in Parliament on Wednesday (Feb 28).

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Why the BOJ won’t rain on the Nikkei’s parade – Asia Times

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TOKYO — With the Nikkei 225 surging to 34-year highs, the conventional wisdom is that the Bank of Japan (BOJ) now has greater confidence — and political cover — to raise interest rates and end decades of quantitative easing (QE).

But what if the opposite is true? Might the Nikkei boom luring tidal waves of capital toward Tokyo actually dissuade the BOJ from normalizing monetary policy? A walk down memory lane suggests BOJ Governor Kazuo Ueda might be too worried about spoiling the Nikkei’s party to tighten.

Consider the BOJ’s track record of hitting the monetary brakes during stock rallies of the past. Case in point: the central bank’s December 1989 rate hike, which signaled the end of the Nikkei’s most infamous bull run.

No one really knew at that moment, least of all then-BOJ governor Yasushi Mieno, who pulled the fateful trigger on Christmas day. That half-percentage point increase in short-term rates to 4.25% seemed like a rational response to upward inflation pressures at the time.

Even then-finance minister Ryutaro Hashimoto said the increase would help maintain price stability. But years later, when Hashimoto served as prime minister from 1996 to 1998, it was clear that the BOJ’s tightening move marked the top tick of Japan’s “bubble economy” era. And the start of a deflationary nightmare from which Japan is only now starting to recover.

Today, economists know that on December 25, 1989, Mieno’s team pulled out the financial equivalent of a precarious Jenga piece, destabilizing everything above and below. Fair or not, Mieno’s BOJ was roundly criticized for collapsing the stock market and setting Japan’s lost decades in motion.

Granted, the titanically large rallies in real estate and stocks might have been better tamed with macroprudential policy tweaks by the Ministry of Finance and regulators than blunt-force BOJ rate hikes. At the time, though, Tokyo’s politics were going through a unique period of volatility.

In 1989 alone, Japan had three different prime ministers: Noboru Takeshita, Sosuke Uno and Toshiki Kaifu. Distracted elected officials left asset bubble management duties to the BOJ.

Once Mieno retired in 1994, it fell to successor Yasuo Matsushita to deal with the economic fallout. That included mountains of bad loans on bank balance sheets. By the time Matsushita passed the torch to Governor Masaru Hayami in 1998, Japan had already fallen into deflation.

In 1999, Hayami became the first major central bank leader to slash rates to zero. In 2000 and 2001, the Hayami BOJ pioneered quantitative easing, or QE. In 2003, it was Toshihiko Fukui’s turn to manage Japan’s QE experiment.

Fukui decided Japan was ready to rip out the monetary intravenous tubes and ended QE. Then in 2006 and 2007, the Fukui-led BOJ managed to hike official rates twice.

The backlash was fast and furious. Politicians and corporate chieftains groused early and often about Fukui yanking away the proverbial punchbowl.

Yet when the economy slid into recession soon afterward and the Nikkei stumbled, the Tokyo establishment blamed the BOJ for messing up – again.

When Fukui’s replacement arrived in 2008, Masaaki Shirakawa quickly restored QE and returned rates to zero. In 2013, Governor Haruhiko Kuroda arrived to turbocharge QE in hyper-aggressive ways. Kuroda’s BOJ cornered the government bond market and nearly nationalized the stock market, becoming the biggest investor by far.

Bank of Japan Governor Haruhiko Kuroda. Photo: AFP / Kazuhiro Nogi
Bank of Japan governor Haruhiko Kuroda walked away without ending QE. Photo: Asia Times Files / AFP / Kazuhiro Nogi

That sent the yen down 30%, boosting exports and generating record corporate profits. In 2013 alone, the Nikkei surged 57%. In the years since then, ultra-loose BOJ policies, coupled with government efforts to strengthen corporate governance, sent the Nikkei to its current highs. The benchmark is up 45% over the last 12 months.

Yet the market’s current bull run, which began last year, appeared to make the BOJ timid about stepping away from QE.

In December 2022, Kuroda tiptoed up to the line by letting 10-year yields rise as high as 0.5%. Global markets quaked, sending the yen and Japanese yields skyrocketing. Kuroda’s team spent the week after December 20, 2022, racing to make large and unscheduled bond purchases to cap yields. After that, Kuroda didn’t attempt to “taper” again.

Enter Ueda, who grabbed the BOJ’s controls last March. Ueda also tested the waters here and there, letting 10-year rates rise to 1% and beyond. Once again, markets took it badly and the BOJ scrambled to reassure bond traders that no big policy changes were afoot.

Since then, Ueda has avoided any hints that QE might be dismantled, that negative yield policies might be abandoned or that an official rate hike might be in the cards. This, of course, is not how global markets saw the Ueda era going.

As 2024 began, the overwhelming conventional wisdom was that Ueda’s team would be hiking rates by next month. But the fact Japan entered 2024 in recession has made the timing of BOJ tightening a moving target.

Analyst Ipek Ozkardeskaya at FXSteet.com speaks for many when she says “the Bank of Japan is in no rush to hike rates this April.”

Etsuro Honda, former special advisor to Japan’s Cabinet, tells Reuters that “while uncertainty is high, I oppose ending negative rates. It’s too early.” Honda adds that “negative rates are used for inter-bank operations, which apply risk premiums when it comes to corporations where no one’s asking for borrowing with negative rates.”

Earlier this month, BOJ Deputy Governor Shinichi Uchida tamped down expectations for near-term tightening moves. Speaking in the western city of Nara on February 8, Uchida said: “If sustainable and stable achievement of our 2% inflation target comes in sight, the large-scale monetary easing will have fulfilled its role and we’ll explore whether it should be revised.”

Complicating the many “if’s” confronting the BOJ is uncertainty about whether inflation is slowing or accelerating. Japan’s consumer prices slowed less than expected in January, with “core” inflation rising at a 2% rate year on year. On the price trend front, “recent data have been extremely disappointing,” says Stefan Angrick, an economist at Moody’s Analytics.

Japan’s inflation is a mixed bag. Image: Facebook

As Hiroshi Yoshikawa, professor emeritus at the University of Tokyo, tells Bloomberg of Ueda’s plight: “I wish him the best of luck. Financial markets and the government are making the BOJ’s exit into a special event and fixating on if the bank is going to act and when. As the governor in charge of the policy, he may have little choice but to be cautious.”

Many are still betting on the BOJ acting. “This means that inflation remains above the Bank of Japan target, validating market expectations for a rate hike in the first half of the year,” says Francesco Pesole, economist at ING Bank.

This view, however, ignores how the ghosts of 1989 are colliding with the economic uncertainties of 2024 — and, to some extent, the ghosts of the mid-2000s, too. Not only did Japan’s crash in the early 1990s and the resulting bad loan crisis cause deflation — it also pushed the financial system to the brink.

In November 1997, Yamaichi Securities collapsed. The failure of a then-100-year-old Japan Inc icon shook markets everywhere, coming amidst the Asian financial crisis slamming Indonesia, South Korea and Thailand. Japan, punters worried, wasn’t too big to fail, but was too big to save. Thankfully, officials in Tokyo kept the episode from becoming a systemic shock globally.

But that near miss might also be factoring into Ueda’s calculus as he mulls withdrawing liquidity. The year since the demise of Silicon Valley Bank in California has put a spotlight on Japan’s vast network of profit-starved regional banks.

Across this aging nation of 126 million people are 100-plus regional institutions serving less economically vibrant regions. These banks have long been reluctant to consolidate or fully embrace the digitalization trends disrupting the globe.

As the population ages and the corporate exodus to Tokyo accelerates, there’s less demand for loans from rural lenders. And the trauma from 20 years of deflation left mid-size lenders more conservative than ever.

Rather than use BOJ liquidity to increase lending, many regional banks spent the last decade buying government and corporate bonds, leaving balance sheets vulnerable to higher long-term rates.

This pivot will sound familiar to students of last year’s SVB collapse in California. Ueda’s BOJ worries that rate hikes could push some fragile rural lenders toward insolvency as longer-term yields surge, SVB-style. 

For these reasons and others, Ueda hasn’t been the maverick some thought the Massachusetts Institute of Technology-trained economist might be. A big one could be the BOJ not wanting to be blamed again for wrecking a bull market in stocks.

As Kei Okamura, portfolio manager of Japanese equities at Neuberger Berman, notes, “we are still at the very beginnings for foreign fund inflows.”

Jean Boivin, a managing director at BlackRock, says “Japan’s equity rally has room to run” and that the market “can best their all-time highs.”

JPMorgan strategist Rie Nishihara adds that the Nikkei boom “will spur corporates to increase growth investment and improve capital efficiency and make institutional and individual investors take more interest.”

If the BOJ is perceived to be the spoiler once again, the risk is that the political empire in Tokyo might strike back.

Japanese Prime Minister Fumio Kishida isn’t very popular these days. Photo: Wikimedia Commons

The extent to which the ruling Liberal Democratic Party’s leadership is unpopular with voters can be seen in the 17% approval rating with which Prime Minister Fumio Kishida entered 2024. The LDP and its actions would surely push back hard on any hints Ueda might shock global markets.

There’s an argument that the feel-good factor from the Nikkei rally could improve Kishida’s support numbers and impart a “wealth effect” that makes businesses and households feel better about the economy.

But the Nikkei’s surge could also be the tail wagging the dog at BOJ headquarters. Remember how wrong the conventional wisdom was about the BOJ last year? It could be even more wrong about what’s afoot in 2024.

Follow William Pesek on X, formerly Twitter, at @WilliamPesek

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Tetra Pak to cut 300 employees, close Jurong factory as part of consolidation move

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SINGAPORE: About 300 Tetra Pak employees will be retrenched as the company moves to close its Jurong factory as part of plans to consolidate production into its other facilities in the region.

This shift will take place over the next 12 months, Tetra Pak said in a press release on Tuesday (Feb 27).

The company said employees were informed of the decision earlier the same day and that discussions have been set up throughout the week to “offer new opportunities or outplacement support”.

“Tetra Pak is committed to supporting all impacted employees by delivering above and beyond all applicable statutory requirements and ensuring they are treated with the utmost respect and care, in line with company values.”

In response to queries from CNA, Tetra Pak said the changes affect those mainly in manufacturing. 

“We understand and recognise that this is not easy for our employees. The company has weighed every option to create the best social package for them. Our priority was to ensure that every single employee would be well taken care of, said the company.

“We will be offering an enhanced social package to employees whose roles are directly impacted, in line with our internal policy and including the statutory redundancy requirements.”
 
Tetra Pak said further details and the package terms according to roles and positions will be provided one-on-one between each employee with the human resources team. 

OPERATIONAL COST EFFICIENCY

The Tetra Pak Packaging Materials factory in Jurong started operations in 1982, supplying customers in Singapore and serving as an export base. It was one of Tetra Pak’s largest packaging materials factories in the world. 

“However, with market dynamics changing significantly over the past decades, the company recognises the need to adapt in order to maintain competitiveness. Striking a delicate balance between market demands, industrial footprint optimisation, and operational cost efficiency is paramount,” it said. 

The company consulted the Food, Drinks and Allied Workers Union (FDAWU) ahead of the announcement and said that it will also leverage NTUC’s e2i (Employment and Employability Institute), with support from Workforce Singapore (WSG) and NTUC LearningHub (NTUC LHUB), to host a job fair to support career conversion with different companies and provide onsite training. 

“The company will also engage with employees keen to apply for other positions in Tetra Pak, locally or in the region,” it added.

RETRENCHMENT SUPPORT

FDAWU said in a separate statement that the affected workers will receive retrenchment support packages in line with unionised norms. 

Affected workers will additionally benefit from numerous “good practices”, both monetary and non-monetary, following the union’s discussions with the company. 

“Through FDAWU’s close working relationship with Tetra Pak, the company gave early notification of the consolidation exercise and coordinated with us to provide adequate support to retrenched workers and facilitate job opportunities for affected workers,” said the union’s general secretary Tan Hock Soon.

“Through discussions between FDAWU and Tetra Pak, the parties were able to align on better retrenchment support packages for affected workers.”

Concurrent with the consolidation exercise, Tetra Pak will relocate its corporate office to a new location in Singapore by the end of this year. It will be one of its largest offices in Asia Pacific with a capacity of up to 250 people. 

“The company will maintain a strong business presence in Singapore to support its global growth with core operational functions, including business management, project centres, IT, human resources, finance and marketing functions.”

According to its website, Tetra Pak has more than 24,000 employees worldwide. 

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Chinese entropy and American stumbles – Asia Times

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In 2001, the US was set on dealing with the rising power of China, but China was saved by the events of 9/11. The threat of Muslim terrorism diverted American attention from China for almost two decades. It was very costly to America.

The US’s plan to take control of Afghanistan (the Eurasian Heartland) and Iraq (the core of the Middle East) could have changed everything for the world and China.

If the US had taken effective charge of these two places, it would have had a hold over both continental land routes and oil production costs.

Iraqi oil, some of the cheapest to extract worldwide, thus acts as a price setter for this crucial commodity. If the US had achieved that, China might have been forced to bend toward America and adopt sweeping political and economic reforms. Such a turn by China might also have influenced Russia.

However, the failure to achieve these aims due to poor implementation, unrealistic goals and the ensuing 2008 financial crisis proved to China, and possibly also to Russia that America was declining and could not perform the post-WWII European and Asian feats – effectively rebuilding countries from the ashes. This assessment set China, and possibly also Russia, on a different path, ignoring and challenging the US-led world.

The new Chinese path refocused American attention on Beijing, which, in the meantime, had become confident about its bright destiny.

Things turned around with Covid and the invasion of Ukraine. The US produced an effective vaccine that saved the world from the epidemic and correctly predicted Russia’s intentions and Ukraine’s determination to resist. These events shook Beijing’s confidence. At the same time, its growth model showed deep fissures.

The real estate sector, the main driver of domestic development, crashed, sapping all confidence. Abroad, the slow motion of de-risking and decoupling the Chinese economy from the US shrank foreign trade. Moreover, during Covid, many businesses went bust.

The surviving ones all had enough cash saved up. Therefore, after Covid, nobody spends; everybody saves more than before because there is widespread fear of possible unexpected incidents.

The official alarm about possible wars with unspoken enemies reinforces this sense of fear and the necessity to save. This all conspires to further shrink consumption, and thus growth, in a vicious circle.

Battle for time

In these conditions, China is gaining time with a war that not only is not ending in Ukraine but is spreading in Gaza and Yemen. The war in Gaza might end sometime in March or April and that would refocus Israeli attention on the whole Middle East. Surely, it will not end the time of confusion.

North Korea could create more threats and a situation of confusion could last at least until the US presidential elections in November. Then, if Joe Biden is re-elected, things could quickly move back to normal. If Donald Trump is elected, there could be a longer period of chaos, coinciding with his plans to replace all US top officials.

In any case, in a few months or a couple of years, the US might tighten again its vise on China. Beijing is apparently already preparing for it with a series of moves:

  • It is developing third-world markets as an alternative to G7 exports (making up all of its surplus) or as a bridge to circumvent direct or indirect US sanctions.
  • Practice what Italians call a “two-stoves policy” – deal with everybody without demanding absolute loyalty from anybody. This approach is amenable to many countries not eager to align themselves exclusively with America and is also easy for some US businessmen keen on making money in any possible way. US demands for economically unrewarded (and perhaps unrewarding) loyalty can become weaker.
  • Continue exporting some essential technologies and capital goods to produce cash. These measures, plus unresolved global tensions, should give time for Beijing to gear up some more fundamental domestic changes.
  • Politically shut down to foreign influence.
  • Rekindle the domestic market by boosting political confidence.
  • Create a basic welfare system to provide enough market confidence to boost domestic consumption. It could help China steer through a few difficult years. But if confusion abroad and in America and Europe keeps on stirring things up, China could eventually emerge better off than the US.

The apparent weakness in this plan is that, on average, Chinese people will grow poorer. But they are meek and don’t rebel. Moreover, they have something to lose and won’t start a revolution for fear of losing the little they have.

Paradoxically, a poorer, more frightened China could be easier to rule and could be more stable. Chinese officials are disgruntled but they too fear losing their small privileges. It’s an open game; Americans know about the situation and are reacting to it fast, binding together all loose knots and bolts of alliances and agreements around the world.

The problem is that the US has forgotten about cultural and political reach for over 30 years. This is important not only outside of the US but also within it. America is bitterly divided at a cultural level, squandering its main capital – its soft power –that won most of the Cold War. Conversely, in the past decade, China has put its structure together and is in better shape politically to face the challenge.

Plus, in a situation of widespread chaos, Chinese entrenchment is easier to implement than America trying to bring order to the whole world, where it stands in the middle. Therefore, the US temptation, voiced by Donald Trump, to leave everything outside to their own devices and close up, in theory, makes sense. But this idea fails to see that America is not just a country; it is a global system. If it abandons its global reach, it’ll stop existing.

China now is trying to build itself conversely as a global system. If the US gives up, China could replace it almost effortlessly, creating more trouble for the US and its allies.

On the other hand, short of a complex strategy, seeking easy solutions and feeling under siege, Trump’s America might push for a tough confrontation with China, escalating to a destructive war. A war could solve Trump’s possible pressing problem of ruling a divided America.

True weakness

China’s true weakness is that everything hangs by a thread. Almost no one is really happy but everybody has something to lose and won’t act. The two odd possibilities are an internal armed uprising or an external war. Either case, no matter what the result, could send shockwaves through the domestic structure, triggering further shocks.

Beijing is aware of this and preventing insurgency is a priority. But for this, it needs to increase repression and ramp up propaganda. All of this will increase entropy. It needs to prevent a war, and to do this, it needs to be more defensive and aggressive, and this again engenders entropy and external panic.

China needs to break the vicious circle, but for this, it needs a plan that apparently is not there.

Conversely, the US as a country (not only a few Washington pundits) needs a moment to realize it is in a broad conflict. This could trigger a 1950s McCarthy-style panic difficult to manage. But it’s not impossible; Washington eventually found the right balance in the Cold War and could find it again.

Surely, the American machinery is more difficult to manage, while the top-down Chinese structure looks more efficient. Still, the Covid experience is an interesting precedent. China, with its competent bureaucracy, accomplished full control at first but then market-oriented America produced a vaccine and bounced back its economy well ahead of China. It’s unclear whether it’ll be different in the existing complex scenario.

Still, it’s not just a bilateral game. If the US doesn’t get its act together, will Europe and Asia simply buckle under Chinese pressure, or will they stand up to it? So far, Europe is divided on Ukraine, and so is Asia.

Will Russia, no matter what the result in Ukraine, continue being on good terms with China or will it turn around? Chances are that if America were to decide to withdraw, the rest of Asia could form a new, more aggressive alliance against China, as could Europe against Russia. That means the forces of chaos could exponentially grow out of control.

This essay first appeared on Settimana News and is republished with permission. The original article can be read here.

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Pritam Singh calls for interest-free SkillsFuture loans to help workers undergoing training

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The S$4,000 top-up can be used for certain training courses such as part-time or full-time diploma programmes and courses in the Progressive Wage Model sectors.

“The Workers’ Party sees the deployment of SkillsFuture credits towards economically productive courses with employment outcomes as an important policy initiative of this Budget.

“But we believe that many of the courses are likely to cost more than S$4,000. To further facilitate skills training and help Singaporean workers, the government should introduce an interest-free SkillsFuture education loan,” said Mr Singh, noting that this proposal was “front and centre” of the party’s manifesto for the 2020 General Elections.

These loans can be calibrated toward courses in high-growth industries that lack local manpower or in other economically important areas, he said.

The government’s moves to invest more in the future are important and critical, but more can be done, he added.

“The Workers’ Party foresees a need for even greater investments in our human capital in future, especially in view of how rapidly the workplace landscape is changing.” 

Steps must be taken to address the widening gap between what Singaporeans aspire toward and the reality they face, Mr Singh said.

He noted that the Forward Singapore report called on Singaporeans to broaden their definition of success beyond the Singapore dream of the past.

“Surely that is an admission, perhaps unintended, that a fair number of the 5Cs are unattainable for most Singaporeans today,” he said referring to cash, car, credit card, condominium and country card membership.

“But I will go further. The reality is that things are very difficult for not a small number of Singaporeans today, regardless of what definition of success one deploys.”

He pointed to the findings of an OCBC survey that said 23 per cent of Singaporeans can only afford their basic needs, and 79 per cent do not have a retirement plan or are not on track with their retirement plan.

“If the sentiments captured in this survey are anything to go by, there is a likelihood that the social compact may be precarious and uneven, particularly if the middle of society feels insecure about their financial future,” he said.

MORE TRANSPARENCY

Mr Singh also called on the government to be more transparent and forthcoming with information so that Singaporeans can participate meaningfully in critical matters.

“This is a recurring theme in my speeches, but I am by no means the only Singaporean to hold this view,” he said.

He pointed to a news report where private sector economists expressed concern about the combination of large cash handouts with a lack of information about the sources of Singapore’s fiscal strength.

Earlier this month, Mr Singh said the government should be more open about Singapore’s reserves and reveal figures to facilitate “mature conversations”.

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NetApp appoints Alwyn David, Country Manager Malaysia, Sheraine Chua as Senior Director for ASEAN

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Reaffirms commitment to ASEAN with new executive hires
Help organizations accelerate business transformations

Data infrastructure company NetApp® has announced the appointments of Sheraine Chua (pic, left) as Senior Director for ASEAN, NetApp, and Alwyn David (pic, right) as the Country Manager for NetApp Malaysia.
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Indonesian President Jokowi makes power play to bolster Prabowo’s coalition – and wield political influence after stepping down

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THWARTING A GRAND OPPOSITION COALITION

The president is clearly concerned about the threat of a parliamentary inquiry, locally known as Hak Angket, into alleged electoral fraud, said political analyst Dr Cecep Hidayat from the University of Indonesia.

Mr Ganjar and the ruling Indonesian Democratic Party of Struggle (PDIP) have called for an inquiry into alleged irregularities in the election. This inquiry, if pursued, would require the support of at least 25 members of the House of Representatives and more than one group of parties in parliament, as outlined in Law No. 17 of 2015.

A parliamentary inquiry could potentially lead to the impeachment of the president, precipitating political turmoil that might destabilise the outgoing administration and disrupt the smooth transition to Mr Prabowo’s presidency, Dr Cecep explained.

Echoing Dr Cecep, Dr Ujang Komarudin, a political expert from the University of Al Azhar Indonesia, said Mr Widodo cannot afford domestic political turmoil that might weaken the incoming administration.

As tensions remain high with PDIP matriarch Megawati Soekarnoputri, Dr Cecep observed Mr Widodo is lobbying Mr Paloh to prevent the formation of a united opposition front between Nasdem and Ms Megawati’s PDIP against Mr Prabowo.

Mr Widodo’s urgency in meeting with Mr Paloh was to preempt the media tycoon from engaging with Ms Megawati, said Mr Hendri Satrio, a leadership and political expert from Paramadina University.

Otherwise, “things could get messy for the president,” Mr Hendri said.

According to local media reports, Ms Megawati now plans to meet with former vice-president Jusuf Kalla, the political mentor of Mr Anies who also enjoys a close relationship with Mr Paloh.

Mr Widodo likely plans to maintain his political influence after leaving office – whether as kingmaker, by assuming an official role in the presidential advisory council, or within a political party, said Dr Ujang.

“He certainly won’t disappear from the political arena. His meeting with Mr Paloh positions him as a power broker to pave the way for Nasdem to enter Mr Prabowo’s coalition, underscoring his vested interest in ensuring the continuity of his policies and safeguarding his legacies,” noted Dr Ujang.

“Mr Widodo understands well that former presidents who have left the palace would lose their influence if they no longer hold political office or attempt to maintain their political leverage.”  

Mr Prabowo’s coalition – made up of his Great Indonesia Movement Party (Gerindra), Golkar, Democratic Party, and National Mandate Party – is likely to command only 43 per cent of parliamentary seats, but the next government coalition would require a broad majority to ensure the political stability desired by Mr Widodo, Dr Ujang reckoned.

Indonesian political parties have a track record of post-election realignments in order to maintain their access to state patronage and resources.

In 2009 and 2014, losing party Golkar joined the winning coalition of PDIP. In 2019, Mr Prabowo’s Gerindra made the surprise move of joining Mr Widodo’s cabinet after its electoral defeat and a bruising presidential contest, showing how ideologically fluid the country’s political landscape is.

Dr Ujang said President Widodo recognises the challenges faced by Indonesian political parties outside the government. “Mr Widodo’s strategy aligns with Mr Prabowo’s desire to embrace all political parties including the losing ones, as articulated in his victory speech,” he added.  

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Analysis: Why big tech’s pushback against Jokowi’s new media regulation could be bad news for Indonesian people

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JAKARTA/SINGAPORE: Online platforms, news publishers, and the government must collaborate and reach agreements that are for the good of the Indonesia public, say analysts, following the introduction of a regulation on mandating digital platforms to pay media companies in Indonesia that provide them with content.

The regulation was signed by Indonesian president Joko Widodo on Tuesday (Feb 20) in a move to level the playing field between media and big tech companies. It will take effect six months after its date of issue.

“The spirit of the regulation is to … provide (a) clearer cooperation framework between them,” said Mr Widodo.

However, the regulation has already received pushback from Meta, the parent company of platforms such as Facebook and Instagram. The tech company has insisted that it does not need to pay for the news content circulating on its platforms. 

Analysts and industry players tell CNA that any divisions will be at the expense of the Indonesian people, especially as the news has a role to play in improving the country’s digital literacy, democracy and public safety. 

According to the chairperson of the Digital Literacy National Movement – also known as SIBERKREASI – Donny Bu, Indonesia has more than 221.5 million internet users who use social media as the primary channel to access information and digital content.

REVITALISING MEDIA WITH NEW REVENUE STREAMS

The secretary-general of the Indonesian Cyber Media Association (AMSI) praised the regulation as a source of income for the media.

“(This is) at a time when the media is experiencing a decline in income (through the loss of advertising revenue) due to the presence of global platforms such as Google,” Mr Maryadi – who like many Indonesians goes by one name – told CNA. 

Mr Suwarjono, the editor-in-chief of news site suara.com, shared that the news industry is now not in good condition, especially after the pandemic and due to the artificial intelligence (AI) era. 

“Disruption not only changes reader behaviour, but also changes the media business model which is no longer centered on news media. (It) moves a lot of … influencers and key opinion leaders to digital platforms,” he told CNA. 

He observed that in addition to introducing a new revenue potential for news sites, the regulation will also serve the public interest so that the digital space is not flooded with “junk information”. 

“The dominance of media business models (that rely on achieving pageviews) has contributed to the emergence of a lot of sensational content, clickbait, and content that relies too much on speed at the expense of accuracy and completeness of facts,” said Mr Suwarjono. 

BIG TECH PUSHES BACK  

A committee must be formed to ensure that digital platforms fulfil their obligations, according to the regulation. 

Chairman of the Press Council, Ms Ninik Rahayu, said that such obligations include aiding professional commercialisation, ensuring that news shared is produced only by press companies, and not facilitating the dissemination of inappropriate news content. 

She noted, however, that the regulation cannot accommodate all requests, and that it is necessary to find a common ground.

“We still have a lot to prepare in the next six months (when the regulation comes into force),” she told CNA.

A day after the regulation was introduced, technology giant Meta’s Director of Public Policy for Southeast Asia Mr Rafael Frankel, said that despite the new regulation, the firm is not obliged to pay for news content posted by publishers voluntarily.

According to CNN Indonesia, Meta claimed that its users do not go to its platforms to look for news content, and that news publishers have instead voluntarily decided to share its content on their various platforms and not the other way around.

Mr Noudhy Valdrino, the former head of Indonesia Public Policy at Meta, told CNA that Meta platforms do not actually benefit from spreading news content. 

He stressed that the government must take a balanced approach to the issue and consider both the interest of press companies as well as the importance of credible news information. 

This is especially since it is in the interest of the Indonesian people to have access to news reports, especially from widely used Meta platforms, said Mr Noudhy. 

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China bond outperformance tells a bigger story – Asia Times

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China’s stock investors could be excused for feeling like President Xi Jinping is disinterested in their plight as market valuation losses mount.

Bond punters seem ascendant, though, as Beijing officialdom makes clear it has their backs in the way few international funds saw coming.

The hyper-targeted nature of policy rescue efforts by the People’s Bank of China (PBOC) and other arms of the state explain why yuan-denominated corporate bonds were among the globe’s best-performing asset classes last year.

The dollar bonds of local government financing vehicles (LGFV) were also big winners in 2023. Unlikely, too, given all the hand-wringing about the US$9 trillion LGFV debt mountain.

The borrowing binge has credit rating companies worried that municipal debt will be China’s next crisis, one that could dwarf today’s huge property troubles.

The reason bonds are winning: Xi’s team understands that a vibrant sovereign bond market is needed to defuse the property crisis and head off a local government debt meltdown. The same goes for achieving Xi’s bigger goal of replacing the dollar as the linchpin of trade and finance.

That’s not to say Xi’s team has given up on putting a floor under China’s stock markets or gross domestic product (GDP). In 2023, inflation-adjusted GDP beat Beijing’s target to grow at 5.2%. But nominal GDP slipped to 4.6% from 4.8% a year earlier as deflationary pressures mount.

To economist Zhang Zhiwei at Pinpoint Asset Management, nominal GDP trailing real output “suggests China is likely growing below its potential growth. More supportive fiscal and monetary policies would help China to restore its growth potential.”

Economist Duncan Wrigley at Pantheon Macroeconomics says news that domestic loan growth only expanded by 10.4% year-on-year in January, the slowest pace since 2003, suggests more stimulus is coming.

The downshift indicates “still-relatively sluggish credit demand, despite net new social financing and net new loans beating market expectations.”

But the longer-term goal of increasing China’s financial footprint is the bigger priority. Beijing has made significant inroads into making the yuan a major reserve currency.

The endeavor shifted into higher gear in 2016 when China secured a place in the International Monetary Fund’s “special drawing-rights” program. It was then that Xi won the yuan entry into the globe’s most exclusive currency club along with the dollar, euro, yen and the pound.

In 2023, the yuan topped the yen as the currency with the fourth-largest share in international payments, according to financial messaging service Swift. It overtook the dollar as China’s most used cross-border monetary unit, marking a first.

The yuan is supplanting the dollar in certain spaces. Photo: Facebook Screengrab

Also last year, Chinese government bonds performed better than US Treasuries in terms of total returns. Adding in the outperformance by corporate bonds, 2023 was a milestone year for China’s emergence as a debt-market superpower.

Yet the dollar continues to dominate despite the US national debt topping $34 trillion and as extreme political polarization in Washington has Moody’s Investors Service threatening to yank away America’s last AAA credit rating.

Xi’s reform team is looking to borrow from Washington’s model for luring waves of capital into local assets. Doing so is vital to financing China’s development and sustaining the giant infrastructure projects driving economic growth.

At the moment, foreign investors hold about 30% of the $26 trillion of US public debt outstanding. In China, it’s 10% at most. Xi, in other words, hopes to get foreign governments and the globe’s top asset managers to fund his economy the same way they long have the US’s.

That means building more vibrant and transparent capital markets. Though the magnitude of China’s total debt liabilities isn’t in the same orbit of the US, China’s public IOUs also exceed GDP. In China’s case, the IMF estimates the burden to be about 116% of GDP when you add in local governments’ off-balance-sheet borrowings.

For China, municipal governments are vital to meeting Beijing’s ambitious annual growth targets. Yet following years of runaway investment in infrastructure, fallout from Covid-era downturns, fewer windfalls from land sales and soaring pandemic-related costs, local government debt is now a top financial risk.

Economists agree that Xi and Premier Li Qiang should lean into increasing global demand for Chinese debt. The end of Federal Reserve tightening signals that interest rate differentials between the US and China have peaked. At the same time, China’s deflation trend means investors buying today could be looking at big returns as bond prices rise.

Already, Beijing has increased and widened the channels to welcome foreign investors, including benchmarks like FTSE Russell.

What’s needed now is a top-to-bottom revamp of market mechanisms from efficient pricing to hedging tools to allowing for capital to enter and leave markets easily. Beijing must make its national balance sheet more transparent and move its fiscal management practices more in line with global norms.

Xi also must resist the urge to weaken the yuan for short-term gain. As economic headwinds intensify, nothing would boost Chinese GDP faster than a weaker exchange rate to boost exports. That might turn off global investors who think in dollar terms.

Hence the Chinese central bank’s reluctance to ease policy. Earlier this month, the PBOC cut the amount of cash banks must keep in reserve by 0.5 percentage points. That pumped 1 trillion yuan ($140 billion) in long-term liquidity into markets.

It was enough to tame bond market dynamics but not stabilize Shanghai stocks. Equity investors have been waiting for Xi’s team to launch a giant new stock stabilization fund – so far, to no avail.

Part of the rationale seems to be that China can do the bare minimum to stabilize stocks and keep GDP as close to 5% as possible. The restrained nature of policy moves, though, appears positive for bond markets and negative for stocks.

“This pattern of new lows in bond yields and resumption of declines in equities highlights to us that the market is concerned that stimulus is not sufficient to address the current deflationary environment,” notes strategist Jonathan Garner at Morgan Stanley. “Our economists continue to argue that a major fiscal package targeting the consumer is needed.”

At the same time, it’s possible “policymakers may start shifting their focus from foreign exchange stability toward more monetary easing” as the need for a stable yuan “has become less necessary,” says Jingyang Chen, strategist at HSBC Holdings.

The overriding focus, though, must be fixing the cracks in China’s financial system. Trouble is, the “ongoing news flow” points to a property crisis that’s “still hot and not easy to resolve,” says analyst Kieran Calder at Union Bancaire Privee.

The bottom line, he adds, is that investor confidence “cannot return” until the property sector is finally fixed. Indeed, the longer the default troubles at China Evergrande Group and Country Garden make global headlines, the more challenging it will be for Asia’s biggest economy to attract enough capital.

At the moment, Xi and Li also are stepping up efforts to head off a local government debt reckoning. Moves include pulling some of the leverage built up by prefectures around the nation onto Beijing’s own balance sheet.

It’s a delicate process. Xi’s Ministry of Finance must maintain confidence among investors that they won’t sustain massive losses. This perception is vital to attracting healthy demand for new debt issues to finance cleaning up older ones.

Here, it’s vital to get right the mix of banks upping lending in the short run and address local government imbalances in the long run.

Beijing is indeed making some progress. As analysts at UBS argue in a note, “continued local government financing vehicle debt swaps using the previous issuance of special refinancing local government bonds in 2023 may have reduced some existing bank loans, corporate bonds and shadow credit.”

In the long run, the ends could justify the means of China prioritizing bond over stock markets. Yet in other ways, the challenges involved in buttressing confidence among global investors is growing.

This week, Xi’s regulators tightened curbs on China’s rapidly growing quant trading industry. Both the Shanghai and Shenzhen exchanges are increasing monitoring of such dealing, particularly in the leveraged products space, after freezing the account of a major fund for three days.

Such regulatory uncertainty has been a constant worry for global investors since Xi’s tech crackdowns beginning in 2020. Those moves, and myriad others since then, tarnished Xi’s 2013 pledge to let market forces play a “decisive” role in Beijing decision-making.

For all Xi’s promises, China today is fending off worries it’s a buyer-beware market.

In March, Xi entrusted the reform process to Premier Li, who has since promised to accelerate moves to diversify growth engines. One key priority is creating deeper and trusted capital markets so that households invest in stocks and bonds in addition to property.

Chinese President Xi Jinping and Premier Li Qiang in a file photo. Image: NTV / Screengrab

Such retooling is needed to change the narrative that Chinese markets. Too many foreign investors still fear that Chinese markets are underpinned by a developing economy with limited liquidity and hedging tools, a giant and opaque state sector, and an immature credit-rating system that obscures risk and enables the chronic misallocation of capital.

In recent years, foreign investors wondered whether China might be facing a Lehman Brothers-like reckoning. Or a crash akin to the 1997-98 Asian financial crisis. For some, the property-overhang dynamic plaguing China’s 2024 echoes Southeast Asia’s predicament 26 years ago.

As top-heavy economies from Bangkok to Jakarta to Seoul hit a wall, investors fled and crashed currencies in their wake. That made dollar-denominated debt impossible to manage as default rates exploded across the region.

China’s property crisis has caused unpredictable challenges for local governments as tax revenues dry up. To Logan Wright, director of China markets research at Rhodium Group, “a collapse in local government investment would be comparable to the economic impact of the crisis in the property market.”

He notes that the “most important variable impacting” the world’s second-biggest economy “will be the success or failure of local government debt restructuring.”

You can’t restructure much, though, if China’s debt capital markets aren’t up to the task. The good news is that Xi’s team is focused on raising China’s bond market game and at least some global investors appear to be getting the memo.

Follow William Pesek on X at @WilliamPesek

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