Speech By Penang Chief Minister Lim Guan Eng During The 4th World Chinese Economic Forum

Speech By Penang Chief Minister Lim Guan Eng During The 4th World Chinese Economic Forum In Melbourne Convention Centre On 13 November 2012.

Many Asian Countries, Including Malaysia, Faces A Talent Cliff That Will Not Only Blight Economic Growth And Innovation But Also Affect Efforts To Establish Integrity In Public Life.

1. The United Nations Population Fund(UNFPA) estimated that in 2008, for the first time in history, more than half of the world’s population will be living in cities. With 3.3 billion people living in cities today this number will double by 2050 where 75% of the world’s population will live, with urban growth concentrated in Africa and Asia. For this reason whilst I agree with the Asian century, I am more inclined to think that the Century of Cities will have more relevance to us.

2. In principle, cities offer a more favourable setting for the resolution of social and environmental problems than rural areas. Cities generate jobs and income. With good governance, they can deliver education, health care and other services more efficiently than less densely settled areas simply because of their advantages of scale and proximity.

3. However this brings us face-to-face with challenges relating urban, property and infrastructure development. The challenge for Asian and African cities revolve around one key issue – urban planning. Melbourne has much to offer in its unique experience and success in transforming itself into the most liveable city in the world.

4. Asia continues to provide the momentum to drive global economic growth. Even though the World Bank recently cut its projected growth rate for East Asia and the Pacific from 7.6% to 7.2% in 2012, this will still be the fasting growing region in the world. Following closely behind is the South Asia region which is projected to grow at 6.4% in 2012. By contrast, the countries in the Eurozone are expected to experience a 0.3% decline in GDP while the United States is only expected to grow by 2.1% in 2012.

5. The center of economic gravity has already begun to slowly but steadily shift away from North America and Europe towards Asia. And this trend will continue for the next decade or so. By 2014, East and South Asia, with slightly more than half of the world’s population, would have overtaken the Eurozone in terms of economic output. Asia’s Nominal GDP in 2014 is projected at US$16.2 trillion, not far behind the United State’s Nominal GDP of US$17.2 trillion.

6. Billions of people have been lifted out of poverty and millions have entered into the ranks of the middle class. According to the Brookings Institute, China already has 157 million people in the middle class, making it the 2nd largest middle class population in the world. Asia is projected to add another 2.5 billion people into the middle class ranks in the next 20 years. The Economist Intelligence Unit projects that China and India will each have more than 200 million people with annual incomes exceeding US10,000 by 2015.

7. Much of this growth has taken place in the urban conurbations in Asia. According to the United Nations, the percentage of the population in Asia who lives in urban areas almost doubled from 23.7% in 1970 to 45% in 2011. Despite having the 2nd lowest level of urbanization among the major areas around the world, Asia already has 52% of the global total urban population, with 1.9 billion people. Urban centric economic growth has increased rural-urban migration and fuelled an explosion in the population of mega-cities in Asia. By 2015, 16 out of the world’s 24 megacities – cities with more than 10 million people – will be located in Asia.

8. Rising incomes and an increasing middle class who will be concentrated in large and growing cities translates into unprecedented levels of demand for this population. The new middle class need to be fed, clothed and housed. They also possess a new found purchasing power that gives them access to a wider range of consumer goods. China is already the world’s largest market for mobile devices and passenger cars, having overtaken the United States in 2010.

9. The infrastructure needs in the region have to keep pace with the increasing demands of the population. Asia needs better and more roads to connect its growing cities and to cope with the ever increasing number of vehicles on the roads. It needs more railway lines to transport goods and passengers more cheaply and efficiently. It needs a greater number and bigger airports to connect cities within its own borders and in other countries. It needs more power stations and alternative energy sources to supply factories, offices and homes. That is why in Penang, we have decided to boldly implement highways and tunnel infrastructure costing billions of dollars.

10. The Asian Development Bank projects that US$8.22 trillion will need to be invested in national infrastructure needs in the energy, transport, telecommunications, water and sanitation sectors from 2010 to 2020. A further US$320 billion is required for regional infrastructure projects such as the Trans Asian Railway and projects in the Greater Mekong subregion as well as in ASEAN.

11. This huge amount of resources needed for infrastructure investment requires the various stakeholders to have clear principles when planning for and carrying out these projects. The stakes involved are high not just in terms of the financial resources being spent but also the possible impact on the environment and on the lives of ordinary citizens affected by these infrastructure projects. Let me outline four clear principles which I have found useful in planning and carrying out such projects in my home state of Penang – what I describe as CAT governance of competency, accountability and transparency.

12. Firstly, Competent and Credible decisions have to be made by policymakers and politicians when planning and carrying out these infrastructure projects.

13. Secondly, the policymakers and politicians have to make Accountable decisions in terms of the location, scope and scale of these infrastructure projects. This means that the local residents who would be affected by these projects need to be properly consulted. Proper environmental impact assessments (EIAs) have to be carried out especially for large projects such as the building of dams which requires thousands of hectares of forests to be cut down or submerged.

14. Policymakers and politicians also have to consider the economic and environmental costs and benefits of these projects to the local community. For example, in Sarawak, the largest state in Malaysia, the state government has plans to build 12 dams under the Sarawak Corridor of Renewal Energy (SCORE) that can generate 7000 MW of power even though there is already an overcapacity of power in the state after the completion of the controversial 2400MW Bakun dam. These 12 dams are supposed to produce cheap electricity to support heavily polluting industries including aluminium smelting. Legitimate questions are asked how the local indigenous communities that have to be relocated will benefit.

15. For some of these projects, neighbouring countries should also be consulted especially where resources are shared. For example, even though the proposed Xayaburi dam in Laos is situated within its own borders, but it will affect the economic activities of millions of farmers and fishermen further downstream in the Greater Mekong area which includes Thailand, Cambodia and Vietnam. The decision of the Laotian government to continue with the construction of this dam despite not having obtained a consensus from the Greater Mekong Commission seems to be against the spirit of mutual cooperating and consensus building which has been the modus operandi of the ASEAN countries.

16. Thirdly, the decisions made by the policymakers and politicians have to be Transparent. And the costs associated with the lack of transparency are huge. For example, the Economist estimates that as much as US$39 billion was lost to the Indian government as a result of the ‘dodgy sale of mobile-phone licenses’ in 2008. Similarly, the less than transparent allocation of coal blocks to public and private companies was estimated to have cost US$34 billion. In Malaysia for example, the construction costs alone for the Bakun dam doubled to US$2.6 billion after the firms in question, which were awarded the contracts through direct negotiation, could not deliver in time and had to be terminated.

17. Fourthly, these large scale infrastructure projects requires Smart Partnerships which are Sustainable in order to bring about long term benefits to the most number of people, especially Public Private Partnerships to finance these projects in a manner which is fair and equitable to both the public and private sector. Far too often, we have seen PPPs turn a privatisation exercise meant to benefit the public to a piratisation exercise to benefit the cronies.

18. The ‘smarter’ the partnerships, the greater the chances of the projects being sustainable from a financial, environmental and social impact perspective. This will create a virtuous cycle that is mutually reinforcing where the government, the private sector and the local communities can work together for the benefit of all in the long term.

19. The USD 10 billion China-ASEAN Investment Cooperation Fund (CAF) by China is a private equity fund focusing on investment opportunities in infrastructure, energy and natural resources in the ASEAN region and China. Commencing in 2010, the CAF gives opportunities not only to ASEAN but also Australian companies to get involved in this Asian century.

20. Australia has the unique advantage of having gone through big infrastructure projects such as the irrigation of the Murray-Darling basin and managing its water resources, building energy infrastructure of coal, iron, oil and gas. Countries in the rest of Asia can leverage on the experience of Australia, to learn from its best practices as well as some of the negative experiences, so that Competent and Credible policymakers and politicians in the region can make Accountable and Transparent decisions which involve Smart Partnerships which are Sustainable.

21. Commencing in 2010, ASLI patron Tan Sri Lee Kim Yew and ASLI CEO Michael Yeoh had mentioned that the Asian region faces four broad challenges, the “Four E’s”: economic growth, energy, environment and education. To which I would like to add “Two I’s” namely integrity and innovation. The challenge to retain human talent and establish trust in society will decide the success or failure of sustainable economic growth and equitable development for all.

22. If America faces a fiscal cliff, many Asian countries including Malaysia, faces a talent cliff that will not only blight economic growth and innovation but also affect efforts to establish integrity in public life.

23. Cities thus present opportunities for social mobilization and women’s empowerment. And the density of urban life can relieve pressure on natural habitats and areas of biodiversity. The challenge for the next few decades is learning how to exploit the possibilities urbanization offers. The future of humanity depends on it.

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