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Wednesday, June 30, 2010

Your Ideas To Change The World

Readers offer their solutions to the globe's problems.

Two weeks ago, we published a special report on 25 Ideas To Change The World. Forbes India asked luminaries like microfinance pioneer Muhammad Yunus, Wikipedia founder Jimmy Wales, philosopher Alain de Botton, designer Milton Glaser and 21 others to pen essays on the topic. You can read all 25 pieces here. But Forbes also asked readers via Facebook (at both the Forbes and Forbes Asia pages) and Twitter to share with us their world-changing ideas. We promised to publish a handful of the suggestions we received.
One theme provoked the most responses: musings on global warming, climate change and pollution put forth by biologist George Schaller, activist Bianca Jagger and "skeptical environmentalist" Bjorn Lomborg.

Readers were most passionate--and prolific--about ways we can reduce our impact on the environment, particularly in light of the Gulf Oil spill. Here are a few of the most thoughtful comments.
I agree that attempting to arbitrarily raise the price of carbon fuels to discourage consumption hasn't worked. I don't think it's rational or fair to cut the existing lifelines of cheap carbon-based fuels today to developing countries and inhibit them from creating a more prosperous future. As Tom Friedman suggests, we need a "Million Manhattan Projects" or massive R&D push to discover and develop alternative sources including, wind, solar, nuclear, bio and thermal. Government can play a role in such an ambitious project through leadership, vision and incentives but I'd like to see it led by the private sector. On the consumption side of the equation, I'm encouraged to see industry leaders like Cisco ( CSCO - news - people ), IBM ( IBM - news - people ) and HP taking steps towards a 'smarter' and technologically greener planet through enabling technologies. --BobOlwig, who also has a blog.
Lomborg is correct that previous emissions cutting measures have not been successful. I believe this is due in part to the fact that ordinary citizens in most nations are alienated from these measures and have not been inspired (or forced) to take personal responsibility for the emissions they contribute. I believe the solution to combating climate changes lies in part with our ability to motivate individual consumers to reduce their energy consumption. Creating more individual accountability for energy consumption can be done either by forcing (by increasing prices, which Lomberg claims is not effective) or by motivating. I believe we need to develop a solution which creates motivating factors for consumers to conserve. The way I propose to do this is to use the power of IT to create online systems where consumers can track their consumption of oil & energy (already happening slowly with smart meters) but also create transparency enabling consumers to compare their energy usage to others in their area, in other cities and even in other countries. Such a system would also provide recommendations on ways to cut, and provide insight into the monetary savings and emissions reductions resulting from taking these measures. I believe that this increased level of transparency would inspire people to reduce their consumption, helping to curtail steadily rising emissions until we can fully transition to a clean energy economy. --Jjreif

Our lack of responsibility in dealing with the environment upon which we live--our hubris, in other words--seems likely to bring us down, and sooner rather than later. --mhenriday

We need to appoint global council for climate change, which will look into all matters rationally and come up with a solution [that] will be binding for all countries. And Western countries have to pay upfront charges for whatever pollution they have done in the past. They will not be allowed to get away…I am no climate expert, it is my humble idea. --greenworld2012
Another hot-button topic came from cognitive scientist David Livingstone Smith's exploration of the psychology of violence and hate. In his article, Livingstone Smith describes his quest to explore human tendencies both to abhor and commit violent acts by studying the inner workings of the mind. He concludes that one of the ways this dichotomy is able to exist is because, as a form of justification, we dehumanize those people--for example, deem them the same as animals or worse--against whom we are violent. It is only once we address the psychological dimension to violence, Livingstone Smith says, that we can hope to stop it.
Many readers agreed. "The stranger has always been the 'other,'" writes Kevin_Walsh. "It is only a small step to a dangerous 'other,' requiring a protective response. Many politicians use fear for control. Fear and mutual protection are the original basis for the formation of community." Other commenters, however, were more fatalistic. Adds mcgator: "Dehumanization, in my opinion, is also a reaction to others dehumanizing us…Once a group of people dehumanize another, then the reaction almost has to be to return the favor. I feel terrible that this is the case but there is also the natural desire of survival."

As the special report was put together by the staff of Forbes licensee Forbes India, many of the visionaries focused their efforts at problems prevalent in that country. For example, Jockin Arputham of the National Slum Dwellers Federation emphasized poverty alleviation can be achieved by not by government degree but by empowering the poorest people to help themselves.

Agreed commenter Juwaeriah: "In order to see a profound improvement, our awareness programs should be a bit more stimulating. Awareness that has an effect in such a way mentally draws people to take responsibility. For a beneficial outcome the people factor within the slums as well as urban dwellers need to collaboratively take action."

Harvard Business School professor Tarun Khanna wrote about how to tap the talent of the lower quadrants of populations in emerging markets. "The Government of India [is] in [its] first national attempt to issue a national registration identity to all Indians above the age of 16; [it] will also open an account in their names in a bank and deposit a certain amount of seed money for them," writes vksharan. "It is necessary to bring the poor and illiterate in the mainstream economy. One has to give the poor something that they will guard with their life and use to it to climb higher and prosper in their lives."

In response to philosopher Alain de Botton's piece about creating a secular religion,

GeorgePJelliss points out that Botton's ideas are just the latest in a long line of other thinkers who posited alternatives to traditional religious practice. "A religion of mankind has been proposed many times," he writes. "After David came Auguste Comte's Positivism, and in England Robert Owen's Rational Religion, and George Holyoake's Secularism."

Meanwhile, creativetechnologist of Fareham in the U.K. writes that he is eyeing a similar project to Botton: "The idea I am working on is to create a group (not a religion) that takes the good parts of community and morality from religion (and there are a lot of bad parts!) along with real world values and promote regular meetings and discussion." Another commenter, loafingisgood, echoed Socrates in reflecting on the very essence of what religion means to society. "The proper question to ask about a religion is not 'Is it true?' but 'is it useful?'" he points out. "The question 'Is it true?' is certain to be answered at the end of life, so why argue? The question 'Is it useful?' is certainly worth addressing.

In response to the creator of India's National Stock Exchange, Ravi Narain, who wrote here about how technology can revolutionize the markets, economies and finance, Lousulliva thought up a tax-based incentive system to encourage wealthy investors to sink money into U.S. startups. First, the person could write off an investment in certain technologies and industries like renewable energy, and second, the person can deduct from his or her taxes a portion of the profits that result from that investment.
"The net effect on this will be a larger tax base as employment falls, [and] increased development capital in the private sector which has always performed better than its government counterparts," Louissulliva writes. "Rules could include but [are] not limited to minimum wages firms who see this kind of capital may pay, [or] a custom 'company" tax' or surtax on its products once profitability is returned."
"Reward those who put their wealth to work through investment," TomBeebe concurs, "and penalize consumption above a certain level. Our tax code should be re-written to this end."

Laxman Thapa agrees that the world's richest people should play a role in its progress, writing on Facebook that "all countries should govern the property of [the] richest persons very carefully, with a need to evaluate and control the tariff they are charging for products to commoners."

Finance was on the forefront of commenter tmd1771's mind, who proposed a system to combat part of the real estate crisis in the U.S.: "What are we spending (have we spent already?) as a country on the various attempts to have trial mortgages refinanced, to administer short sales and foreclosures, to maintain bank-owned real estate? Would it not be expedient to create a fund--equally funded by both federal and bank interests from the money saved by not administering--that compensates for, say, a 20% principle reduction for all home mortgages?"

Some readers were more creative. Jessica Lynn, who wrote via Facebook message, was inspired to think of a more down to earth, world-changing idea. "I'd sure love to make some changes starting right in my own community!" she writes. "I dream of starting a girls' youth group, teaching young ladies how to be confident, independent, self-sufficient and that they can do anything they set their minds to."

Melvin Wizamgee wrote on Forbes' Facebook page that meditation would help change the consciousness and awareness of our leaders. Carmelita Omli says the world should eliminate visa requirements, while Carl Wayne Hardeman believes a cheap way to desalinate sea water could help solve water shortage problems. Ajduggal suggests adopting English as a universal language.

Forbes wishes everyone the best of luck in turning all of these ideas into action!

Hana R. Alberts,
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2010 FIFA World Cup Kicks Off Summer Scams

Some call it soccer. Some call it football. No matter what you term the game, the effects of the 2010 FIFA World Cup, the most widely-viewed sporting event across the globe, can be seen all around the world — and around the Web — following the kickoff in June.

A growing trend seen by online security experts is for scammers to take advantage of the latest breaking news and major worldwide events to distribute malware and, unfortunately, the World Cup, which will be in full swing until mid July, is a prime opportunity for cyber criminals to do just that.

Since the games began this summer, the cyber scams have been kicking off in full force, with reports of sophisticated World Cup-related malware scams, increases in spam themed around to games, and other malicious online ploys.

Cyber criminals know that they can exploit popular international events to lure victims through various types of social engineering tactics. The World Cup is a prime target due to its prestige and the amount of interest it draws from fans around the world,” says Andrew Browne, head of Lavasoft Malware Labs.

How can you avoid becoming a victim of an attack? Lavasoft Malware Labs' analysts have compiled a list of five eminent online security risks surrounding the World Cup — and specific steps you can take to stay safe. Read on to learn more.
  1. Spam with malicious attachments. Be wary of unsolicited World Cup-related messages with an attachment, particularly if the attached file is a PDF. One of the latest PDF attacks took advantage of an Adobe Reader vulnerability that was recently patched. “Check that all applications and programs are patched and up-to-date. Turn on Windows automatic updates and make sure to have the latest security patches from Microsoft installed,” Malware Labs says.
  2. Targeted phishing ploys. There has been a deluge of the following themes in World Cup-related phishing messages: refunds, tickets sales and lotteries, accommodations, travel, and team merchandise. “If you receive an unsolicited message, delete it without opening,” Malware Labs says.
  3.  SEO poisoning. Cyber scammers are poisoning search engine results using World Cup-related headlines and videos to lead to malicious sites in an attempt to push rogue (fake) security software and other types of malware. “Check all URL's carefully before clicking on them, and be especially mindful of only using trusted sites during this time,” Malware Labs says.
  4.  Application downloads. With so many viewers planning to watch the games online, malware purveyors can be expected to capitalize on ways to infect users looking to download media players. “Vet any applications that allow you to stream World Cup content,” Malware Labs says.
  5.  Legitimate sites serving malware. Malicious code can be hacked into vulnerable, legitimate websites in order to infect users. Legitimate World Cup-related sites are attractive targets for cybercriminals. “Make sure that you have core protection on your PC (anti-virus, anti-spyware, and firewall). Consider using an alternate browser, like Google Chrome or Mozilla Firefox, rather than Internet Explorer. If you use Firefox, install the NoScript plug-in for Firefox to intercept potentially malicious scripts (,” Malware Labs says.
The target of these types of social engineering attacks is the computer user, where infection occurs by the person making an interactive choice. We hope that sports fan watching the games online from their home or office — in addition to having anti-malware protection on their PC's — pay close attention to the types of threats that we anticipate will be prevalent so they have a better understanding of what not to click, download, or respond to,” Browne says.

Inflation or Deflation?

Martin Feldstein

 CAMBRIDGE – The investors that I talk to these days are not sure whether to worry more about future inflation in the United States or about future deflation. The good news is that the answer – for at least the next few years – is that investors should worry about “neither.”

America’s high rate of unemployment and the low rates of capacity utilization imply that there is little upward pressure on wages and prices in the US. And the recent rise in the value of the dollar relative to the euro and the British pound helps by reducing import costs.

Those who emphasize the risk of inflation often point to America’s enormous budget deficit. The Congressional Budget Office projects that the country’s fiscal deficit will average 5% of GDP for the rest of the decade, driving government debt to 90% of GDP, from less than 60% of GDP in 2009. While those large fiscal deficits will be a major problem for the US economy if nothing is done to bring them down, they need not be inflationary.

Sustained budget deficits crowd out private investment, push up long-term real interest rates, and increase the burden on future taxpayers. But they do not cause inflation unless they lead to excess demand for goods and labor. The last time the US faced large budget deficits, in the early 1980’s, inflation declined sharply because of a tight monetary policy. Europe and Japan now have both large fiscal deficits and low inflation.

The inflation pessimists worry that the government will actually choose a policy of faster price growth to reduce the real value of the government debt. But such a strategy can work only in countries where the duration of the government’s debt is long and the interest rate on that debt is fixed. That is because an increase in the inflation rate causes interest rates on new debt to rise by an equal amount. The resulting higher interest payments add to the national debt, offsetting the erosion of the real value of the existing debt caused by the higher inflation.

In the current situation, the US cannot reduce the real value of its government debt significantly by indulging in a bout of inflation, because the average maturity on existing debt is very short – only about four years. And the projected fiscal deficits imply that the additional debt that will be issued during the next decade will be as large as the total stock of debt today. So raising inflation is no cure for the government’s current debt or future deficits.

Those who worry about deflation note that the US consumer price index has not increased at all in the past three months. Why won’t that continue and feed on itself – as it has in Japan – as consumers delay spending in anticipation of even lower prices in the future? And doesn’t Japan’s persistent deflation since the early 1990’s also show that, once it begins, deflation cannot be reversed by a policy of easy money or fiscal deficits?

But the recent weakness in US prices is very different from the situation that prevails in Japan. Zero inflation for the past three months has been a one-time event driven by the fall in energy prices. The other broad components of the consumer price index have increased in recent months, and the consumer price index is up about two percentage points over the past 12 months.

Moreover, surveys of consumer expectations show that US households expect prices to rise at more than 2% in both the coming year and the more distant future. That expected inflation rate is consistent with the difference in interest rates between ordinary US government bonds and Treasury Inflation Protected Securities. With such expectations, consumers have no reason to put off purchases.

A second reason for relatively low inflation in recent years has been a temporary fall in the cost of production. As firms shed workers during the economic downturn, output fell more slowly. The resulting rise in output per worker, together with slow wage growth, reduced unit labor costs. That process is now coming to an end as employment rises.

So the good news is that the possibility of significant inflation or deflation during the next few years is low on the list of economic risks faced by the US economy and by financial investors.

But, while inflation is very likely to remain low for the next few years, I am puzzled that bond prices show that investors apparently expect inflation to remain low for ten years and beyond, and that they also do not require higher interest rates as compensation for the risk that the fiscal deficit will cause real interest rates to rise in the future.

You might also like to read more from Martin Feldstein or return to our home page.

Tuesday, June 29, 2010

Resetting economy, society and the world

Review by Abby Wong

 The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity

Author: Richard Florida
Publisher: Harper Collins

AN economic downturn is always unwelcome. But amidst even the worst depression, there is always a silver lining. This hope is firmly held by Richard Florida, a renowned American economist and urban theorist who has authored three international bestsellers on social trends of the 21st century, The Rise of the Creative Class, The Flight of the Creative Class and Who’s Your City?

In his latest book, The Great Reset, Florida sets his foot into economics, calling the current financial woes the necessary adjustments that will eventually give rise to new epochs of inventiveness, ingenuity, economic growth, and prosperity. But Florida is not being imprudent. Lest he upsets millions of people affected by the current downturn, he backs this idea with facts drawn from both history and rigorous research.

With flair of a storyteller, Florida recounts causes of the Long Depression of 1870s and the Great Depression of 1930s, and analyses the ensuing social and economical effects – the rise of innovation, changes in infrastructure, geographical resettlement and alteration of ways of living and working. Florida calls these adjustments resets and thinks the next Great Reset will take place soon or even now, if not already.

But what has worked in the past will not work quite as well in this era. No longer is our economy driven by manufacturing and factories like it was in the 20th century. Connected by a web of countries across the world and confronted by a mélange of problems never before seen as imminent, today’s economy can only be propelled by ideas and creativity.

Furthermore, with the busting of consumerism, restarting economic growth this time requires more than boosting spending but a new socio-economic framework that is in line with frugality, flexibility, conservation and environmentalism.

With his trademark blend of wit, verve and analysis, Florida presents an optimistic future and a society that he envisions as vibrant, mobile, prosperous and creative. To achieve this vision, he calls for abolishment of certain long-held beliefs, realignment of our way of life and redesign of governments’ policies.

So, will the current crash usher in a new age of thrift, caution and frugality? Will car-ditching be the next badge of honour, replacing car-loving? Will troubled, if not deserted, industrialised cities be revitalised? With mortgage lending became overblown and began to undermine the economy, will house ownership be replaced by renting? Finally, will education, infrastructure, employment, and the role of government be improved, adjusted and attuned?

Yes to all that, according to Florida, as he puts forth his reasons and suggestions. For instance, to breathe life back into abandoned industrial cities, he suggests a high-speed rail system that is faster than a speeding bullet, knitting active and dormant cities together to form mega-regions.

On jobs, which are fast disappearing as a result of the crash, Florida advocates creative job creation by knowledge professionals, rather than depending on big conglomerates that hire and fire and then close down when crisis takes place. On housing and cars, bigger is no longer better, while renting will be the new normal, more for mobility reason than for cautious introspection.

Though some changes may have already taken place, the real challenge, according to Florida, lies in the efficient and productive use of capital, which has become dangerously scarce after the financial crisis. Only by making intelligent investments in new infrastructure that goes beyond the current energy and environmental constraints, can we build a new creative economy and society that is vibrant and prosperous.

The Great Reset is a fantastic book that I think should be read especially by all policy makers seeking an inkling as to what will and should happen in the aftermath of this disastrous financial meltdown. Although much of the context is drawn from the United States, it is very much written for the emerging economic and social landscapes of the world.

Indeed, I closed this immensely stimulating book with a sigh and reflected on what seems to be a poverty of natural resources we are facing and wondered for how long the earth can endure human destruction before arriving at the much better world that Florida envisions.

Not too long, I hope.

Monday, June 28, 2010

G20 walks tightrope between growth, deficits

Updated: 2010-06-28 08:04, China Daily

TORONTO – World leaders agreed on Sunday to take separate paths toward shared goals of lasting growth and safer banks as two years of global crisis give way to a fragile economic recovery.

G20 walks tightrope between growth, deficits

The leaders of the Group of 20 pose for a family photo at the G20 Summit in Toronto June 27, 2010. [Agencies]
Balance was the buzz word. The Group of 20 pledged to halve budget deficits by 2013 without stunting growth, and clamp down on risky bank behavior without choking off lending.
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But they left room for countries to move at their own pace and adopt "differentiated and tailored" policies that match national economic or political priorities, a sharp reversal from the unity of the previous three crisis-era G20 summits.
"The G20's highest priority is to safeguard and strengthen the recovery and lay the foundation for strong, sustainable and balanced growth, and strengthen our financial systems against risks," the group said in a statement released at the end of meetings here.
The G20 allowed each country space to decide how to proceed with controversial provisions such as taxing banks to recoup bailout costs and implementing tougher bank capital rules.
The G20, which includes emerging economic powers as well as the developed economies, which is where the economic trouble started, united last year to throw trillions of dollars into the battle against recession.
But that unity has begun to fray as countries emerge from crisis at different speeds and with different policy needs. Emerging Asian economies such as China have come roaring back while the US recovery remains tepid and Europe lags behind.
"Now that the worst of the crisis is past, the dewy-eyed vision of G20 countries pulling together to solve global economic problems is steadily giving way to a more pragmatic approach of merging competing perspectives and agendas to fashion imperfect compromises and make incremental progress," said Eswar Prasad, a senior fellow at the Brookings Institution and a former International Monetary Fund official.
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Hu hits out at 'all forms' of protection

Chinese President Hu Jintao has slammed protectionism and urged his G20 partners to ensure exit strategies from economic stimulus programs will not harm the global recovery.

Speaking at a G20 summit in Toronto on Sunday, Hu took aim at the developed world, saying they should promote international trade with greater openness.

"We must take concrete actions to reject all forms of protectionism, and unequivocally advocate and support free trade," Hu told his counterparts from the G20 group of major developed and emerging economies.

He called for a renewal of commitments from countries not to impose new restrictions on goods, investment and services, and urged his partners to "earnestly follow through" on these pledges.

Amid warnings from American legislators seeking to impose trade sanctions on China over its relatively undervalued yuan currency, Hu said trade disputes should be settled through consultation.

"It is important to address trade frictions appropriately through dialogue and consultation and under the principle of mutual benefit and common development," Hu said.

Hu did not touch on the issue of the yuan's value, but said: "Exchange rates of major currencies fluctuate drastically and international financial markets suffer from persistent volatility."

He also weighed in on the debate between the United States and countries such as Germany and Britain - which are seeking rapid deficit reduction - on how to nurture the fragile global recovery from the worst recession in decades.

Despite its mounting deficit, the United States wants stimulus measures to be maintained while Germany and Britain, worried about the escalating budget crisis in Europe, feel deficits needed to be trimmed swiftly.
Hu offered words of caution.

"We must act in a cautious and appropriate way concerning the timing, pace and intensity of an exit from the economic stimulus packages and consolidate the momentum of recovery of the world economy," he said.

Hu also wanted a shift in the focus of the G20, the premier global economic forum, from coordinating stimulus measures to coordinating growth and from addressing short-term contingencies to promoting long-term governance.

"We should strengthen coordinating of macroeconomic policies among G20 members, keep the right intensity of our policies and support countries hit by the sovereign debt crisis in overcoming the current difficulties," he said.

The sovereign debt turmoil in Europe was triggered by a Greek budget crisis and has threatened to spread across the eurozone, undermining the stability of the euro and the strength of many European banks.

© 2010 AFP

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A bold and calculated move

Malaysia’s global sukuk issue a huge RM4bil success

Tan Sri Wan Abdul Aziz Wan Abdullah


THE announcement to launch a global sukuk on May 19 was greeted with a lot of questions, doubts and scepticism. This was due to uncertainties caused by the sovereign debt crisis, particularly in Greece, Spain, Portugal and Ireland, which accentuated concerns over a double-dip recession.

Notwithstanding this, we went ahead with the launch after taking into consideration the factors in favour of Malaysia. These include the strong demand for good quality sovereign debt papers in the market; Malaysia’s credit risk spreads, which had narrowed considerably; the country’s good credit story supported by sound economic fundamentals; and clear economic transformation agenda under the New Economic Model.

It was a calculated and bold move. We were proven right when the issue was oversubscribed by nearly six times the initial size of US$1bil (RM3.25bil).

The issue was a huge success with a final sukuk size of US$1.25bil (RM4.06bil). It was Malaysia’s first in the international debt market after a lapse of eight years and was accorded emas, a special recognition given to foreign currency denominated issues in the Malaysian capital market.

The global sukuk has three objectives: to establish a new US dollar benchmark as pricing guidance for corporate fund raising, to profile Malaysia’s credit story in international capital markets, and to showcase the country as a global Islamic financial hub. The issue successfully met these objectives.

In line with Malaysia’s leadership in Islamic finance, the issue was structured as a syariah-based Ijara − an asset-based Islamic instrument, which pays sukuk-holders returns from the rental of 12 government-run hospitals.

The purchase price is equivalent to the proceeds raised by the special purpose vehicle – 1Malaysia Global Sukuk Sdn Bhd (the trustee/issuer).

It is a sale and lease-back arrangement, where the Federal Land Commissioner as the land owner of the 12 hospitals would sell the asset to the trustee which will lease the assets to the Government. Rentals received will be used to make periodic payments to sukuk investors.

Upon maturity, sukuk holders will be paid the redemption sum through the proceeds received from the Government as the obligor who will purchase the rights, interest, benefits and entitlements on the lease assets from the Trustee. (See chart on transaction structure)

The sukuk was assigned a rating of A- by Standard and Poor’s and A3 by Moody’s. The credit ratings reflect Malaysia’s sovereign credit worthiness backed by a deep and liquid domestic capital market, a well-managed and resilient financial system, strong external position, net external creditor position as well as a diverse and competitive economy.

The global sukuk roadshows started off with a team lead by Second Finance Minister, who met investors in Jeddah, Riyadh, Abu Dhabi and Dubai. The second team led by the Finance Ministry secretary-general saw investors in Hong Kong, Singapore, London and finally in New York, where the sukuk size and pricing were finalised.

During the roadshows, the teams met investors in groups and also had one-on-one interactions with key investors. Investors raised questions on Malaysia’s fiscal sustainability, economic fundamentals as well as the reform agenda of the Government. The teams took the opportunity to explain Malaysia’s economic policies, the accommodative monetary policy as well as impressed upon the investors the reform agenda and growth prospects that will be realised through the New Economic Model.

Fundamentals intact

Investors were convinced that Malaysia’s fundamentals remained intact, with strong fiscal position and credible economic growth from enhanced reform initiatives under the New Economic Model.

These meetings were well-received and generated significant interest among investors in Asia, the Middle East, Europe and the United States, despite increased uncertainty and market volatility created by the debt crisis in Greece.

The high-level delegations were instrumental in raising Malaysia’s profile and entrenching its growth prospects among key investors and decision-makers.

As a result, the issue attracted bids from a diverse group of over 270 investors around the world with most bids from Asia and the Middle East.

The final distribution reflected the wide interest among global institutional investors for Malaysia’s debt papers. (See table on final distribution of global sukuk )

It also reinforced Malaysia’s lead position in the global sukuk market, accounting for 65% of global outstanding sukuk.

The initial proposed size of the global sukuk was US$1bil, which was upsized to US$1.25bil after receiving bids of about six times over the initial cover, making it the largest global sovereign sukuk ever.

The five–year sukuk was priced on May 27 to yield 3.928%, the lowest yield for an Asian sovereign issue in the last five years.

In New York, where the pricing was to be decided, the global markets had turned volatile threatening to scuttle the whole exercise. However, with a strong order-book from Asia and the Middle East, a small window of opportunity appeared when the market stabilised.

Bold and quick decisions were made to capitalise on it. The price “whisper” began at around the Treasury+200 basis points range and the order-book started to fill up and demand momentum was sustained.
With such an encouraging order-book, the pricing guidance was issued at Treasury+190 basis points and finally the issue was priced to yield 3.928%.

The final pricing at Treasury+180 basis points was very competitive, given the uncertainty and volatility of markets caused by the ongoing Greek debt crisis.

The spread on the five-year sukuk due in June 2015 further narrowed by six basis points a day after listing, reflecting robust demand for Malaysia’s dollar debt.

It was challenging to launch and conclude the largest sovereign sukuk ever at the lowest price for an Asian sovereign issue in the last five years. Despite the volatile markets, there was overwhelming response to the global sukuk, reflecting investor confidence in Malaysia’s credit story and growth prospects.

We must sustain this confidence by implementing all reform measures, however painful it may be in the short term. We must sacrifice for the greater good of the nation in the long run.

The success of the global emas sukuk is indeed an international recognition and endorsement of Malaysia’s credit story and confidence in the reform agenda of the New Economic Model under the leadership of Prime Minister Datuk Seri Najib Tun Razak.

“Our sukuk offering was priced at the lowest yield achieved by an Asian sovereign in the past five years notwithstanding volatile market conditions. We also had wider investors base from Asia, the Middle East, Europe and the US. This is a great achievement for Malaysia.”

Tan Sri Dr Wan Abdul Aziz Wan Abdullah is the Finance Ministry’s secretary-general of Treasury.

Saturday, June 26, 2010

Financial literacy vital to achieve high income status


THE first report on the New Economic Model (NEM) for Malaysia presents a clear message for radical change in our approach to economic development. The stated goal is to enable Malaysia to reach high income status by 2020.

The National Economic Advisory Council, which came up with the report, recommends that businesses must heighten their appreciation of people as valuable assets that they must collaborate actively with to make Malaysia a sustainable and vibrant nation.

However, the recent announcement of likely subsidy reductions on essential items has raised the spectre of many Malaysians experiencing an increase in inflationary pressure. While there is much commentary in the media focusing on how to help the poor, the aged and middle-income wage earners, we need to collectively and individually solve the problem so that we can speed up the process and reach these goals as a society. The year 2020 may seem a long way off, but nine years is not a long time to achieve these lofty NEM goals.

The Government cannot expect Malaysians to continue showing excellent work performance to contribute to economic growth when we experience personal financial stress in our day-to-day lives. Unless we have salary increases that align with living costs and the Government heightens its efforts to work with the business community, things may stall.

Without the financial security and benefits as envisioned in the NEM goals of “inclusiveness” and “sustainability” to improve the rakyat’s quality of life, the majority of our society will continue to experience a bleak financial future, culminating with an unsustainable retirement.

Stuck in the middle income trap

While the Government is trying to put things in order to help us get out of the middle income trap to reach a high level income society, there is still a missing link. We need to start looking into a national strategy to help Malaysians improve their personal financial literacy and develop the necessary skills to keep their personal financial matters in the proper perspective.

There are several transitions that Malaysians must navigate through as they grow from children, through wage-earner, on to retirement. Each stage requires an understanding of personal financial matters that are sorely lacking in most of us.

Financial literacy is important to everyone. Financial stress is not biased based on race, age, gender, marital status or different income groups. Just because a person might be below the middle-income group doesn’t mean he or she may need financial education more than others. Just as likely, the children of wealthy parents need to be educated to maintain family wealth. Similar to reading and writing literacy, financial literacy is necessary to all. When a nation has a high level of financial literacy, it is easy to promote healthy financial ethics and values across different generations, from young to the old.

What other countries are doing

In 2008, the Organisation for Economic Co-operation and Development (OECD) launched the International Gateway for Financial Education to serve as the first global clearing house on financial education. It seeks to raise awareness to ensure wide dissemination of research, best practices and guidelines and build a worldwide network of government stakeholders on financial education. Several countries, most of whom are members of the OECD, have developed and implemented national strategies on financial literacy:

Australia: In 2005, the government established the Financial Literacy Foundation (FLF) to implement a national literacy strategy. The FLF worked to integrate financial literacy into the educational system, to develop resources and support for teachers and to provide financial literacy materials for the workplace. In July of 2008, all of FLF’s functions were transferred to the Australian Securities and Investments Commission, in order to consolidate the Australian government’s financial literacy response under the Commission and to strengthen its role in safeguarding Australia’s economic reputation and well-being.

New Zealand: A crown agency, the Retirement Commission, led the development of New Zealand’s National Strategy for Financial Literacy, in 2008. The New Zealand Retirement Commission also created “Sorted”, an independent government-funded organisation dedicated to helping New Zealanders manage their personal finances, throughout their lives. In 2009 the Ministry of Education also took over all responsibilities for financial education in schools.

Singapore: The national financial education programme MoneySENSE was launched in October 2003 to bring together industry and public sector initiatives in financial education, to create a long-term sustainable programme to enhance the basic financial literacy of Singaporeans. Through its national MoneySENSE programme, the Singapore government continues to support initiatives that enhance the basic financial literacy of consumers.

The Netherlands: Under the working title CentiQ (Sensible with Money), around 40 partners from the financial sector, the government, information and consumer organisations and science centre signed an agreement in 2006 to work together on financial education. Together, the partners carry out a strategic agenda that includes programmes and projects aimed at improving the financial knowledge and skills of consumers and stimulating an active attitude, so that consumers can make conscious financial choices and become financially competent.

Getting our house in order

Malaysia shouldn’t be left behind. We need a concerted effort to create a national financial education blueprint. Let’s start transforming the nation with a new attitude and mindset by emphasising building a “made-in-Malaysia” financial education programme in schools, tertiary institutions, workplaces, community centres and NGOs.

There are some stakeholders who are already educating different parts of our society according to their core business objectives. A central regulatory body is required to consolidate existing financial education programmes and be the centre of influence to create a national strategy to improve the nation’s financial literacy level based on sound ethics and core values, and in line with the NEM goals.

·Yip is a personal financial coach and also founder and CEO of Abacus for Money

Systemic risk a puzzle or mystery?


MALCOLM Gladwell deserves his reputation as one of the most brilliant and popular writers today. His books – The Tipping Point: How Little Things Make a Big Difference, Blink: The Power of Thinking Without Thinking, Outliers: The Story of Success – all became No. 1 bestsellers.

I just read his latest book, What the Dog Saw, actually a compilation of his New Yorker magazine articles. He is brilliant because he looks from an angle that most of us miss. He did not think what you and I think when talking about a dog; he looked at what the dog thinks.

In the chapter titled Enron: Open Secrets, Gladwell posed the right question: Was the failure of Enron a puzzle or mystery?

A puzzle is something that can be solved with extra information. A mystery is a question that may not have simple answers, requiring judgment and the assessment of uncertainty. “The hard part is not that we have too little information, but that we have too much,” he wrote.

He concluded that Enron was not a puzzle, but a mystery, since Enron disclosed most of the information according to the (then) accounting rules. Exactly like the current crisis, Enron had the best professionals working for the company, but no one stopped the company producing misleading accounts until it was too late.

In this age of high transparency, crises happen openly. Why? In Enron, Gladwell posed the issue: “It’s almost as if they were saying, ‘We’re doing some really sleazy stuff in footnote 42, and if you want to know more about it, ask us.’ And that’s the thing. Nobody did.”

Gladwell asked, “Had we taken the lessons of Enron more seriously, would we have had the financial crisis of 2008?”

Right question. But why did nobody, especially policymakers and regulators, ask the right questions? Is the current global crisis a puzzle or mystery?

There is general acceptance by financial regulators (in hindsight) that what we all missed during the current crisis is systemic risk, which is defined in Wikipedia as “the risk of collapse of an entire financial system or entire market, as opposed to risk associated with any one individual entity, group or component of a system”.

It can also be defined as the serious destabilisation of the financial system, caused or exacerbated by failures in parts of the system that spreads through the financial system and the real sector.

Systemic risks are risks passed through common interlinkages and interdependencies in a system or market, through contagion that leads to a system-wide cascading failure.

Most regulators would agree that systemic risks are not usually measured by micro-prudential regulators, who focus mostly on institutions or processes. It is now fashionable to talk about “macro-prudential regulation”.

The current reforms in the United States and European Union vigorously debate how to measure, monitor and control systemic risks. These range from creating an independent “financial stability council” specifically to comment on systemic risks, the use of a tax to reduce systemic risks, and more regulations and reporting requirements.

Everyone seems to agree that we need to control the “too big to fail” banks and the “too interconnected to fail” smaller institutions, such as hedge funds. There is general agreement that all scope of regulation should cover all institutions that generate systemic risks.

The trouble with controlling systemic risks is that they are not easily identified. We know that systemic risks are generated by behaviour, that they are inherent in eco-systems and that they have macro as well as micro origins. But we do not know the trigger when these risks begin to cause real problems.

We now face the Gladwell question: Is systemic risk a puzzle or mystery?

If it is a puzzle, then if we find the right information, we can have the right solution. But if it is a mystery, then we may have to think about the problem completely differently.

Gladwell thinks that puzzles are “transmitter-dependent”, depending on what we are told. Mysteries are “receiver-dependent”; they depend on the skills of the listener. If the public does not understand the risks, then the risks will happen.

Systemic risks are related to the system as a whole and also the behaviour within the system and also the commonalities within the system that create the contagion.

Understanding this means that we need to understand not just the dynamics of the financial system itself (what is endogenous to the financial sector), but also the complex exogenous inter-relationships within the financial sector and the real sector.

It means that we have to understand the reflexive actions between parts of the real and financial sectors.

This is an epistemological question, the science of the limits of knowledge. Suppose we have a super computer that is able to digest every bit of information, can we accurately estimate systemic risks? What if systemic risk stems from the fact that the externality of what we do (everyone in the financial system) generate enough spillover effects that create a massive disaster?

In other words, are we dealing with the unknown unknown? These are sometimes called acts of God.
Perhaps the recent preoccupation with risk management models and information systems that assume that we can calculate all the risks is wrong.

We now know that the current generation of risk models cannot cope with Black Swan or extreme event risks.

Risks can be reduced in four main ways: avoidance, diversification, hedging and insurance by transferring risks. The current generation of regulators thinks that diversification, hedging and insurance is a science that can be measured. This crisis proved that they are wrong. There is much about systemic risks that we do not understand.

Hence, it is better to have ample capital and simple “avoidance behaviour” or prudence in whatever we do. Regulators have the unpleasant task of saying no when no one understands what the risks are.

Risk prevention or avoidance is still an art, not a science. We need to be humble that we do not yet fully understand how our systems work or fail, hence the need to be “balanced” or finding the golden mean. When everyone thinks something is right, it could very well be wrong.

·Tan Sri Andrew Sheng is adjunct professor at Universiti Malaya, Kuala Lumpur, and Tsinghua University, Beijing. He has served in key positions at Bank Negara, the Hong Kong Monetary Authority and the Hong Kong Securities and Futures Commission, and is currently a member of Malaysia’s National Economic Advisory Council.

U.K. Scraps FSA in Biggest Bank Overhaul Since 1997

U.K. Chancellor of the Exchequer George Osborne
U.K. Chancellor of the Exchequer George Osborne speaks at Mansion House in London. Photographer: Chris Ratcliffe/Bloomberg 

Chancellor of the Exchequer George Osborne said he will abolish the Financial Services Authority and give most of its power to the Bank of England, undoing the regulatory system set up by Gordon Brown in 1997.

In the most sweeping changes to financial regulation since then, the watchdog will be wound down and replaced by three bodies over the next two years, the chancellor said. A Prudential Regulatory Authority will be created as a subsidiary of the central bank. Osborne will also set up a Financial Policy Committee at the bank and establish a consumer protection and markets agency.

Osborne, whose Conservative Party took power after the May 6 election, is delivering on a promise made almost a year ago to shake up the way the U.K.’s banks and markets are policed. He’s blamed the system established by former Labour Prime Minister Brown for failing to prevent a financial crisis that saddled taxpayers with liabilities of as much as 1.4 trillion pounds ($2.1 trillion) and plunged the economy into the worst recession since World War II.

“At the heart of the crisis was a rapid and unsustainable increase in debt that our macroeconomic and regulatory system utterly failed to identify let alone prevent,” Osborne told bankers at his first Mansion House dinner in London’s financial district last night.

Northern Rock

Brown’s government had to nationalize Northern Rock Plc, the first U.K. casualty of the credit crunch, in February 2008. The lender nearly collapsed in 2007 after it had to seek emergency funding from the central bank and then suffered a run on its deposits. The government also had to take controlling stakes in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc.

With the economy emerging from recession, Britain now faces the deepest spending cuts since the 1970s to tackle the record budget deficit, overshadowing prospects for recovery.

“Many in the City had felt that giving the Bank of England responsibility for macro-prudential regulation would be a positive step, but there will be disappointment that the government has decided to launch such a radical overhaul of the regulatory system at this particularly difficult time in the economic cycle,” said Nathan Willmott, a lawyer at Berwin Leighton Paisner in London.

Tripartite System 

Osborne’s plan scraps Brown’s tripartite system of regulation -- in which the central bank, FSA and Treasury shared responsibilities -- and places most of the onus on Bank of England Governor Mervyn King. Legislation to replace the FSA will be in place by 2012, Osborne said.

Osborne’s predecessor, Alistair Darling, defended the tripartite system and blamed the crisis partly on the “quality, skills and judgment” of individual regulators that failed to examine “the connections between institutions.”

“Can every country, every regulator, hand on heart, say they have sorted out the problems of their individual banks, and are regulators in different countries aware of any residual problems,” Darling said in an interview on Bloomberg Television today. “These problems don’t go away. It’s rather like having a bad smell in the house. There’s no point in ignoring it. You need to get the floorboards up.”

The FSA’s chief executive, Hector Sants, 54, will stay on at the authority while it is wound down and will take up new roles on the bodies that replace it, becoming a deputy governor of the central bank.
‘Macro Issues’

Executive power over financial supervision will go to the Financial Policy Committee at the central bank, which will operate in a similar way to its rate-setting monetary policy panel. The new committee “will have the tools and the responsibility to look across the economy at the macro issues that may threaten economic and financial stability and the tools to take effective action in response,” Osborne said.

The committee will be chaired by King and will include Sants among its members. The panel’s work will be scrutinized by Parliament’s Treasury Committee, the chancellor said.

The Prudential Regulatory Authority “will carry out the prudential regulation of financial firms, including banks, investment banks, building societies and insurance companies,” Osborne said. Sants will be its chief executive and King its chairman. Andrew Bailey, the head of the central bank unit that deals with failed banks, will be Sants’s deputy.

Authority, Knowledge’ 

“Only independent central banks have the broad macroeconomic understanding, the authority and the knowledge required to make the kind of macro-prudential judgments that are required now and in the future,” Osborne said. “They must also be responsible for day-to-day micro-prudential regulation as well.”

Angela Knight, the chief executive of the British Bankers’ Association, a lobby group, said she welcomed steps to make the system “clearer and more effective” and pledged to support the government during the transition.

The third pillar of Osborne’s regulatory overhaul will come with the creation of a Consumer Protection and Markets Authority. Osborne said the agency will regulate financial firms “providing services to consumers” and maintain the “integrity of the U.K.’s financial markets.”

King told the Mansion House dinner that the new framework will assure the stability of the financial system.
‘Credible Regime’

“A credible macro-prudential regime could help forestall both excessive exuberance and unnecessary caution,” King said. “By altering the pressure on the financial brakes according to circumstances, regulation, far from being an inflexible foe, would become a flexible friend.”

FSA Chairman Adair Turner said he welcomed Osborne’s plans.

“The overall future shape of financial regulation is now much clearer and we are in a strong position to create a future regulatory system which builds on the FSA’s achievements over the last few years of major change,” Turner said in an e-mailed statement.

“It is ironic that while in opposition the Tories identified the tripartite system as the root of all regulatory evil, yet here they are as government inventing multiple front- line agencies and creating distracting confusion in the process,” said Ash Saluja, a lawyer at CMS Cameron McKenna in London.

Osborne also said he will bring under one roof the handling of “serious economic crime,” which is currently dealt with by a number of organizations.

The chancellor also gave the names last night of the people who will work alongside former Bank of England Chief Economist John Vickers when he leads a panel on the future of banking.

Martin Wolf of the Financial Times, Bill Winters, the former co-chief executive of JP Morgan’s investment bank, Martin Taylor, formerly of Barclays Plc, and Clare Spottiswoode, the former head of the gas regulator Ofgas, will work with Vickers on the Independent Banking Commission, Osborne said.

To contact the reporter on this story: Gonzalo Vina in London at

Major US financial reform agreed

President Obama: "We've all seen what happens when there is insufficient oversight"

The US Congress has all but finalised the biggest reform of US financial regulation since the Great Depression.

President Obama said the reforms would "hold Wall Street to account".

Legislators stayed up all of Thursday night for 19 hours of non-stop negotiations to reconcile separate versions of the bill that had been passed by the two houses of Congress.
Agreement was reached to impose strict limits on banks' ability to take risky speculative bets on markets.



 Mark Mardell
It will be a political tool for Obama. He's trying to take the initiative after a difficult few months
Mark Mardell BBC North America editor Read Mark's blog in full
Speaking before the start of the G8 and G20 summits in Canada, President Barack Obama said he was "gratified" by the progress made by Congress.

Treasury Secretary Tim Geithner said the bill that had emerged was "strong" and described it as "the most sweeping set of financial reforms since those that followed the Great Depression".

US bank shares greeted the news positively, with Citibank rising 3% in early trading, Goldman Sachs was up 1.75% and JP Morgan 2.25%.

The debate only ended at 0540 Washington time (0940 GMT), with compromises reached on all major points.

The bill represents a second major legislative victory this year for President Barack Obama - following healthcare reform - and rode a popular backlash among American voters against Wall Street.

"We worry about big money," said Democrat Barney Frank, who headed the negotiations.
"I worry about big money having a corrupting influence, but it is reassuring to know that when public opinion gets engaged, it will win."

Volcker rules
 The bill introduces the so-called Volcker rule - named after the former Federal Reserve chairman Paul Volcker, who proposed it.

Barney Frank 
Chairman Barney Frank and colleagues stayed up all night negotiating 
The rule is intended to ban banks from risky entanglements in the financial markets.
US banks will be barred from taking big trading bets on markets.

They will also be limited to investing a maximum of 3% of their capital in speculative businesses such as hedge funds or private equity funds.

The bill will also set up a powerful consumer financial protection bureau, with powers to clamp down on abusive practices by credit card companies and mortgage lenders.

It now has to be passed by both the Senate and the House. When asked whether this would happen, President Obama said, "you bet".

Sticking points 
Analysis Continue reading the main storyMake no mistake, some on Wall Street feel they've dodged a bullet.

However much their revenues will be hurt by the new laws' provisions, things could have been much worse. Fuelled by deep public rage at banks that nearly destroyed the US economy, lawmakers seriously considered much more drastic action than this.

The Brown Kaufman amendment in the Senate would have limited the size and leverage of banks. Needless to say the giants of Wall Street were appalled at that prospect.

And who helped kill that amendment? The Obama administration itself. So it's worth bearing in mind that up to a point he has actually also been Wall Street's protector.

Mr Obama said the final bill "represents 90% of what I proposed when I took up this fight".
But concessions had to offered in order to win over Republican backing for the deal.

The US Congress is dominated by President Obama's Democratic party, which holds majorities in both houses.

However, following the death of Edward Kennedy last year, Republicans won his Massachusetts seat in the Senate, giving them a crucial blocking minority there.

Indeed, the 3% permitted investment in speculative businesses was a dilution to the Volcker Rule demanded by the new Massachusetts senator, Scott Brown.

Agreement was also reached on higher capital requirements for banks.
This means banks will either need to do less risky lending, or they will have to raise more money from shareholders to hold in reserve against loan losses, or both.

However, congressmen conceded a five-year transition period for banks to meet the new capital rules, and they exempted smaller banks - with less than $15bn in assets - from the rules altogether.

Swap limits


  • Volcker rule: ban on banks' proprietary trading
  • Volcker rule: limit on banks investing in hedge funds or private equity funds
  • New Consumer Financial Protection Bureau
  • Credit Default Swaps trading moved onto exchanges
  • Banks to spin off certain swaps businesses
  • New capital adequacy rules for big banks in five years
  • New Council of Regulators to monitor systemic risks
  • Regulator powers to seize and resolve big troubled banks
Q&A: US bank regulation 
Another major sticking point was a Senate proposal to ban banks from dealing in so-called swaps.
Swaps are a type of derivative - financial contracts once described by investor Warren Buffett as "financial weapons of mass destruction".

Under the Senate bill, banks would have been forced to spin this business off into separate affiliated companies, in order to protect them from losses.

But negotiators agreed to water down the Senate bill, exempting the biggest swaps markets - on interest rates and currency exchange rates - from the ban.

But banks will still be banned from dealing in credit default swaps unless they do so through the safety of a financial exchange.

This measure will severely curtail one of the most profitable activities of the big international banks when they do business in the US.

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Friday, June 25, 2010

What To Expect At The G-20

The largest countries, like China and the U.S., should lead by example.

Rebellion, Repression And The Red Shirts
Hatoyama Accommodates The U.S. On Futenma
China: Managing A Summer Of Discontent

The central focus at the G-20 will be to change the composition of world growth as recovery takes hold: current-account-deficit countries should save and export more and consume less while surplus countries should consume and import more. Some of the required measures will not be popular at home as they impact consumer and trade interests that are vested in the unsustainable status quo.

Yet with Europe a drag on world growth and the U.S. consumer no longer the engine a determined effort to rebalance is essential to take up the slack. What needs to be done?

The best strategy to ensure G-20 momentum is for the largest countries to lead by example. A credible medium-term plan of fiscal consolidation would make the United States the natural leader of the Mutual Assessment process. This is unlikely until after the November 2010 mid-term elections, however, when the bipartisan National Commission on Fiscal Responsibility's report comes due.

The Chinese authorities have a rebalancing strategy that includes nominal exchange rate appreciation, shifts domestic demand towards consumption and shifts job generation more towards labor-intensive production in services as well as manufacturing. They need to follow through. Unfortunately, the euro's recent depreciation against the dollar has put unanticipated pressures on exporters' margins. So has recent labor unrest. Further delay in nominal appreciation will be inflationary and renew international tensions.

The European stabilization fund and unprecedented central bank intervention have bought Greece time to restructure its finances. But serious questions remain about economic governance in the euro zone where deeper coordination is required to restore and maintain fiscal prudence. Clearly future economic growth will have to be sought by raising productivity through politically-difficult and long-delayed structural reforms in a slow-growth environment. Germany as the large surplus economy should stimulate domestic demand to facilitate such changes.

The G-20 co-chairs, Canada and South Korea, both have successes from which others can learn.

Few realize that Canada completed a major fiscal adjustment in the mid-1990s when it moved from a deficit of 8.7% of GDP to a small surplus helped by public support for consolidation, a growing world economy and a flexible exchange rate.

South Korea is a graduated emerging market economy which has recovered from severe crises a decade ago. Others can learn from South Korea's strategy to reduce export dependence through domestic investments in human capital, technology and a "Green Korea" strategy of energy conservation, clean energy R&D and energy efficient transportation.

Other East Asian economies could contribute more to global demand by reducing export incentives and increasing exchange rate flexibility; increasing domestic demand by deregulating services and encouraging green and other needed infrastructure projects; and supporting household consumption as the economies adjust by creating social safety nets.

None of these recommendations is a slam dunk because most imply painful macroeconomic and structural adjustments. But the G-20's credibility to restore global growth is on the line.

The outlines of a successful summit began to appear this past week as President Barack Obama, in a June 16 letter to G-20 leaders, committed to reduce the U.S. deficit to 3% of GDP by 2015 and stabilize the debt-to-GDP ratio. On June 19-20 the People's Bank of China committed to greater nominal exchange rate flexibility. Follow through is needed in both countries, and from the Europeans, or renewed global imbalances will threaten global stability.

If growth in the heavily-indebted advanced countries continues to be modest threats of protectionism and political pressures to turn back globalization will rise. Few have much room to maneuver in the face of still-high unemployment.

Thus, the second G-20 summit, and the first to take place in Asia in Seoul in November, may turn out to be extraordinarily fortuitous if President Lee Myung-bak achieves further progress by persuasion and example.

We cannot afford more of the deadlock and inertia of Doha and Copenhagen. To prod governments to act--and to prevent backsliding--the IMF's Mutual Assessment analysis should be published (the April 2010 World Economic Outlook provides a more general but no less urgent assessment). Name-and-shame tactics helped mute protectionist actions during in the heat of the crisis. Such tactics, or a high-profile independent wise persons group, may be necessary to rally public support.

The stakes for the G-20 are high. There must be forward momentum or its credibility and effectiveness will ebb away. And the burdens of global financial crises on future generations will only grow.

Wendy Dobson, a professor at the University of Toronto, is a former Associate Deputy Minister of Finance in Canada. Her most recent book is Gravity Shift: How Asia's New Economic Powerhouses Will Shape the 21st Century.
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