The World As I See It

America and the European Union are mulling steps to impose tariffs on China’s imports, particularly textile. "China-bashing" is the term that captured the headlines. Pressurised by the local business groups (who are important source of votes), the forerunners of free market are starting to eat their own words. Protectionist bills that violate WTO rules nearly got their ways through the Congress.

"America’s Congress is taking a harsher line on trade, particularly with China. The Bush administration is also getting into the act, with the treasury secretary and even the newly nominated trade representative talking tough. Is America turning protectionist?"       - The Economist

Speaking at the Boao Forum in southern Hainan island on Saturday,

"If there is more pressure from outside, it will force us to speed up our reform," Mr Zhou Xiaochuan (governor of People’s Bank of China) said without giving a timeframe, the first time China’s government has said it may alter its schedule for the exchange rate because of overseas interests. - The Business Times

In a previous occasion, Chinese Premier Wen Jiabao had also said that yuan revaluation will come as a surprise, at an unexpected moment. But I still regard these assurances, both without specifying a timeframe, as mere rhetoric, to soothe the US or EU with some hopes, as set forth by the columnist,

"Asian mercantilism is all about sacrificing the present for a prosperous future. It makes possible, and is in turn made possible by, the extravagance of the US government and consumers who are equally adept at doing just the opposite: sacrificing the interests of tomorrow’s taxpayers for their financial excesses today. Why should China alter its present before the US rethinks its future?" - Andy Mukherjee, Bloomberg columnist.

"Once this happens [yuan unpeg], the People’s Bank of China can stop stockpiling dollar reserves — meaning its demand for American government securities will also dry up. Critics wonder if Congress, which has made little effort to curb America’s soaring budget deficits, has quite thought things through." - The Economist

And I am glad to find this view that tallies with mine in my previous post on this topic,

"America blames China for the bilateral trade deficit, but America’s trade deficits are a result of its huge fiscal deficits and the fact that Americans do not save. America’s defence that it is doing the world a service by consuming vastly beyond its means is self-serving and rings hollow: US fiscal policies and low savings have become the fundamental source of global imbalances." - Lawrence Lau and Joseph Stiglitz, Financial Times.

On the other hand, the US Commerce Department report, provided to lawmakers in February, reckoned that a rise in yuan would do little to cut the US trade deficit or boost job growth. It would likely only benefit other Asian nations and China’s other competitors.

The above citations have given a glance especially at the relationship between yuan and the US , better than what I can possibly come up with. There is also a pressure of internal imbalance in money supply that might force the central bank to revalue its yuan, but I do not address it here [edited]. It is interesting to see who US will target next to blame for its own shortcoming, if the situation does not improve after China loosens its currency.

I find Senior Minister Gong Chok Tong’s remark in the Parliament on the casino issue as one of the rare speech by politicians. Not forgetting he was a First Class Honours in economics from the University of Singapore, 1965, he dissected his reasons for a casino in a mildly economist way.

"We should look at the incremental social costs, not the total social costs, and balance them against the [incremental] economic benefits and social problems of unemployment."

"The debate is not really over whether we should or should not have a casino. It is whether we should forgo the Integrated Resort because of its gaming component [opportunity cost analysis]. It is about our economic future over the increase in social costs. It is about families who would benefit from the jobs created versus families who could have their lives destroyed because of gambling. It is about whether we want to have a vibrant, cosmopolitan and fun Singapore or a fuddy-duddy Singapore."

His 4 reasons to move on to the next stage of the project are

1. Credibility of Singapore and how Singapore is perceived
2. Economic benefits
3. Easy access to existing casinos
4. Manageable incremental social costs

He cited anecdotes of his worldwide encounters with businessmen, high-rollers and ministers, and humorous moments of his gambling history and casino visits during official missions. The speech is light, with the underlying reasoning remains clearcut. Some of his findings are eye-opening to me, that I had never given a thought to, such as "static tourist sights will not attract repeat visitors, but the ever-changing scene of world-class entertainment will", and having skylight to prevent gamblers from losing track of time.

And there is Mr Lee Kuan Yew’s remark. He started off with a narrative of his observations during the Japanese occupation, his student years, as a young lawyer, and when he first took office in 1959. As usual, he gave a very broad view and examined the situation from a global perspective. What is every part of the world evolving into, what impact do they have on Singapore, what lessons can we learn, can Singapore afford not to adapt and reposition itself, will the best offers just vanish and not go to somewhere else in the region if we reject them, what is lack in Tokyo etc. He depicted a picture where Singapore can bring itself to greater height, at the same time with the basic values held firm.

Both of them are for casinos in Singapore. The difference lies in their stance on gambling as stated in their first line.

Goh Chok Tong: I do not approve of gambling but I am not anti-gambling.

Lee Kuan Yew: I am anti-gambling.

Note that their speeches were not in the core Parliamentary debate. They were just sharing their views on casino after the debate. Transcripts of the ministerial statements are available on the government website.

• Prime Minister Lee Hsien Loong explains how the Cabinet reached this decision.
• Minister for Trade and Industry, Mr Lim Hng Kiang explains the tourism and economic aspects of the proposal.
• Minister for Community Development, Youth and Sports, Dr Vivian Balakrishnan explains the safeguards to limit the social impact of casino gambling.
• Minister for Home Affairs, Mr Wong Kan Seng explains issues of law and order and enforcement.
• Minister-In-Charge of Muslim Affairs, Dr Yaacob Ibrahim responds on what this decision means to the Muslim community and how should they approach it.

The Integrated Resort proposal with a casino component has raised strong opposition voice from the community, especially from the religious groups. But as Mr Lee Kuan Yew noted, when addressing university students in a Ministerial Forum, "it is not because they are more organised and have a larger scale, therefore they should prevail. We have to analyse the issues rationally". In Mr Goh Chok Tong’s speech, "These Singaporeans give Singapore its moral ballast. If there were little objection to the casino, I would be even more worried. For it would mean that we have become so blase about life and have lost our moral bearing." PM Lee, "bring all Singaporeans together, so that even though we may not all agree on this issue, we understand and respect each other’s reasons and concerns, and can close ranks and move ahead."

The reasons and the key considerations that caused the Government to change their longstanding policy of casino ban for 40 years were given in the ministerial statements, of which I think they are sound and valid. I won’t go through them here. For those uninformed, the Government has approved 2 integrated resorts with casino. One at Marina Bayfront, which is right at the Central Business District. The other is at Sentosa Island, a leisure and holiday spot. They target different markets, with one complements each other.

As for my stand, I am 100% for casino in Singapore, provided the Government delivers what it promised - the precautionary measures for pathological gambling and organised crimes. As Deng Xiaoping said, we have to "open the windows, breathe in the fresh air, and at the same time fight the flies and insects." Anyway, we should not lose sight of the bigger picture. The 2 casinos are not more than 5% of the gross floor area allowed. They are only a fascinating component of 2 huge-scale Integrated Resort projects involving US$ 3 - 5 billion each. What we should focus on is the role of the entire concept of integrated resorts, with the casinos included, in the process of Remaking Singapore. I can feel the vibrancy of the business buzz, artistes’ performances as well as the jobs created in the hotels, restaurants, shopping malls, convention space, theatres, museums, and theme parks. I believe the Marina Bayfront IR, especially, will hold the limelight in this region. I am confident with the Government’s promises, in the light of its multi-pronged aproach and its track record of extremely cautious manner in every aspect.

Being aware of IR’s potential damage on Singapore’s brand name, the Government has been looking for best practices to adopt. It has explicitly made clear to model after London, Sydney and Geneva, 3 cities with casinos that have maintained their reputations. "All three are financial centres which depend on their reputations for integrity and rule of law, just like Singapore. We can learn from them how to stay abreast of the times, be exciting and cosmopolitan, and still be a safe and well-managed city".

I attach a report by the Institute of Policy Studies, Singapore on the Casino Proposal published on 10 January 2005.

Looking at my previous post on the Open Economy Trilemma, it struck me that I should talk about the case in Malaysia.

The capital controls came into place in 1998 under then Prime Minister Mahathir in the face of 1997 Asian financial crisis. The Ringgit depreciated by 35 percent from July to December 1997 against the greenback. This plunge not only severely affected the Malaysian stock market but also destroyed investor confidence. From the trilemma, it is clear that if Malaysia wanted the pegging of ringgit to the US dollar (fixed exchange rate) and an autonomy monetary policy, it must let go capital mobility. Hence, the extreme measure, capital controls.

Malaysia was the only country among the crisis-hit nations that did not ask for IMF help. Following this, the then Deputy Prime Minister Anwar Ibrahim, who was in line with the conventional wisdom and supportive of the IMF program, was sacked and jailed under the controversial charge of sodomy. For all these, Mahathir was scorned internationally and

"accused of being ‘panicky, shortsighted and stupid’. The IMF, Western governments, free market gurus and the Western press were united in attacking Malaysia and Mahathir for his unconventional measures." - The Jakarta Post

But now, all of them have to admit they were wrong. The measure had stabilised Malaysian economy and the currency value. Malaysia largely escaped the horrible collapse across the region, as was experienced by Indonesia, Thailand and South Korea. I still remember my first year Singaporean economic professor, in his last lecture, had expressed his admiration of Mahathir as a politician, in facing this crisis with his drastic measures.

"Malaysia stood alone and persevered with the success of its own policies, though they were bitter pills to swallow. Ultimately, it proved to the world that it could manage its own house without losing its dignity and economic sovereignty." - The Jakarta Post

On 23 March, Bank Negara Malaysia (the central bank) announced the abolishment of the 7-year-old capital controls. It took the market by surprise. It was unexpected. Is it a hint that the Ringgit will soon be floated? From the trilemma, the 3 conditions cannot exist together for long. One of the reasons of the scrap of capital controls is to facilitate the proposed cross-trading between Bursa Saham Malaysia and Singapore Exchange. Whether we have reached a point where the benefit (competitively priced exports) of declining US Dollar has brought upon our exports is overshadowed by the costs (imported inflation) of increasingly expensive imports from other countries is left for Bank Negara to determine.

Certainly the authority would not want to appear succumbed to the urge of US as well as the retired Mahathir. Despite the Prime Minister Abdullah Badawi’s and the Second Finance Minster Nor Mohamed Yakcop’s assurance in many occasions that the Ringgit peg will remain unchanged, which were seen as mainly to calm the inflow of speculative hot money, analysts including Merrill Lynch and Goldman Sachs go on to predict the unpeg of dollar in the second half of this year. Let us see who is right then.

"They are not responsible for our country. To them, if our people suffer, it is not their problem. But we are responsible. We are elected by the people. And it is our responsibility to look after the people’s security and well-being."

- Mahathir, 2002, in looking back at his decision not to follow the route taken by Indonesia, Thailand and South Korea, all of which came under the IMF programs

In the World Economic Outlook April 2005, the IMF pointed out 2 global trends in the medium-term future,

1. Increasing economic importance of developing countries
2. Aging of industrial countries populations.

Put together, there is a need for the rich countries to save more and run larger current account surpluses to transfer capital to younger, poorer developing countries. The poorer countries should be investing more and running larger current account deficits. As IMF puts it, "this will enable Adrian and Becky to draw on their foreign investments in their old age even while the younger, increasingly skilled Abebe or Nafisca receive the capital to remain productive today." The United States, especially, should adapt its policies to suit the demographic changes.

Ideally this would be the best result for both developed and developing countries - a virtuous cycle to help lifting more developing world citizens out of poverty, while easing the pension fund problem of the baby boomers. Instead, we see capital flowing in the opposite direction today, with emerging markets financing the rich. This is alarming. Immediate actions are needed.

But the global expansion is still overly dependent on growth in the United States. Supposedly Europe and Japan can help ease the situation but both economies are still mired in a despondent mood. Japan is having difficulty dealing with its fiscal problems while Europe is addressing its structural labour market problem.

"Europe simply cannot afford its welfare state. Structural reforms to increase competition and flexibility are essential. When call centres are helping firms around the world squeeze 24 hours into a working day, Europe cannot still be debating stretching 35 hours into a working week." - Raghuram Rajan, IMF chief economist

Political leaders, both in the US and Europe are not unaware of these problems, but

"Unfortunately, elections make rational discussion of such ideas almost impossible. But as the Clinton administration and the Blair government showed with their first-term fiscal discipline, bullets can be bitten, and voters can see the bigger picture - if it is offered to them." - Guardian Unlimited

"Politicians typically deal only with the painfully immediate. Any gain that follows elections counts for nothing; any pain that precedes it is multiplied manifold." - Raghuram Rajan

As IMF contended, since the public will appreciate the gains from the outlined policies only in the medium term, it is not surprising that little has been done thus far on US budget deficit, social security revamp, and Europe’s rigid-labour-market reform.

Is this a problem inherent in a democratic system? To me, yes and no. I will come to this, illustrated by the notion of "responsible electorate" and Singapore’s avoidance of becoming a welfare state, much later.

Condoleezza Rice, US secretary of state, said the world would be watching the outcome of the trial of Mikhail Khodorkovsky, founder of the Yukos oil company, "to see what the Yukos case says about the rule of law in Russia". Ms Rice expressed her repeated concerns over the concentration of power in the hands of Mr Putin. But she insisted the US-Russia relationship remained a positive one, describing Russia as a "strategic partner". - Financial Times 

The notion of strategic partner is probably what is disturbing to Kasparov. For him, it is a form of US’ support for Putin, which endorses and solidifies his autarchy. Together with the engagement of Chirac, Schroeder, Blair and Zapatero, it has boosted his international image which, I believe, more or less, has inadvertently rendered some legitimacy to his conducts.

There are probably only 2 emerging powers that run a different system from the West, and whose participations in world matters are greatly desirable. This implicit endorsement phenomenon has been so frequent, that a standard response from US or the Western countries when approached in this matter can roughly be anticipated - "Autocratic rule and the judicial system need to be addressed", "we are friends, partners. Our relationship is built on mutual trust" and so on.

It has developed into a mere formality, either to serve as a reminder that they are still on this line, or because they have no other choice but to take this stand, or for other reasons else. The subject countries, particularly the emerging superpowers, recognising their increasing weight in the world, seem to have acknowledged the need for them to utter the formalities and thus are not taking their words seriously. Back in their home countries, everything goes on as usual.

I attach a conversation with Garry Kasparov titled "Strategic Intensity" published in the current issue of Harvard Business Review.

Last month, the undisputed world chess champion, Garry Kasparov announced his retirement from chess, after his reign of 2 decades, to go full time into Russian politics.

Wikipedia, in algebraic chess notation, illustrates a game in 1999 that Kasparov commented as possibly the best of all his games. Sacrificing rooks and knight, he made a brilliant turnaround from a weaker position and secured victory. This is classic. I can’t help myself but to stop preparing for tomorrow’s exam and immerse in these moves again and again. Clearly he had that in mind from 24th move onwards. I am not sure if Deep Blue can exhibit this kind of consciousness.

I find this most interesting in his career. In 1984 World Championship between Karpov and Kasparov, Karpov (former world champion before Kasparov) had lost 10kg over the course of the match and had been hospitalised several times, after a result of 5 -3 in Karpov’s favour and a staggering 40 draws! The match had lasted 4 months and ended with a controversial termination by the organiser. Let’s turn to the politics.

"The sovereign must be autocratic, for no other form of government but that which concentrates all power in his person is compatible with the dimensions of a state as great as ours. Any other form of government would be not only harmful, but utterly ruinous for Russia" - Catherine the Great.

I wouldn’t say the empress’ statement is completely wrong, but is valid in certain situations to an extent. Putin inherited a democratic country in turmoil from Yeltsin, after his 10 years of presidency under a multiparty electoral system. Turbulent situations call for a strong hand. As the then Prime Minister, Putin emerged at the right time to reinstate law and order, and reform the ailing economy.

"Russians admire his youth, sobriety, steely restraint and love of order, and many find their own lives better and calmer. Foreign investors who ran away after the government default and economic crash in 1998 have flocked back. They extol the increasing stability of the economy, the growing power of consumers, the energy and imagination of entrepreneurs" - The Economist

But as years passed and the country is roughly on track, things can run on their own. The leadership style has to change, either towards liberalisation and more democracy or more autocratic and central control. Putin chose the latter. He has increased the repression on media and free speech, planted former secret agents throughout the government, and turned both houses of parliament into his puppets. Rampant corruption permeates the bureaucracy. Police officers and government officials have unlimited power in the towns. An open economy and a closed political system make investors and businessmen uneasy. There are no guarantee for their fortune and future.

About Kasparov’s remark on the leaders of free world, I think they do have their faults. But in some occasions, they are not condoning Putin’s deeds but to befriend Putin as a courtesy in diplomatic and a respect for the events they were in. Politics and economy should be separated. In an economic summit, they discuss foreign aid, exchange rate, oil production etc, regardless of their political ideals. As an oil producer, Russian’s involvement in the world economy is certainly desired. Putin’s political and China’s human right records should be brought up in the General Assembly in the United Nations. These are among the issues that appear on the agenda every year, and this is the appropriate venue to voice their concerns in politics and general welfare.

I believe Kasparov and his team have formulated a plan to attack Putin, restore democracy from the root and call for an election. Chess players are known for their caution in every step. There are many cases where a blunder costs the whole game.With his overwhelming fame among the Russians, I wonder if Putin sees Kasparov as a formidable strategist opponent or just someone talented in the game board.

Following are excerpts from the transcript of an interview with him by Charlie Rose, 26 March 2005.

On chess

"The most difficult challenge: To face generation that came into existence because of your own contribution to the game of chess, and you sense that they already know something better than you did. They are probably more sophisticated."

"They made each other better. One of the reasons I could stay for so long is that Karpov was there. He didn’t give me time to relax."

"You have to criticise yourself, analyse your games, exhaust all possibilities to find your mistake. Confess it was a mistake, otherwise you can’t improve."

"Chess is mathematically infinite. Any decision in the game must include intuition and evaluation. These are the two factors you cannot transmit into the silicon brains."

On his new book "How Life Imitates Chess"

"I’m going to explain that there’s not much difference in the decision making process in the White House or in the kitchen."

On politics

"Khodorkovsky (41, former Yukos head, net worth US$8 billion, ranked 26 in Forbes Billionaires list, richest man in Russia when arrested on 25 Oct 2003) didn’t want to pay bribes to criminal officials. He wanted to pay taxes to the treasury. It sounds ridiculous for American ears, but in fact, Khodorkovsky is in jail because he wanted to pay taxes officially."

"I was never part of any business or any scam. I assume it would be difficult for Kremlin to launch a direct assault on me based on accusations that will not be supported by the public opinion."

"Garry, it’s dangerous, you don’t have to work anymore, can just enjoy life, write books. There’s so much on your plate. Why are you doing this?"

"And I have just only one response. Moral duties. I want my son to be proud of his father, and I want my son to grow up in a free country, not to be afraid of Putin’s dictatorship. Either you fight, staying there; or you emigrate. I want to stay and fight. I don’t want to, in 2,3,4 years from now say, OK, we had the chance and we blew it because we didn’t have enough courage."

"The love for democracy in Washington is quite selective. On one hand they’re promoting democracy in the Middle East; on the other hand, they pretend that nothing is happening in Russia. They pretend they are neutral, but in fact they are supporting Putin. Russia is an important partner for this and for that and they want stability." - PBS: The Charlie Rose Show (C) Voxant Inc.

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In my previous entry, I did not give a more complete picture as I cite the European Union only as an example and it involves economic theory. But I should briefly elaborate here to give a clearer view.

In the Europe the Open Sky Agreement exists partly because it facilitates labour mobilisation, and the condition is ripe over there. A phenomenon where a country cannot simultaneously have

1. Stability in exchange rate
2. Autonomy/independent monetary policy
3. Free capital mobility

is referred to as the Open Economy Trilemma. At any time, it can only choose two. The reason can be found in any macroeconomic text.

The EU member states adopt a single currency, the Euro. It is the same as having a fixed exchange rate pegged to an arbitrary value set by the European Central Bank. And there is no restriction on capital movement between the borders. Hence, the member states relinquish their autonomy monetary policies to the central bank based in Frankfurt, Germany. Each individual state has no decision on the money supply nor the interest rate. Interest rate is unified all over EU.

What happens when one country faces inflation, growth decline or high unemployment while the other country is in the opposite situation? Recently the Federal Reserve in US raised the interest rate consecutively to fight inflation pressure. But in EU, labour mobility comes into play. Before the unemployment level reaches a level, the labour movement will settle it to the equilibrium. It may look troublesome and ineffective, but the benefit of stability and combined forces offset the costs. Of course when faced with an economic problem, each government still has fiscal policy to exercise, but let’s not complicate the matters here.

The Asian Development Bank has also proposed to have a single currency in this region but we can expect it to realise only in the long long future. At least it requires each country’s budget deficit to be within a range (known as the Stability Pact in EU) with unrestricted capital mobility between them. Both of them are still a problem here. And because of huge difference in the pace of development, a free labour mobility is not yet a desired outcome. Imagine out of a sudden, 2 million people flock to Singapore. 2 million is not even 0.5% of the population in Southeast Asia alone.

Hence, liberalisation of aviation industry in Southeast Asia is not as imperative as in the Europe. That said, bear in mind that, here I am referring only to the macroeconomics which explains why we can afford a layback position in this matter, and secondly liberalisation of aviation industry is not the same as free labour movement. Certainly a liberalisation of aviation industry will benefit the region.

High oil price is here to stay. This is the message IMF economists want to convey. Earlier this month, they caused a stir when they suggested that the world needed to get used to a "permanent oil shock", and even predicted the price to soar past the level of US$100 per barrel. Nonetheless, the consequence of rising oil prices this time has been quite different from the shock in 1970s, which was followed by a deep recession.

"So far, it is perhaps remarkable how little impact rising oil prices have had. Last year, global GDP grew by 5.1%, the fastest rate in a generation". - The Economist

3 reasons are given:

1. The world economy is much less oil-intensive than it used to be.
2. In contrast to the supply shocks of the 1970s, this time round, it is fuelled by rising demand, particularly from America and China.
3. Central banks have gained reputation in fighting inflation. They managed to stop the translation of high oil prices into wage-price spirals. [An economic concept, but should be intuitively understandable]

However, the bright global GDP growth gives an overall performance. The negative effects of soaring oil prices are certainly to be felt in some countries or industries. This implies that, behind the scene, it is likely to give a disparate world, which total average gives the overall GDP growth. It means there are some who are doing exceptionally well and some at the other end - widening imbalance of global growth. The article goes on to describe the stark dichotomy between how, as oil importers, America and China as a group have reacted differently from "the wheezing" group - Japan and continental Europe. The price hike is affecting virtually every country. For instance, to offset import inflation, in its 12 Apr Monetary Policy Statement, MAS "will maintain the current policy of a gradual and moderate appreciation of the nominal effective exchange rate policy band". From countries, let’s move to an industry.

I think airline, where fuel accounts for a large part of the total operating cost, should be among the worst hit industries. The impact is deep and wide. Oil prices hiked at a time when global airline industry was recovering from the aftermath of SARS. Thus, we witness a series of events unfolding in this sector. Rising fuel surcharge by SIA, Cathay Pacific, Thai etc, a huge layoff at British Airways, Lufthansa’s takeover of Swiss Air, etc. Together with the emergence of low cost carriers (LCC), Indonesia has stopped all LCC, except the existing services, from flying to its popular destinations to protect its national carrier Garuda. I see it as an unwise and unsustainable move. As what happened to the protection of Proton, national car maker of Malaysia, the move will only further derogate Garuda’s competitiveness. The government shunned from injecting a hard medicine, which costs electoral vote but is more likely to inflict only a short term pain. Building fence, and you will find yourself living in a failed imaginary world. This is what Jawaharlal Nehru tried to do for India after independence. It happened to the post-colonial African countries too. They had enough of foreign occupation and their mood was to keep all foreign entities out of their borders, including foreign competition. Soon, corruption and low efficiency set the stage, quality of domestic product corroded, infrastructure in a parlour state. The end result - uncompetitive industry and low standard of living. This is a vicious cycle. It has tempted the leaders to heighten the fence.

On the other hand, we also see SIA adapting its business model - costs lowered, operations leaner, target market shifted. Over the last year, it had signed a cooperation pact with Emirates Airlines and codeshare agreement with Malaysia Airlines, Air New Zealand, Lufthansa, ANA etc. Last year SIA boasted a new record for the world’s longest non-stop commercial flight over the hemisphere in its maiden Singapore-Los Angeles and Singapore-New York routes. Meanwhile, the Transport Ministry is pressing hard at its Australian counterpart to open the Sydney-LA route, which is currently dominated by Qantas, to SIA. Airhub status and the airline business are the lifeblood of Singapore. The government cannot afford to see it lost out merely due to oil price fluctuation since the interest of SIA and Singapore are tightly intertwined. The executives and officials are going all out to make sure they stay ahead. SIA has showcased the nimbleness of a colossus in adapting to changing environment. I would say SIA is well poised for future challenges.

As for LCC, in the European Union, the member countries have an open sky agreement. As a result, the air traffic network is extensive, and LCCs thrive, with Ryanair emerged as the biggest player. (Check the website, the low fares and the coverage of destinations really stunned me). In Southeast Asia, each flight has to obtain a traffic right from the authority. The lucrative Kuala Lumpur-Singapore route is still dominated by Malaysia Airlines and SIA. Regulatory hurdles, protectionism and high oil price will suffocate and impede the regional LCC growth in its infancy.

"This could trigger the beginnings of a premature consolidation of the industry. Such an outcome would be a pity as this region of 550 million people has a huge potential for low-cost travel. Asia’s budget airlines could service the hundreds of cities with no international air links, if the conditions were right. But for this to happen, governments must liberalise the aviation industry".                        - The Business Times

Unfortunately the implementation of the proposed bringing down of air transport barrier in the ASEAN FTA to alleviate rising oil price is yet to be in the visible horizon.

In fact, seeing Mr Lee Kuan Yew’s phrase "Look at the circumstance…possibilities…within this framework, what can be achieved…", the first thing that struck my mind is something from the syllabus - the chapter on hindsight bias, from a social psychology text.

Briefly, it means when people learn the outcome of an experiment, that outcome suddenly seems unsurprising. We invoke common sense after we know the facts. Events are far more "obvious" and predictable in hindsight than beforehand. We tend to overestimate our ability to have foreseen the result. If we are given an opposite set of results, we would have labelled it as obvious also.

When we are judging a political leader on his past actions or even our own past decisions, we must bear in mind that we are looking at matters with a hindsight benefit. It is unfair to criticise with all the eventual outcomes known to us. Putting ourselves in others’ shoes "spacewise" is not enough if time dimension is left out. As far as we can, we should "visualise the circumstance, consider the given possibilities, and within that framework, has he or she achieved the most out of it AT THE TIME when the subject is making decision". Our accessible knowledge of the situation is limited up to that time, after which uncertainty is what is left to us. This may not be easy, but with awareness, we can consciously eliminate it. I do not mean that we should never criticise. I mean we should make our point on the ground that we do realise that hindsight benefit is with us, so as to avoid charging a person unfairly.

Autobiography is an area of much concern with hindsight bias. When we are looking back, our memory is not perfect. We tend to fill in the gap. The author has to make sure he sees everything as from the beginning. But there are perhaps not many souls in this world that has the same capacity as Mr Lee Kuan Yew to assemble a team to gather the nitty-gritty data, carry out interviews, collect every scribble and piecewise information from the press, the cabinet archive and other sources that I cannot think of. Perhaps we should be more reserved when reading an autobiography or memoir.

I attach a short and very interesting article on hindsight bias - "Did You Know It All Along?". Follow the sample experiment by Paul Lazarsfeld (1949). It should be enlightening.