Radical management: it’s happening! make more money!

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Radical Management Makes Much More Money

Steve Denning RETHINKinShar

“Radical management: it’s happening” is the headline in the editor’s letter of the management journal, Strategy & Leadership, Volume 39, Issue 3. Robert Randall offers twin messages:

“One, corporations are failing their stakeholders by wrongly favoring some more than others or by not managing discontinuity through best practices that foster continuous innovation; two, it’s time to try something else.”

He continues:

As a result of working with these authors and reading manifestos by other leading strategic management thinkers that also call for a reinvention of management, I’m confident that we are witnessing a best-practice revolution. When respected management thinkers like Michael Porter and Gary Hamel tell management to re-boot, then it’s time. It’s not as if the failings of hierarchical, shareholder-first management are a secret. So it should be no surprise that many of the principles of radical management are quietly being adopted by leading companies around the world, to a greater or lesser degree.

Management reinvention… offers company-wide rapid-business-model development as a response to market discontinuity. To compete successfully despite frequent and sudden change, firms have to foster the competencies that promote continuous innovation in both offerings and operations. In practice, managers shift their focus from producing low-cost or high-differentiation offerings to satisfying customers. They become enablers instead of controllers, coordinate their organizations through dynamic linking of teams and customers rather than command and control, make social and customer values their prime concern, and communicate so as to further stakeholder conversations. Leading advocates are Gary Hamel (“It’s time to reinvent management,” S&L V36, N2), Stephen Denning (“Masterclass: The reinvention of management,” S&L V39, N2 and “Reinventing management: the practices that enable continuous innovation,” in this issue), John Hagel in The Power of Pull, and others.

(Note: Those articles require a subscription.)

Outstanding article award

Meanwhile the Emerald Literati Awards For Excellence were officially announced last week.  My article, “Rethinking the organization“, was selected as the Outstanding Article in Strategy & Leadership for 2010. The direct link to all Outstanding and Highly Commended Papers is here.

As a special exception, my prize-winning article, Rethinking the Organization, is available free for unlimited distribution until September 1 here.


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Steve Denning’s most recent book is: The Leader’s Guide to Radical Management: Reinventing the Workplace For the 21st Century 

Surprise! Radical Management Makes Much More Money

My colleague, Dennis Rebelo, has written a generous piece about my book,  The Leader’s Guide to Radical Management (Jossey-Bass, 2010). (Jossey-Bass, 2010) while also asking: is radical management really so radical? Isn’t this really just a restatement of the humanist principles that have been formulated many times before?

The bridge between radical management and humanist values

In his blog, Dennis notes the connection between the humanistic principles taught at Saybrook University and the principles laid out in my book and has crafted “a list of some rules of thumb to offer leaders to expand on (but not replace) Steven’s interlocking principles – bridging his concepts to humanistic studies, topics and approaches.”

1. “Focus the organization on delighting clients” (Steve Denning) which means “become more aware of the role of a collaboration culture in supporting the mission you joined to serve fellow human beings” (Dennis Rebelo).

2. “Work in self-organizing teams” (Steve Denning) meaning “focus on natural formation versus control and command styles of the carrot and stick era of management so that you can experience joy at work” (Dennis Rebelo).

3. “Operate in client driven iterations” (Steve Denning) or “engage in a dialogue in the Bohmian-spirit to suspend judgment en route to understanding others” (Dennis Rebelo).

4. “Deliver value to clients” (Steve Denning) in other words “work with honor as you promised you would to serve” (Dennis Rebelo).

5. “Foster radical transparency” (Steve Denning) which is to say “graciously accept the sharing and critical thinking that stems from diversity” (Dennis Rebelo).

6. “Nurture continuous self-improvement” (Steve Denning) because “people are naturally inquisitive and so let the human endeavor at work encourage learning” (Dennis Rebelo).

7. “Communicate interactively” (Steve Denning) which is to say “dialogue versus monologue because no collective wisdom comes from watering down the thoughts of another human” (Dennis Rebelo).

Dennis concludes: “To be human means to accept, honor and be able to work with ease and grace despite having differences in thoughts and feelings with other people… Perhaps being human to get a human back is not a radical concept after all. Let’s not let it be.”

The article is a useful reminder that some of the roots of radical management have been around for a very long time. Indeed much of the spirit of radical management is driven by a wish to transform organizations from places where employees and customers are treated as things to places where people are treated as people. As Dennis points out, that ought not be a radical thought.

Future historians and psychologists will undoubtedly look back on the 20th Century and scratch their heads, wondering why did hundreds of million people accept to go on, day in and day out, treating other people as things and allowing themselves to be treated as things. What illness of the human spirit could have afflicted so many people to act in such a strange way?

More than just the old humanist principles

Yet this line of thinking should not delude us into thinking that radical management is really no more than the general humanistic principles that have been around for centuries. There are at least five fundamental ways in which radical management goes beyond general humanistic principles.

1. A change in the goal of the organization

Fixing the goal of the organization on delighting customers (or stakeholders) involves a lot more than “becoming more aware of the role of a collaboration culture”.

It is a fundamental change in the goal of organizations from making money for the shareholders to delighting the customers or stakeholders. It is a change in the basic geometry of organizations. Top-down becomes outside-in.

By and large, the humanist school of management from Mary Parker Follett onwards tried to work within the existing framework of shareholder capitalism, without always realizing that the goal itself would inexorably undermine humanist values. Instead of working within the goals of shareholder capitalism, radical management changes the very goal of the organization. Radical management rejects the framework of assumptions of traditional management and offers a different framework.

2. Radical management makes much more money

Happily, when the organization changes its goal to delighting the customer, it ends up making more money for the shareholders, because the organization is now in sync with today’s marketplace, where the customer is in charge. Delighting the customer is not just profitable, it is hugely profitable, as one can see from the results of Apple [APPL], Amazon [AMZN] and Salesforce.com [CRM], particularly in comparison to companies still being run in the mode of shareholder capitalism, such as GE [GE], Walmart [WMT] and Intel [INTC].

Hence radical management doesn’t have to depend on persuading business people to treat people as people just because that’s the right thing to do (which it is). Happily the economics is inexorably driving the change, whether business people want it or not. Wall Street is already putting traditional, thing-driven firms out of business at an accelerating pace, as Deloitte’s Shift Index conclusively demonstrates. In one sense, this phenomenon is a triumph of humanism. But we should not forget that there is a lot more than general humanist principles that is responsible for what is occurring.

3. Many of the practices are genuinely new

Many of the people-oriented vocabulary and practices would be unfamiliar to the humanist writers. That’s because these practices and this vocabulary are genuinely new:

• At the organizational level, the goal of the firm to delight customers is measured by the Net Promoter Score. It enables the organization to measure whether it is delighting the customer by inviting the customer to imagine a story: “Would you recommend this product or service to a colleague or friend?”
• At the level of the team, work is planned in the form of user stories—a special kind of story devised to formulate the goals of teams in terms of customer outcomes.
• The user stories that are developed are then sized and prioritized using other methodologies called “story points” and “planning poker” to measure how much work is involved in making any of the user stories “come true.” In such work places, people routinely speak of “implementing stories.”
• Value stream mapping is a tool that creates a story of the organization seen from the customer’s point of view, and helps identify any delays in delivering value to the customer. It enables the organization to manage the forgotten competitive weapon: time.
• These story-based measures enable the firm to go further and—for the first time—calculate the productivity of a firm in terms of human outcomes rather than merely the production of things.

With radical management, we are thus in a world of NPS, user stories, story points, planning poker, team velocity and value stream mapping. This vocabulary and these methodologies represent an evolution of the innocent world of general humanist values. In effect, by using these discoveries, radical management is able to transform general humanist principles into actionable business processes. The humanist principles are sound. But by themselves, they are not enough to run an organization.

4. Doing all the changes together is new

Individually none of these seven principles is new. Each principle has been implemented by some organizations for many years:

• Finding ways to measure client delight and the consequent impact on firm growth has been systematically studied by Fred Reichheld and his colleagues at the consulting firm Bain & Company for over twenty-five years.

• Self-organizing teams have been the staple of new product development for several decades.

• Iterative work practices have been promoted since the 1930s by Walter Shewhart, a quality expert at Bell Labs.

• Reducing inventory and delivering value to clients each iteration lie at the heart of lean manufacturing, which was invented by Toyota some fifty years ago.

• Radical transparency has been a guiding principle of software development practices known as Scrum and Agile for several decades.

• Continuous self-improvement is a legacy from the total quality movement for more than half a century.

• Interactive communication—storytelling, questions, conversations—has a rapidly growing literature and practice in the past decade.

Individually, then, none of the seven principles is new. What is new is for organizations to break free from the interlocking assumptions of traditional management and put all the principles of radical management together as an integrated, mutually supporting whole. It’s the integrated implementation of all the pieces that gives the approach its full power. Each of the components adds an increment: when they are combined, the increment becomes exponential.

As I noted in my post yesterday, many companies have mistakenly approached radical management (and its forerunners: Scrum, Agile and Lean) as it if were just another business process to be bolted on to the existing business processes. The result is generally a failure. Radical management is a different way of thinking, speaking and acting in the workplace. It is only when firms realize this that they achieve the full benefits from implementing it.

5. An end to mere PR

Traditional managers have often professed to be devoted to delighting their customer and valuing employees as the organization’s most important asset. Yada, yada, yada. Everyone knew that the real bottom line was neither customer focus nor valuing employees: the real goal was making money for the shareholders. The other stuff was PR bullshit.

So if radical management were to be merely talking about becoming more aware of the role of a collaboration culture, there would be a serious risk that people would see it as more of the same traditional management PR bullshit. They would suspect that the real bottom line of radical management was really still what it always was: making money for shareholders. By being crystal clear that this is a shift in the real bottom line of the organization from making money for shareholders to delighting the customer, we get to the heart of the matter of what is really driving the organization. This is not just PR bullshit. This is a fundamental change in the way organizations are run. This is what makes this thinking radical.

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To learn more about the principles and practices of radical management, read Steve Denning’s book: The Leader’s Guide to Radical Management: Reinventing the Workplace For the 21st Century (Jossey-Bass, 2010).

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Obdedient Wives Club (OWC) to offer sex lessons

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Obedient Wives Club to offer sex lessons on how to pleasure husbands

 By ISABELLE LAI isabellelai@thestar.com.my

RAWANG: Sex lessons to help wives “serve their husbands better than a first-class prostitute” will be among the classes provided by the Obedient Wives Club (OWC) to help promote harmonious marriages and counter social ills.

Its vice-president Dr Rohaya Mohamad said it was time sexual prowess took a front seat in marriage, beyond that of the traditional “good mother or good cook” roles.

“A good or religious wife should also be good in bed,” she told reporters after the launch of the club's Malaysian chapter at a golf club here yesterday.

She said a husband who was kept happy in the bedroom would have no reason to stray, seek out prostitutes or indulge in other social vices.

Making its debut: Fauziah Arifin from the OWC giving a token of appreciation to Positive Image Resources Sdn Bhd executive director Datin Zainah Abdul Ghani at the launch of the club in Rawang yesterday. Looking on are Sakinah Rahmanuddin and Selayang Umno deputy chief Datuk Nasir Ibrahim.

 

“The family institution is protected and we can curb social ills like prostitution, domestic violence, human trafficking and abandoned babies,” she said, adding that she believed these problems stemmed from unfulfilled sexual needs at home.

Dr Rohaya, who previously served 15 years as a doctor in the Health Ministry, said the club would also offer counselling and lecture sessions for wives, husbands or couples.

She said the Malaysian chapter had around 800 members while its chapter in Jordan had 200, adding that another in Indonesia was set to be launched on June 19 in Jakarta.

Asked whether wives should remain obedient if their husbands still abused or cheated on them despite being “kept happy” in the bedroom, Dr Rohaya said everyone was subject to God's rule.

“God has His ways and is fair to all. A husband is also subject to God's rule, meaning he can go to hell, too. But a woman must be a good wife to the end,” she said, adding that according to Islam, women should pray, fast during Ramadan, protect their chastity and obey their husbands if they wanted to enter heaven.

Dr Rohaya said the club was undaunted by public criticism, adding that she believed this was a “successful formula” to happy marriages.

OWC and the Polygamy Club were formed by Global Ikhwan Sdn Bhd, an organisation founded by former members of the banned Al-Arqam Islamic group.

A mass wedding reception for eight couples was also held during the launch.

The brides were aged 18 to 22 while the grooms were aged 20 to 48. All are OWC members and agreed that disobedient wives were the cause of many social ills.

FB group counters ‘sexist’ wives club

PETALING JAYA: Facebook users have started a group called “We Do Not Want Sexist Nonsense From Global Ikhwan Sdn Bhd” after reading about the Obedient Wives Club (OWC) launched by the organisation.

Someone called Matthew Tard Ong wrote that he created the group as he believed both partners played a role in keeping a marriage healthy.

As of 9.30pm yesterday, 133 people had joined the group. The OWC, or Kelab Taat Suami, was launched yesterday. Its members strived to delight their husbands in almost every way.

OWC vice-president Dr Rohaya Mohamad said this included keeping husbands sexually satisfied so they would not turn to prostitutes or keep mistresses.

A Muslim husband, who only wanted to be known by his first name Zul, said he did not agree with the message sent out by the club.

“Yes, sex is important, but you can’t say that it will help curb social ills in such a sweeping manner. “There are other factors involved,” said the 36-year-old technician.

He said men tended to stray for psychological reasons that he himself did not fully understand. Men, he said, could cheat on their wives despite having a happy marriage.

Sociologist and social activist Rohanna Ariffin suggested that OWC members read up on statistics by women’s rights groups and the police to find out the factors that caused domestic violence.

“Women shouldn’t be women’s worst enemy. Husbands have to take responsibility for their own behaviour,” said Rohanna who is also a Parti Rakyat Malaysia central committee member.

She stressed that it was wrong for women to take all the blame for men’s weaknesses.

However, Selayang Umno deputy chief Datuk Nasir Ibrahim said the club was extraordinary and unique.
He said Selayang Umno fully supported the club as most problems had their roots at home.

“There may be negative voices decrying this as male chauvinism but I don’t see it that way. If the family institution is strong with good marital relations, it can help counter social ills,” he said at the launch of the club yesterday.

‘Wives can curb social ills like prostitution by being obedient and alluring’

By ISABELLE LAI

PETALING JAYA: Wives who “obey, serve and entertain” their husbands can help reduce social ills such as prostitution and domestic abuse, according to members of The Obedient Wives Club.

The Club, to be launched Saturday by Global Ikhwan Sdn Bhd, aims to teach wives how to keep their husbands happy and contented.

Global Ikhwan, an organisation founded by former members of the banned Al-Arqam Islamic group, also launched the Ikhwan Polygamy Club two years ago.

Global Ikhwan spokesperson Siti Maznah Mohd Taufik said that many social ills were caused by disobedient wives who failed to bring joy to their husbands.

“Domestic abuse happens because wives don't obey their husband's orders. A man must be responsible for his wife's wellbeing but she must listen to her husband,” said Siti Maznah in an interview on Friday.

When asked whether it was the wife's fault for being abused, she said: “Yes, most probably because she didn't listen to her husband.”

Siti Maznah, 48, also stressed that husbands would not stray and turn to prostitutes if wives supplied them with a satisfying sex life.

She said women had the duty of making themselves attractive and dressing up beautifully at home.

“Wives should welcome them with sexy clothes and alluring smiles when in the privacy of their homes,” she said, adding that she herself did the same as everyone in the club practised what they preached.

Siti Maznah, a second wife and mother to five children, said she treated her husband's first wife like her elder sister.

“Altogether, we have 16 children in our household. My husband is a happy man, you can see it from his actions,” she said.

According to her, the Ikhwan Polygamy Club now has over 1,000 members comprising both husbands and wives. The average number of children per polygamous household ranges from four to 26.

Siti Maznah admitted that husbands were not perfect and it was natural for disagreements to occur, sometimes.

“We can have discussions and disagreements. We don't just keep quiet when we don't agree with our husbands,” she said.

However, as long as husbands did not go against Islamic law, their final word was law, she said.

Perak mufti supports Obedient Wives Club

By SYLVIA LOOI and FARIK ZOLKEPLI  newsdesk@thestar.com.my

IPOH: Perak mufti Tan Sri Harussani Zakariahas given his backing to the Obedient Wives Club, which offers “sex lessons” to help women keep their husbands.

Harussani, who recently banned the poco poco dance in Perak, said women needed to be reminded of their roles and responsibilities to their husbands.

The younger generation is too absorbed in cultures that are not their own. Wives must be very obedient to their husbands. - Tan Sri Harussani Zakaria

“The younger generation is too absorbed in cultures that are not their own. Wives must be very obedient to their husbands.

“However, in Islam, the wife can go against her husband if what he does is not according to the religion,” he said, calling for more such clubs to be set up throughout the country as a way to counter social ills.

He was responding to a statement by club vice-president Dr Rohaya Mohamad that a husband who was kept happy in the bedroom would have no reason to stray, seek out prostitutes or indulge in other social vices.

The club had also offered sex lessons to help wives “serve their husbands better than a first-class prostitute”.

However, Johor Islamic Council advisor Datuk Nooh Gadut said the use of the term “first-class prostitute” was extreme, adding that marriages in Islam should not be just for sex but for, among others, love.

The Joint Action Group for Gender Equality (JAG), which includes the Women's Aid Organisation, Sisters in Islam and Women's Centre for Change, said the club's principles were narrow-minded, degrading, and an insult to women around the world.

JAG spokesman Maria Chin Abdullah said Malaysian women had contributed enormously to society and that the latest development was a setback in progress.

“It is degrading to ask another individual in this case, a woman to wait on another person hand and foot. Our group is fighting for gender equality but the club is looking to degrade women even more.

“To objectify women as mere sex objects to satisfy their husbands' lust is simply unacceptable. “I hope more men can speak out against the club's outrageous stand,” she told The Star yesterday.

Social activist Pang Khee Teik said women should realise that they were not only “doing it” for their husbands but for themselves as well.

“We must remember there are people with little or no sex drive. Any campaign by the club must not pressure women into feeling guilty about it,” said Pang, who is also the co-founder of annual sexuality rights festival that advocates equal sexual rights for all.

Supremacist thinking, race, religion conspiracy theories of threat: same actors, same old script!

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Sharing The Nation By Zainah Anwar

There should be zero tolerance against those who abuse race and religion to promote supremacist thinking and incite hatred.

WHOSE voice should prevail? Those who perpetually see race and religion as being under threat and demand that every person who believes, thinks, behaves, dresses, acts and opines differently should be “fixed” through state-sanctioned operations (such as boot camps or rehabilitation camps), punished under the Internal Security Act, the Sedition Act, the Official Secrets Act, the Printing Presses and Publications Act, the Syariah Criminal Offences Act, or just denounced and demonised as enemies and traitors of race, religion and country?

Or those who envision a democratic and just future, where rights are recognised on the basis of citizenship rather than just race, religion, or sex?

The choice is obvious to most of us, the good citizens of Malaysia who love this country and are determined to be resilient, resourceful, and open-minded to face the challenges and realities of the 21st century.

Healthy beat: Even the innocuous fun of poco-poco is considered a threat. — Filepic

 

But there are demagogues in our midst who are relentless in their abuse of race and religion to stir up fear and conflict.

For what purpose? To remain in power so that their privileges and entitlements are entombed forever?

Could this escalating rhetoric of racial and religious-based recriminations be a last ditch do-or-die effort to maintain business as usual, never mind the consequences to the nation or even their own party?

Is it because the elections are coming and they remain myopic in their belief that race and religion will win them the battle?

So they endlessly manufacture many more new threats – from the innocuous fun of poco-poco to the relativism of post-modernism, from calling Muslims opposed to Umno and PAS unification as “pengkhianat Islam” (traitors of Islam) to accusing Christians of plotting to turn Malaysia into a Christian state!

Even the outdated “communists under every bed” threat is now being thrown into the cauldron of dangers besieging the Malay community. All this, of course, to add to the existing long list of threats that include pluralism, liberalism, feminism, secularism, kongsi raya, open house, tomboys and yoga.



If this is merely tiresome, one can just laugh it off. Alas, it is not. It is corrosive to the body politic and well-being of the nation. It foreshadows a downhill slide into ethnic and religious conflict. It contributes to the record outflow of capital and talent that the country is suffering now.

It has got to stop!

And yet, for years, a mainstream daily newspaper continues to be the conduit for such inflammatory, unverified, provocative stories with front page banner headlines, giving it authority and legitimacy with seeming support from the powers that be.

The Government cannot talk about 1Malaysia, economic transformation, government transformation, talent recruitment or high income country on the one hand, and on the other legitimises, whether directly or indirectly, the use of race and religion to incite fear for short-term political gain.

It is hard to understand why these same actors are trotting out the same old script that cost the Barisan Nasional government so dearly in 2008. It’s as if nobody has learnt any lessons from that political tsunami.

Since attacking liberal Muslims and ungrateful Chinese did not work in 2008, they have amended the script to add Christians and the so passé communists. Aren’t they creating more enemies instead of making friends?

Ashutosh Varshney, the Indian political scientist based in the United States, spent 10 years examining three pairs of Indian cities, one riot prone and the other peaceful, in confronting the same contentious ethnic issue.

In his seminal work Ethnic Conflict and Civil Life: Hindus and Muslims in India, he establishes three findings significant to Malaysia.

First, the role of the press. In violent cities, instead of investigating rumours, often strategically planted and spread, the press simply printed them with abandon. In studying peaceful Calicut and violent Aligarh over the Babari mosque agitation, he finds Aligarh’s local newspapers printing inflammatory falsehoods, while Calicut’s newspapers neutralised rumours after investigating and finding them unfounded.

When I was a journalist 20 years ago, my editors would not print any news – and certainly not on the front page – with alarming headlines without authoritative verification. Now some mainstream newspapers act just like irresponsible bloggers who turn rumours into instant fact, intentionally to damage reputations and serve partisan interests.

Second, Varshney finds that whether violence or peace prevails depends on the role politicians play in polarising citizens along ethnic lines. Politicians who seek to polarise Hindus and Muslims for the sake of electoral advantage can tear at the fabric of everyday engagement among citizens.

He finds that conflict erupts into violence when organised gangs are not just involved, but are also protected by politicians, thus escaping prosecution under the law for their criminal actions.

Third, and most importantly, he finds that trust built on inter-ethnic social and civic ties is critical for peace. Inter-ethnic associations in cities, such as trade unions, business associations, teachers, lawyers, doctors, non-governmental organisations and some cadre-based political parties, are decisive in preventing violence because they build bridges and manage tensions in times of ethnic conflict.

Varshney finds that a synergy emerges between communally integrated civic organisations and local arms of government. This leads to better monitoring and preventive action as these relationships nip rumours, small clashes and tensions in the bud. In the end, polarising politicians either do not succeed or eventually give up trying to provoke and engineer communal violence.

The lessons for us are clear. The sources of threat to our society and the sources of strength for bridge-building in our multi-ethnic society are clear for all to see. Thank God, again and again, many fair-minded Malaysian citizens have not risen up to bite the bait thrown out by the demagogues.

The point is our diversity, our pluralism, had always been our strength. We have a proud and long history of the races and religions living and working together. Malaysia was truly Asia. Now this rings hollow, meant only to trot out in tourism campaigns. Why is our pluralism now a threat? On what basis? Where’s the evidence? Who benefits from such a projection of threat?

What makes it mind-boggling is why these supremacist groups are given so much face and space? Think of the number of meetings held by those searching for solutions to ethnic, religious and regional conflicts that have been stormed by these “thugs”? Those of us meeting peacefully indoors, sharing our concerns and exploring possible solutions were the ones forced to abandon our meetings because they posed “a threat to public order”!

It is high time the Government unequivocally adopt a zero-tolerance policy against such agent provocateurs who abuse race and religion to promote supremacist thinking and incite hatred.

Our leaders must seriously come to grips with our new political realities and work harder to bring the message of change to its grassroots leaders. Some others do not even feel they need to be protected – by anyone. They feel 40 years of affirmative action are enough for them to stand on their own two feet and compete on their own strength and merit. What they want now is just simple good governance to enable them to thrive and for everyone to be given a fair chance to reach their full potential.

I wish these demagogues would spend their time and energy finding real solutions to real threats. For a start, how about chewing on the fact that a Merdeka Center survey found that 70% of Malays feel that the main threat to the Malay political position in the country is corruption among Malay leaders. Not the Chinese, Christians, communists, liberalism, pluralism, feminism, post-modernism, poco-poco, or yoga.

Can we please not waste any more time and emotion on imagined enemies and threats before we reach a point of no return? I know problems exist. But can we please search for solutions through rational dialogue and mutual respect, using verifiable facts, data and analysis instead of inflammatory pronouncements and conspiracy theories?

Embrace China, says Najib; US not restricting China & to keep military prence in Asia: Gates

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Embrace China, says Najib

By NELSON BENJAMIN nelson@thestar.com.my

SINGAPORE: China should be engaged in a positive and constructive manner and not seen as an adversary, Prime Minister Datuk Seri Najib Tun Razak said.

He said Malaysia was fully convinced that the rise of China would be a benign influence in the region. “We do not feel threatened by China.

Guiding hand: US Secretary of Defence Robert Gates gesturing as he meets Najib on the sidelines of the Shangri-La Dialogue yesterday. — Reuters

 

 

“It will be a mistake to see China as an adversary and if we treat China in a positive and constructive manner, they will also respond to us positively.

“I can tell you that the Chinese have a good memory and if you do them a good deed, they will remember for a long time,” he said at the 10th International Institute for Strategic Studies Shangri-La Dialogue here yesterday.

Citing an example, Najib said Malaysia was the first South-East Asian country to establish diplomatic ties with China during his late father Tun Abdul Razak Hussein’s tenure and until today, it was still being talked about in the country.

“I am optimistic that besides China, we can also develop a meaningful and constructive relationship with India,” he said, adding that trade with these two countries had been on the rise.

“In Asean we do not have to make a choice.

“We do not want to go back to a Cold War mentality and we look forward to engagements and relationships not just with India and China but others, including the United States,” he added.

On the build-up of conventional arms in the region especially involving navies, Najib downplayed it as a modernisation effort saying that this was part of efforts by countries as their economies got stronger and wealthier.

He said there would be more to lose if countries were engaged in conflicts while there was more to gain if everyone continued to engage constructively.

Earlier in his speech, Najib reiterated Malaysia’s role as a responsible global citizen with actions to help ensure global peace and stability.

“We will continue to play our part and show that our commitment is not merely rhetorical but is backed up by action,” he said, touching on the peacekeeping efforts by Malaysian soldiers, the deployment of female doctors to Afghanistan, Malaysia’s fight against terrorism and the intermediary role it played in southern Philippines.

He also touched on Malaysia’s readiness to be deployed to Bahrain to play a role if invited by the people there.

He also added that there was a new set of asymmetric and non-traditional security challenges involving human trafficking, drug smuggling and nuclear proliferation.
Najib also called for border disputes among regional countries to be resolved in the spirit of mutual respect and cooperation.

Also at the event, Najib outlined six strategies to maintain peace and stability in the region and called for the setting up of a new Rapid Response Team with the ability to respond to disasters.
“The way forward is through dialogue, engagement and consensus,” he added.

Gates: US not restricting China 

By Li Xiaokun (China Daily)

SINGAPORE / BEIJING - Outgoing US Defense Secretary Robert Gates said on Thursday that the United States was not trying to "hold China down" and doubts that Beijing aims to match Washington's military power. 

"We are not trying to hold China down. China has been a great power for thousands of years. It is a global power and will be a global power," he said. 

Gates was speaking en route to the annual Shangri-La Dialogue, Asia's most prominent security conference, scheduled for June 3 to 5 in Singapore, where he is scheduled to meet his Chinese counterpart Liang Guanglie on the sidelines of the meeting. 

Liang is the most senior Chinese official to attend the security conference. 

Gates added: "The Chinese have learned a powerful lesson from the Soviet experience, and they do not intend to try and compete with us across the full range of military capabilities." 

He was alluding to the ultimately fatal economic burden that the Soviets assumed in trying to keep up with Washington in the Cold War arms race. 

Gates said he is very satisfied with the progress of Washington's relationship with Beijing, but sees room for improvement between the two militaries. 

"Under those circumstances, there is value in a continuing dialogue by the two sides of just exactly what our concerns are, what our issues are and how we might alleviate the concerns on both sides," he said. 

Gates added that Washington will continue to build relationships with its allies in Asia despite potential budget restrictions and that Washington plans to remain a reliable partner in the region. 

"I would say, if anything, these pressures put a premium on multilateral responses to problems," he said. "Whether it's humanitarian assistance or disaster relief, we see opportunities with a number of countries out here, including China." 

It is Gates' seventh trip to Asia in the past 18 months and his final overseas trip before he retires on June 30. US President Barack Obama has named CIA Director Leon Panetta to replace him. 

Gates also said the reshaping of much of Obama's national security team - including the selection of Gates' own successor and the controversial search for a new chairman of the Joint Chiefs of Staff - was at least a year in the making. 

In his first extended comments on the process, Gates said the key consideration was preserving what he called a sense of teamwork among the top national security aides as the administration winds down the US military role in Iraq and fashions a plan for turning over security responsibilities in Afghanistan by 2014. 

Obama announced on Monday that he would nominate General Martin Dempsey, who had just taken over on April 11 as army chief of staff. Gates said he would not discuss publicly his own recommendation to Obama for the joint chiefs selection. 

Li Qinggong, deputy secretary-general of the China Council for National Security Policy Studies, said Gates is likely to make full use of his last overseas visit as defense secretary to meet Chinese military leaders and give another push to military ties between Washington and Beijing. 

"Gates, unlike his predecessor, has always been positive on improving military ties with China," Li said.
Although he might talk about a Chinese military "buildup" and "threats", the underlying theme of his speech and his meeting with Liang will be positive, Li added.
As for the change of US defense leaders, Li said it is unlikely to impact the improving ties between the two militaries. 

"US leaders, including Obama, Hillary Clinton and the new military leaders all know that military ties with Beijing have become more and more important for overall ties," he said. 

However, potential disputes still linger on regional hotspots, such as Taiwan, the South China Sea and US exercises in Northeast Asia, said Li. 

AP, AFP contributed to this story.  Newscribe : get free news in real time 

US to keep military presence in Asia: Gates 

By Ma Liyao and Zhou Wa (China Daily)

Neighbors appreciate China's efforts in maintaining regional security

Chinese Defense Minister Liang Guanglie (right) shakes hands with former US defense secretary William Cohen at the Asia-Pacific security forum in Singapore on Saturday. [Photo/Agencies]

Singapore / Beijing - Despite its fiscal troubles, the US will maintain a "robust" military presence across Asia, backed up by new high-tech weaponry, US Defense Secretary Robert Gates said.

Gates made the remark during a speech on the second day of the Shangri-La Dialogue, hosted by the International Institute for Strategic Studies in Singapore. 

The US military will expand its presence by sharing facilities with Australia in the Indian Ocean and deploying new littoral combat ships in Singapore, where it has regular access to naval facilities, he said.

"Gates' comments were made as assurance to the allies of the US in the region that its policies will continue after his impending retirement," said Major General Luo Yuan, a senior researcher with the Academy of Military Sciences.

Gates will step down by the end of June, and the current director of the CIA, Leon Panetta, has been nominated to replace him.

Worries about the ability of the US to maintain its military presence have been raised as President Barack Obama faces mounting political pressure to deal with Washington's $1.4 trillion budget deficit and more than $14 trillion in debt. 

Gates said that he would take a $100 bet that "in five years, the US influence in this region will be as strong, if not stronger than now". 

The US remains as the dominant power in the Asia-Pacific region, and its influence over the region will continue in the next five years, said Yuan Peng, director of the American Studies Center at China Institutes of Contemporary International Relations in Beijing.

In his speech, Gates also said the key to solving the maritime issues in the Southeast Asia is to provide a "peaceful mechanism" that will not intensify tensions. 

"We should not lose any time before strengthening these mechanisms of dealing with the claims. Clashes serve nobody's interests," he said in answer to questions about the South China Sea issues.

China's stance on these issues remains that they should be solved bilaterally, between China and other coastal countries. 

Confidence is needed that the parties concerned can solve the problems themselves through a peaceful bilateral mechanism.

The regional disputes should be solved by countries in this region, Luo said, adding that a third party, who is not familiar with the history and culture in the region and has a different mode of thinking, can make things more complicated .

During meetings with Chinese Defense Minister Liang Guanglie on the sidelines of the Shangri-La Dialogue, China's neighbors voiced appreciation on Saturday for Beijing's efforts toward regional security and international assistance.

Kim Kwan-jin, defense minister of the Republic of Korea, appreciated China's work at maintaining stability and peace on the Korean Peninsula and thanked China for its help in protecting South Korean merchant ships in waters off Somalia from pirate attacks in February.

Japanese Defense Minister Toshimi Kitazawa and Wayne Mapp, defense minister of New Zealand, thanked China for its rapid aid to their countries when they were struck by major earthquakes this year.

Liang also met with Russian Deputy Prime Minister Sergei Ivanov, who is in charge of the country's national defense affairs and military industries. 

Gates called for all countries to recognize the potential problems caused by cyber attacks, saying that the US defense system is under attack "all the time".

The Pentagon is working to identify hackers, who will be responded to in kind or with traditional offensive action, Gates said. "We take the cyber threat very seriously and we see it from a variety of sources, not just one or another country," he said. 

"China is one of the biggest targets of cyber attacks," said Luo, adding that China always tries to work with other countries to fight against such attacks. 

AFP contributed to this story.

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US dollar cracking at the seams

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WHAT ARE WE TO DO By TAN SRI LIN SEE-YAN

MY last columns dealt with the international monetary system (IMS), specifically why the world monetary order is in disorder, and why free movement of capital underpinning the IMS is increasingly being challenged.

Today's column concerns the basic anchor of the IMS the reserve currency role of the US dollar and why it will give way to rapidly rising pressures towards multipolarity, that is, the concurrent pulling of forces emanating from more than two growth centres.

In 20 years, the World Bank expects the newly emerging BRIIKs (Brazil, Russia, India, Indonesia and Korea) to join China as new drivers of growth towards a multipolar world. Today, none of their currencies is used for reserve accumulation, invoicing or exchange rate anchor. The status quo remains centred on the US dollar. But change is in the air.

In 1991, the G3 (US, euro-zone and Japan) accounted for 49% of world trade, and the BRIICKs (BRIIKs plus China) only 9%. By 2010, the G3's share had fallen to 29%, while the BRIICKs' share rose beyond 30%. Without doubt, the post-war structure dominated by advanced nations is in the midst of fundamental change. Globalisation and the rapid growth of the emerging market economies (EMEs) are bound to translate into greater global economic power. It's just a matter of time.

Multipolarity

We are witnessing the cracking of the global institutions created in 1945. They are still unadjusted to the growing weight of the EMEs, reflecting reluctance by the United States and euro-zone to come to terms with a world they no longer dominate. It is also a manifestation of uneasiness in China, India and Brazil that the management of their domestic economy, long the jurisdiction of internal prerogative, now matters to the rest of the world.

This is understandable. The founding of the Bretton Woods institutions (IMF and World Bank) after the devastation of the Great Depression and WWII set in motion an era of stability at a time when the US was unchallenged in the global economy. In international finance, this post-war order began to fall apart in the 1970s as the US economy floundered, the dollar tanked, Europe was rebuilt and Japan asserted itself.

The move towards multipolarism was, however, interrupted in the 1980s and 1990s by the Soviet Union's collapse, the euro-zone's indigestion after swallowing a re-united Germany, and the Asian currency crisis. The US was thrust into the forefront to lead. But, the home-made US financial crisis in the 2000s in the face of rapidly rising EMEs, brought the era of US dominance to an end.

Yet, neither the US, euro-zone nor China has the capacity and clout to manage global problems. Happily, the G-20 came along to replace the G7, stumbling on to a mutually beneficial co-operation. Prof Barry Eichengreen's reference in history of another scenario is scary: “The decades following WWI were marked by the inability of rising or declining powers to stabilise the world economy or create functioning global institutions; the result was the Great Depression & WWII.”

A definite shift is taking place, driven by the rising power of the emerging BRIICKs, together representing more than one-half of global growth in 14 years. According to the World Bank report, Multipolarity: The New Global Economy, the EMEs will grow at 4.7% per annum up until 2025, which is double the rate of the advanced nations (2.3%). The implications are far-reaching:

• the balance of global growth and investment will shift to the EMEs;

• this shift will lead to boosts in investment flows to nations driving global growth, with a significant rise in cross-border M&As, and a changing corporate landscape where established multinationals will largely be absent;

•  a new IMS will gradually evolve, displacing the US$ as the world's main reserve currency by 2025;

•  the euro and the RMB (renmimbi, China's currency) will establish themselves on an equal footing in a new “multi-currency” monetary system;

• the euro is the most credible rival to the US$; “its status is poised to expand provided the euro can successfully overcome sovereign debt crisis currently faced by some member countries and can avoid moral hazard problems associated with bailouts within the European Union;”

•  the rising role (and internationalising) of the RMB should “resolve the disparity between China's growing economic strength on the global stage and its heavy reliance on foreign currencies;” and

• the transition will happen gradually.

At no time in modern history have so many EMEs been at the forefront of an evolving multipolar economic system.



A strong US dollar a delusion

The US dollar is the reserve currency. This refers to its use by foreign central banks and governments as part of their international reserves. This role, combined with its widespread use as a medium of exchange (transactions and settlement vehicle), a standard of measurement (unit of account) and a store of value (method of holding wealth), has given rise to the key currency status of the US dollar. For these reasons, the US serves as world banker.

This was not planned. It just evolved since it met various needs of foreign official institutions and foreign private parties more effectively than any alternative could. Many of the reasons for the use of US dollar by official and private parties are the same. However, the aims of the two users need not always coincide. If the US dollar's role as reserve currency was terminated, its use by private traders and institutions would most likely remain, perhaps even stronger. The wheels of commerce keep turning. The role of the US dollar as world banker remains relevant.

It is a long-standing tradition for the US Treasury to favour a strong US dollar. The US Fed has no say since it is outside its purview of fighting inflation and unemployment.

The exchange rate is just another price. The price of the US dollar relative to other currencies is determined in the market, and not under the control of anyone. An increase in demand for US dollar or a reduction in its supply strengthens the US dollar. Lower demand and increased supply will weaken the US dollar.

A strong US dollar is not always good. It depends on what causes it to strengthen; if the cause is rising productivity or innovation, that's good. But in an economy struggling to grow and to create more jobs, a strong US dollar is not so desirable. A weak dollar means goods are cheaper relative to foreign goods; it stimulates exports and reduces imports. Foreign goods get more expansive but more US jobs are created.

At this time, US is better off with a weak dollar. Strangely, most politicians thinks it's desirable for the US dollar to weaken only against one currency, the renminbi. The US Congress routinely bashes China for not weakening the US dollar enough. Indeed, a fall in the value of the US dollar against all currencies would help the US even more. Yet, in the next breath, the same Congress wants the US dollar to be strong. This delusion just won't go away. They are like failed dieters who talk earnestly about healthy living while eating a chocolate doughnut.

The US dollar isn't going anywhere. It is not about to be replaced anytime soon. The only dangers are (i) reckless US mismanagement giving rise to chronic inflation (or deflation if the exit of QE2, the second round of quantitative easing, is not well handled), which is implausible; and (ii) US budget deficits run out of control; outright debt default is far-fetched. Mark Twain once responded to accounts of his ill health by saying “reports of my death are greatly exaggerated”. He might well have referred to the US dollar. For the moment, the patient is stable, external symptoms notwithstanding. But there will be grounds for worry if he doesn't commit to a healthier lifestyle.

The euro and renminbi

Today, the US dollar faces growing competition in the global currency space. The serious contender is the euro, which has gained ground as a currency goods are invoiced and as official reserves held. Nevertheless, share of reserves held in US dollar remains well over double the share held in euros; US$ share did fall from 71% in 2000 to 67% in 2005 and 62% in 2009, while euro's share rose from 24% in 2005 to more than 27% in 2009. In terms of global forex, the US$ market turns over US$3.5 trillion daily, more than double that in euros. But the US dollar share of the market fell from 45% in 2001 to 42% in 2010. Euro capital markets are of comparable depth and liquidity as the US dollar's, and the euro-zone and US economies are roughly the same size.

Events since 2008 have shaken faith in the US financial markets. But the banking crisis and its economic fallout are a trans-Atlantic affair. Continuing euro bailouts is a sign the old continent is not much safer than the US. Worried savers may still sleep better with US$ under their pillow. So for the euro, it's going to be a long haul.

The sheer dynamism of China and the globalisation of its corporations and banks will propel the renminbi to a greater international role. It can become a global settlement currency this year. China has made good progress, signing currency swaps with more central banks. The issuance of renminbi-denominated bonds is actively promoted. Renminbi offshore deposits in Hong Kong (to top 1 trillion renminbi by year-end) are rising rapidly, and offshore renminbi trading will expand beyond Hong Kong.

But with the undervalued exchange rate, an asymmetry in settlement has arisen. Foreign importers are reluctant to settle in renminbi, while foreign exporters are glad to do so. In the end, success at internationalising the renminbi depends on the pace China liberalises the capital account.

The problem lies in speculative capital flows aimed at profiting from arbitrage. Capital controls remain as China's last line of defence against hot' money inflows. Its policy continues to encourage non-residents to hold more renminbi and renminbi-denominated assets. The sequencing of policy adjustments remains critical as China moves forward. The road ahead is going to be bumpy.

Policies co-ordination

By 2025, the World Bank's best bet is the emergence of a multipolar world centered around the US dollar, euro and renminbi. A world supported by the likelihood US, euro-zone & China will constitute the three major “growth poles” by then. They would provide stimulus to other nations through expanding trade, finance and technology transfers, which in turn creates international demand for their currencies. Already, private investment inflows into EMEs are expected at US$1.04 trillion this year (mainly to China) against US$990bil in 2010 and US$640bil in 2009.

Inherent in this shift is rising competition among them, which is real. This is bound to create situations of potential conflict, which can exact a heavy toll on global financial markets and growth. This calls for workable mechanisms to strengthen policy co-ordination across the major growth poles in particular. This is critical in reducing risks of political and economic instability.

In the recent crisis, the G-20 was able to pick low-hanging fruits by managing the re-alignment of macro-economic policies aimed at generally common objectives to get out of recession and to rebuild financial systems. In today's world, shifts in policy co-ordination will be increasingly towards more politically sensitive domestic fiscal and monetary and exchange rate policies. Also, the interests of the least developed countries (LDCs) have to be safeguarded against pressures accompanying the transition to a multipolar order.

Against the backdrop of the tragic earthquakes and tsunami that hit Japan, the political turmoil of the Arab spring' gripping much of Middle East and North Africa (MENA), and growing uncertainties emanating from euro-zone sovereign debt crisis, global growth remains at sub-par this year with high unemployment, and rising inflation in the EMEs and LDCs. This calls for building confidence and promoting investments to boost productivity and create jobs to absorb the large pool of youth in MENA in particular. The LDCs and MENA nations are heavily dependent on external demand for growth. Aid and technical assistance have the ability to cushion adjustments as they adapt in the transition process.

According to the World Bank: “It is also critical that major developed economies and EMEs simultaneously craft policies that are mindful of the growing interdependency associated with the increasing presence of developing economies on the global stage and leverage such interdependency to derive closer international cooperation and prosperity worldwide.”

A former banker, Dr Lin is a Harvard-educated economist and a British Chartered Scientist who now spends time writing, teaching and promoting the public interest. Feedback is most welcome at starbiz@thestar.com.my