Infrastructural Platforms on Marine Cabotage under Netarchical Capitalism

Collective on Geoeconomics

30/01/2023

PROLOGUE

As countries try to recover and emerge from the pandemic, the firm rise in demand for intermediate inputs with energetic manufacturing activity, there arises a demand for container shipments. However, shipping capacity has been constrained by logistical hurdles and bottlenecks and even shortages in container shipping equipment. On top of these existing problems are also the unscheduled wharf disruptions and port congestions that have led to a surge in surcharges fees, including demurrage and detention fees.

Beneath the blue waterways, another geoeconomic submarine warfare is surfacing under the guise of infrastructural platforms as part of the netarchical capitalism torpedo-battle with a new governance.

1] INTRODUCTION

By the second half of 2020, shipping costs have soared. Since October 2021, cost indicatots of shipping containers by maritime freight had pointed to an increase of over 500 percent from their pre-pandemic levels, while the cost of shipping bulk commodities by sea had tripled (Fig. 2).

The geoeconomics of ports and ships are that in 2020, 41.8% of the world’s exports and 38.2% of global imports come to or from Asia and the Pacific,  (ESCAP, 2020).

2] WHO ARE THE INFRASTRACTURAL PLATFORMS

Since raw data, processed information and uninterrupted communications are of prime importance in a globalised geoeconomic environment, the installation, repairs and maintenance of the underwater cables in the country are with these infrastructural platform players of tech giants such as Google, Amazon and Microsoft, and the national internet exchange body, Malaysian Internet Exchange.

On the other hand, cabotage involves laws put in place to protect domestic shipping industries from foreign competition.

2] WHAT ARE THE INFRASTRUCTURAL PLATFORMS PROBLEMS

According to the infrastructural platform entities, the requisite domestic shipping licensing exemption (DSLE), which allows a ship to undertake submarine cable repairs, can take up to 27 days to obtain in Malaysia. This is in contrast to 20 days in the Philippines, 19 days in Singapore and 12 days in Vietnam.

There were also other issues including that the foreign-flagged vessels selected to undertake submarine cable repairs had to be endorsed by the Malaysian Ship Owners Association or MASA, which would have to confirm that there was no locally registered vessel capable of handling the required function.

The infrastructural platform tech giants had further alluded that MASA was looking to protect its members and blocking foreign-flagged shipping companies from operating in Malaysian waters, which led to delays in getting approval for vessels to maintain and repair undersea fibre-optic cablelines in Malaysian waters.

3] WHY ARE THE INFRASTRUCTURAL PLATFORMS  COMPLAINING

That the implementation of the cabotage policy by previous transport minister Wee Ka Siong is inappropriate and inconsistent with the Malaysia Digital Economy Blueprint, which was meant to spearhead Malaysia’s progress as a technologically advanced economy.

These infrastructural platform entities had contended that the technology pathway is predicated upon having fast and reliable internet connectivity, which in turn requires a supportive regulatory environment that would then encourage further investment in digital communication and its connectivity.

4] WHEN DID THESE ISSUES AROSE

The infrastructural platform players had contacted to previous prime ministers Tan Sri Muhyiddin Yassin in November 2020 and Datuk Seri Ismail Sabri Yaakob in September 2021, for the exemption under Section 65U of the Merchant Shipping Ordinance 1952 to revoke an exemption for vessels involved in submarine cable repairs.

His predecessor, encik Anthony Loke, had approved submarine cable repair vessels from being exempted from the cabotage laws in March 2019.

There were also appeals made to the then science, technology and innovation minister, Khairy Jamaluddin, in mid-January 2021, to help resolve their problems, but nothing came of it nor the cabotage matter resolved.

5] HOW OTHER CAPITAL PLAYERS ARE INVOLVED

Much of the undersea cable repairs have been undertaken by Asean Cable Ship Pte Ltd (ACPL), which operates three vessels — Asean Explorer and Asean Protector where both are flagged in Indonesia, and Asean Restorer which is registered in Singapore.

ACPL was set up by the Asean Telecommunications Authorities — Telekom Malaysia Bhd, CAT Telecom Public Co Ltd, Eastern Telecommunications, PT Indosat Tbk, Telekom Brunei Bhd and Singapore Telecommunications Ltd.

6] WHERE ARE CLIENTELE CAPITAL COLLABORATING

Telekom Malaysia’s largest shareholder is government-controlled Khazanah Nasional Bhd, which has a 20.11% stake. As at mid-March 2022, government-linked agencies Khazanah, Employees’ Provident Fund, Permodalan Nasional Bhd, Kumpulan Wang Persaraan (Diperbadankan) and Pertubuhan Keselamatan Sosial controlled about 60% of Telekom Malaysia’s stock.

OMS Group Sdn Bhd — another undersea cable repair company with five cable repair ships and two barges, some of which are flagged in Malaysia — has also been handling repairs for submarine cables locally.

OMS – a Malaysian company controlled by businessman Datuk Lim Soon Foo – is the only company in Malaysia that claims to have undersea cable submarine repair capabilities and the largest beneficiary of the cabotage policy, (I³ Investor, 2021).

7] HOW TO PROCEED

Since this marine issue is with regard to the Malaysian cabotage policy pertaining to submarine cable repairs came about in mid-November 2020 after previous transport minister Datuk Seri Wee Ka Siong exercised his powers under Section 65U of the Merchant Shipping Ordinance 1952 to revoke an exemption for vessels involved in submarine cable repairs, and that his predecessor, Anthony Loke, had approved these submarine cable repair vessels from being exempted from the cabotage laws in March 2019, the untangling has to be executed by present government, and encik Loke as the present transport minister once again.

8] WHAT ARE OUR POSITIONS TOWARD INFRASTRUCTURAL PLATFORM PREDATORS

The country has promoted the cabotage policy mainly to develop local know-how and expertise to support a national digital economy.

The country needs local expertise to ensure our national undersea cables are well maintained and not to be wholesomely dependent on Global North monopoly-capital corporations on an unequal economic and inaccessible technological exchanges.

That the international infrastructural platforms had once threatened to withdraw in cooperating with the national digital economic aspiration is uncalled for.

It is unbecoming and unbelieving for foreign investors – specifically Global North monopoly-capital corporates – not wanting to partner local expertise to provide support and services on their financialised capital but monopoly investment.

It is also most improper that when an undersea cable is cut and requires immediate attention, is it not that a national presence is better than relying on foreign vessels as a first choice?

That this ensuing case is a question of national security and that the country is at risk when foreign undersea repair ships are allowed to be operating freely in sovereign Malaysian waters.

9] WHO WHY WHAT WHERE WHEN NETARCHICAL CAPITALISM BE BURIED UNDERSEA

Digital infrastructural platforms are like neoliberal connotation of colonial ‘forward movement’ activities or ‘colonial intervention’ or better termed as anything but colonialisation where lands are to be discovered and conquered, and natural resources to be expropriated and labour to be exploited.

Under present environment of a digital economy, whoever gets there first, and holds fast and tight, shall get their information server-riches. The infrastructural platform kings (colonial-feudal lords) position themselves above end-users (the colonised), and their data surfing activities (serfs’ farm cultivation), thereby giving them overwhelming privileged access (lordship) to record and retrieve (dictate and dominate) end-users (the serfs and slaves) as and when demanded (as surplus value expropriation) under an information-commodity chained monopoly-capital domain (via routers and cloud servers) .

To gain, and accumulate, capital on behalf of the infrastructural platform kingdoms are the telecommunication intermediary knights riding on their Internet of Things to provide, partition and protect, information services to their surfing serfs.

It is the emergence of a new business model of large monopolistic firms on digital platforms that are capable of extracting immense amounts of data overwhelming legacy enterprises and suppressing labour empowerment, (Paul Langley and Andrew Leyshon, Platform capitalism: The intermediation and capitalisation of digital economic circulation, 2020).

10] At a time of an epidemiological-economic-ecological polycrisis, many national banks accelerated the monetary flow – and the resulting wave of liquidity – leading to substantial increases in corporate wealth in many developed and advanced economies, whereas the emerging and low income economies face external debt distress compounding poverty of the global
poors, (World Bank 2022). As a result of falling income levels, widespread employment losses and widening fiscal deficits, (UNCTAD 2020) – a rakyat-oriented governance should not allow vulture-capitalism in the shape of infrastructural platforms be roaming the waves of high blue waterways as predatory pirates.

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Related Readings

Techno-Feudalism

Vulture Capitalism

Poverty Global Poors

Financial Monopoly Capitalism

Class Analysis of Ethnocapitalism

Big Money Big Farms: Financial Globalisation of Agribusiness

collective on Geoeconomics

30th January 2023

1] INTRODUCTION

Around the world: private equity funds are ploughing pension funds, sovereign wealth funds, endowment funds and investments from governments, banks, insurance companies and even high net-worth individuals tilting financial monopoly-capital into the agriculture sector.

Big Farms are in many ways undermining local and regional food security by buying up land and entrenching an industrial, export-oriented model of agriculture. In the process – with wide-spread circuitry of capital, the inadvertent existence of monopoly-capital – large transnational conglomerates are not only expropriating emerging economies their natural resources in an unequal exchange, but also inducing long-term environmental and social devastation as a consequential ecosystem disaster.

2] GLOBALISATION OF AGRIBUSINESS

In September 2020, Grain.org indicated that monopoly-capital is using money to lease or buy up farms on the cheap and aggregate them into large-scale, US-style grain and soybean concerns. In fact, several offshore tax havens and the European Bank for Reconstruction and Development had targeted Ukraine in particular.

That country contains one third of all arable land in Europe. A 2015 article by  Oriental Review  noted that, since the mid-90s, Ukrainian-Americans in the US-Ukraine Business Council have been instrumental in encouraging the foreign control of Ukrainian agriculture.

In another instance, soy has become one of the world’s most important agro-industrial commodities – serving as the nexus for the production of food, animal feed, fuel and hundreds of industrial products – and South America has become its leading production region. However, the soy boom on this continent entangles transnational capital and commodity flows and disrupted social relations deeply in contested ecologies and economies,  see The Journal of Peasant Studies : Soy Production in South America: Globalization and New Agroindustrial Landscapes and John Wilkinson, The Globalization of Agribusiness and Developing World Food Systems, Monthly Review, Sep 01, 2009.

Most of the new soy crops are located in savanna and dry forest regions – the  Cerrado in Brazil and the Gran Chaco in Argentina, Paraguay, and Bolivia.

However, some new croplands have eaten into rainforests. For instance, soybean fields in the Brazilian Amazon increased more than tenfold over the two decades. About 32 percent of the new fields were planted among  primary tropical rainforests, often in areas that had first been cleared for cattle pastures,(nasa.gov).

The outcome is that transnationals have had a dominant presence in the Brazilian agrifood industry since its genesis; players have include: Nestlé, Unilever, Anderson Clayton, Corn Products Company, Dreyfus, and the Argentine transnational Bunge y Borne (now simply Bunge). They were later followed, as different market segments matured, by Kraft, Nabisco, General Foods, and Cargill from the United States, and United Biscuits, Bongrain, Danone, Parmalat, and Carrefour from Europe.

In Africa, the IMF, under its Structural Adjustment Programme, or the World Bank, often imposed upon African debtor countries to develop their exports of cash crops at the expense of imports and expenditure on social welfare, resulting in cutting subsidies into local food production.

Food aid that is sent to Ethiopia, which could do a better job of feeding itself if the coffee price was not driven down by commodity markets in London or New York. In Mugabe’s Zimbabwe, food aid does not reach all needy inhabitants because of their political affiliations.

Then, we have a case-firm like chocolate firm Hershey purchasing so many cocoa beans in the futures market that prices rose by more than 30 percent; the Ghana Cocoa Board had accused the firm on the abuse of the derivatives market to impoverish the West African farmer.

In Jamaica, it means that local food industries go out of business because of the dumping of cheap, subsidised food from the USA.

Nearer to Asia, Malaysia’s agricultural sector is strongly biased towards large-scale agriculture. The estate (plantation) sector is predominantly a producer of oil palm and rubber accounting for 70% of the country’s agricultural area. These estates are big – each individual unit commonly covering 2,000-10,000 hectares, managed by global companies such as Sime Darby which controls over 300,000 hectares in Malaysia.

Malaysia land development schemes, started by the Federal Land Development Authority (FELDA), are managed like a feudal land-owner than as a co-operative occupying 21% of the land; read Big Capital Small Farmers.

With adherence to the neo-colonial praxis in financial corporatisation of large agribusiness plantations catering to metropolitan countries commercial needs, a country like Malaysia had neglected her domestic food security concern so much that the country imports almost 100% of grain corn or two million tonnes annually from Argentina, Brazil and the US.

The local rice production has stagnated in the last thirty years and between 2016 to 2018, rice production actually decreased by 6.20%. As by today, Malaysia is importing between 30 to 40 per cent of its rice consumption mainly from Vietnam, India and Thailand.

3] CONSEQUENCES of FINANCIALISATION CAPITALISM

Although modern human societies have attained an unprecedented levels of wealth, there is a significant amount of the world’s population continues to suffer from hunger or food insecurity on a daily basis. In Agriculture and Food in Crisis, Fred Magdoff and Brian Tokar said that nowhere more evident than in the production and distribution of food.

The United Nations Food and Agriculture Organization (FAO) had stated that wheat and fertilizer supply shortages have driven up prices and increased food import bills for the most vulnerable countries by more than $25 billion, putting 1.7 billion people at risk of going hungry.

The persistence foray of metropolitan corporate capital from Global North only subjugates the agriculture and domestic food markets of many developing countries and peripheral emerging ones that are undergoing rapid urbanization, to the needs of global agribusiness. For some of the larger developing countries, however, national compradore capital is also the principal force contributing to the emerging urban food crisis, by acting as or colluding with, Global North monopoly-capital. In addition, the state – through clientele capitalism and through government-linked companies (GLCs) – have also been playing a key role in the consolidation of the urban food system much to the insufficient stomachs of poverty poors, (read firestorm, 2021, Beefing Capitalism to sandwich Commodity Chains).

According to the World Food Summit, food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food. 

Food security must be seen in terms of availability, accessibility, consumption and stability. Physical availability means that food must be readily available, while physical accessibility means the food must not only be available but people must also have access to it. 

This comes at a time when world economic situation is expected to become more challenging in 2023 as energy crisis and food security are among the main economic threats, especially for developing countries, and even a developed country like Malaysia where agro-food import stood at RM$64 billion in 2022 or according to the Department of Statistics Malaysia (DoSM), imports of food accumulated to RM$482.8 billion over the last 10 years, while agricultural produce exports amounted to mere RM$296 billion. 

With metropolitan corporate capital and its agribusiness entities owning and controlling the agriculture and domestic food markets of many developing countries, the situation enables, and ensured, a socio-economic shift in lifestyles and food habits favoring the rise of convenience foods, which, in turn, stimulated the expansion and large-scale entrance of foreign corporations into the fast-food sector. The main input ingredients in this sector are the white meats.

Brazil and Argentina, together with Thailand, became major suppliers of animal feed and meat, particularly in the provision of poultry and pigs, thus giving rise to domestic agribusiness firms – Sadia and Perdigão in Brazil, the Charoen Pokphand Group in Thailand and Leong Hup, Malaysia, which have poultry farms spread across Southeast Asia.

Although Perdigão and Sadia remain leaders in the white meats sector in South America, presently there are other strong entries of TNCs – with Doux the leading French poultry producer, ARCO from Argentina, Cargill, Bunge, and most recently Tyson from the United States now accounting for more than 20 percent of Brazil’s exports in this sector.

In the 1990s, China encouraged transnational corporate investment in partnership with domestic firms. As a result, global players are now firmly in place in trading, food processing, and retail in China. The major global seed firms for examples: Monsanto, Dupont, Syngenta, and Limagrain – are nowadays involved in joint ventures with Chinese seed companies and research centers, too. Therefore, with new regional actors emerging, the traditional global traders have successfully repositioned themselves around the new Southern Cone-China axis.

Increasingly, there is an indication of a long-term trend toward reproduction of the oligopoly pattern in agribusiness structured along the United States and European financialisation capitalism mode on a global scale.

A good example of the trend towards total control in the commodity supply chain is COFCO. This leading international, China-based agribusiness has acquired companies abroad, such as seed providers and agricultural trading corporations, to expand its control over the global supply chain. The company focuses on production of grains, oilseeds, and sugar and invests heavily in markets where there is potential for growth in these food items.

For example, COFCO acquired a leading seeds manufacturer in South America (Nidera) and a major food processing and trading company in Singapore (Noble Agri). As a result, COFCO has expansive control over the supply chain, all the way from sourcing and production to transportation and distribution.

Clearly, it is not a viable path for the many smaller countries across the world that are too small and too poor to compete on this basis.

The issue of economic power and concentration in monopoly-capital systems is thus would remain a vital concern of non-government organisations, labour movements and trade unions, and the green left on the financialisation of capitalism in the global agribusiness.

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Financial Monopoly Capitalism and the Poverty Global Poors

Collective on Geoeconomics

24th January 2023

1] INTRODUCTION

According to a World Bank Report, extreme poverty has increased. Concurrently, extreme wealth has also dramatically risen since the Covid-19 pandemic began.

The report shows that while the richest 1 percent captured 54 percent of new global wealth over the past decade, this has accelerated to 63 percent in the past two years. US$42 Trillion of new wealth was created between December 2019 and December 2021. US$26 Trillion (63 percent) was captured by the richest 1 percent, while US$16 Trillion (37 percent) went to the bottom 99 percent. According to Credit Suisse, individuals with more than US$1 million in wealth sit in the top 1 percent bracket.

Further, in the Oxfam publication: “Survival of the Richest” indicates that the richest 1 percent grabbed nearly two-thirds of all new wealth worth US$42 Trillion created since 2020, almost twice as much money as the bottom 99 percent of the world’s population.

For the past decade, the richest 1 percent had captured around half of all new wealth. Indeed, billionaires have gained extraordinary increases in their wealth.

Since 2020, during the pandemic and cost-of-living crises, US$26 Trillion (63 percent) of all new wealth was captured by the richest 1 percent, while US$16 trillion (37 percent) went to the rest of the world put together. A billionaire gained roughly US$1.7 million for every US$1 of new global wealth earned by a person in the bottom 90 percent. Billionaire fortunes have increased by US$2.7 billion a day. This comes on top of a decade of historic gains where the number and wealth of billionaires doubling over the last ten years.

2 HOW ARE THE IMMENSE WEALTH ACCUMULATED?

The wide wealth disparity between the ultra-rich and the poverty poors emerges from the coarse profits from the food and energy sectors. Billionaire wealth surged in 2022 with rapidly rising food and energy profits. The report shows that 95 food and energy corporations have more than doubled their profits in 2022. They made US$306 billion in windfall profits, and paid out US$257 billion (84 percent) of that to rich shareholders. The Walton dynasty, which owns half of Walmart, has received US$8.5 billion over the last year. Indian billionaire Gautam Adani, owner of major energy corporations, has seen this wealth soar by US$42 billion (46 percent) in 2022 alone.

It is stated in Oxfam 2023, “Survival of the Richest: the Indian Story” that 5 per cent of Indians own more than 60 per cent of the country’s wealth while the bottom 50 per cent of India’s population possess only three per cent of the wealth. From 2012 to 2021, 40 per cent of the wealth created in India has gone to just one per cent of the population and only a mere 3 per cent of the wealth has gone to the bottom 50 per cent. The combined wealth of India’s 100 richest has touched US$660 billion.

In Spain, the CCOO (one of the country’s largest trade unions) found that corporate profits are responsible for 83.4 percent of price increases during the first quarter of 2022.

Further, in the U.S., the UK  and Australia, studies have found that 54 percent, 59 percent and 60 percent of inflation, respectively, was driven by increased corporate profits.

3 WHERE DOES THE INEQUALITY ARISES?

This spectre of inequality, and the immense wide-spread in hunger, occur increasing under an inflationary trend. At a time when at least 1.7 billion workers are living in countries where inflation is outpacing wages, and over 820 million people – that is, one in ten people on Earth – are presently going hungry everyday. Women and girls often eat least and last, and make up nearly 60 percent of the world’s hungry population. As indicated in various reports, the World Bank says we are witnessing the biggest increase in global inequality and poverty since World War 2.

Entire countries are facing bankruptcy, with the poorest countries now spending four times more repaying debts to rich creditors than on healthcare. Three-quarters of the world’s governments are planning austerity-driven public sector spending cuts – including on healthcare and education – by US$7.8 Trillion over the next five years.

Thus, debt is hunger.

4 HOW FINANCIAL MONOPOLY CAPITALISM DOMINATES?

In the New Political Economy, 30 Mar 2021 article by the Jason Hickel, Dylan Sullivan and Huzaifa Zoomkawala research team presents that wealth drain from the Global South remains a substantial feature in post-colonial global economy; rich countries continue to indulge in imperial forms of appropriation to sustain their high levels of income and spending.

For instance, prominent transnationals have had an important presence in the Brazilian agrifood industry since its birth; players include: Nestlé, Unilever, Anderson Clayton, Corn Products Company, Dreyfus, and the Argentine transnational Bunge y Borne (now simply Bunge). They were later followed, as different markets matured, by Kraft, Nabisco, General Foods, and Cargill from the United States, and United Biscuits, Bongrain, Danone, Parmalat, and Carrefour from Europe. The immediate consequences are that uneven and often uncoordinated foray of metropolitan corporate capital is subjugating the agriculture and domestic food markets of many developing countries, particularly smaller, peripheral ones undergoing rapid urbanization, to the needs of global agribusiness monopoly-capital; read Ukraine’s Big Farms’ global agribusiness land grab.

Then during the 1990s’, unrestricted movement of international finance capital, public sector enterprises or government-link companies (GLCs) increasingly are subjected under the hound of financialization capitalism. The metropolitan capital-as-finance (Patnaik 1999), gets control over Third World resources and enterprises to see the rise to international finance capital in league with the local neocomprador class becoming crony capitalism through the force of accumulation as articulated by Samir Amin (2019) in The New Imperialist Structure, Monthly Review, July 01, 2019. Anchored upon a capital-market system, this leads to the emergence to, and the pervasion of, financialization capitalism in Malaysia.

With globalisation, rentier capitalism compradores attaching to neo-imperial monopoly capitalism and their linkages to the global commodity chain dimension, the consequence is that these capitalists are accentuating wealth disparity with the working class; see  Khalid 2019 study where the absolute gap across income groups has increased, contributing to big chunk of the poverty poors being left behind. The top 20% of population – the T20 – possess 46.2% of the national income share, while M40 have 37.4% of the national income share.

5 WHAT TO DO?

According to various analyses by the Fight Inequality Alliance, Institute for Policy Studies, Oxfam and the Patriotic Millionaires, an annual wealth tax of up to 5 percent on the world’s multi-millionaires and billionaires could raise US$1.7 trillion a year, enough to lift 2 billion people out of poverty, fully fund the shortfalls on existing humanitarian appeals, deliver a 10-year plan to end hunger, support poorer countries being ravaged by climate impacts, and deliver universal healthcare and social protection for everyone living in low- and lower middle-income countries.

Oxfam is calling on national governments to:

• Introduce one-off solidarity wealth taxes and windfall taxes to end crisis profiteering.

• Permanently increase taxes on the richest 1 percent, for example to at least 60 percent of their income from labor and capital, with higher rates for multi-millionaires and billionaires. Governments must especially raise taxes on capital gains, which are subject to lower tax rates than other forms of income.

• Tax the wealth of the richest 1 percent at rates high enough to significantly reduce the numbers and wealth of the richest people, and redistribute these resources.

This includes implementing inheritance, property and land taxes, as well as net wealth taxes. There are 80 percent of Indians, 85 percent of  Brazilians and 69 percent of citizens polled across 34 countries in Africa are supporting increasing taxes on the rich.

Our leading economists are calling:

“This is precisely the time when you must reform taxes as you have it (windfall tax) all the time amid extraordinarily high petroleum prices or palm oil prices,” according to Khazanah Research Institute senior advisor Professor Dr Jomo Kwame Sundaram.

Institute of Malaysian and International Studies research fellow Dr Muhammed Abdul Khalid pointed out that policymakers tend to ignore the imposition of capital gains tax when it comes to the issue of tax reform. “Taxes must be fair ….. and we never talk about the urgency of imposing capital gains tax, maybe because it is going to affect the very well-off in  Malaysia,” he said.

Indeed, there should be greater effort across tax instruments: to increase the progressivity of personal income tax, re-examine the number and targeting of corporate income tax incentives and to consider new sources of revenue such as environmental taxation and capital gains taxation. The introduction of capital gains tax, raising the tax rate for those in the top individual tax bracket and imposing a tax on retirement savings above a certain threshold were among the suggestions on how to enhance revenue in the World Bank Report, 2021, Malaysia Economic Monitor June 2021: Weathering the Surge.

EPILOGUE

Oxfam’s research shows that the ultra-rich are also the biggest individual contributors to the climate crisis. The richest billionaires, through their polluting investments, are emitting a million times more carbon than the average person. The wealthiest 1 percent of humanity are responsible for twice as many emissions as the poorest 50 percent and by 2030, their carbon footprints are set to be 30 times greater than the level compatible with the 1.5°C goal of the Paris Agreement.

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Related Readings

Unequal Exchange

Monopoly Capitalism

Financial Monopoly Capitalism

Sovereign Debts, Debt Dependency and Financial Capitalism

  

PROLOGUE

Nations borrowing has gone global, playing a pivotal role in the world economy by enabling national governance economic development to finance investments that ostensibly to uplift productivity and ensuring growth. However,  the risks – overborrowing and potential default – haunt such national states.

Malaysia critical Sovereign Debt and State of Nation

1. WHAT IS SOVEREIGN DEBT?

The sovereign’s debt is a country’s national debt: the multitrillion, multinational, multicurrency network of debt obligations owed to financial capitalism of corporate bankers, global equity managers and the International Monetary Fund.

2. WHY DO SOVEREIGNS BORROW?

Governments borrow to spend beyond what they can or want to raise through general taxation. There are several economic rationales, and the parallel political motives for this activity. When tax revenues are down, such as during a recession or before an election, governments will borrow to pay for existing spending commitments to please and entice potential populace-voting cohorts.

Already at 18% of federal government revenue, Malaysia’s interest payments alone will become more expensive as new debts are taken at higher rates to roll over old debt.

Often than not, it is the “tax smoothing” justification for the continuity of public services such as schools and hospitals, and highways to nowhere. It is an expressed exhortation that the government is not forced to cut spending even though an economy is already weak, the country though poor and or poorly administered, and the poverty poors are getting restless and agitated. It is something that could – and should not – make the situation worsen wider.

Indeed, governments oftentimes take a step further and actually increase spending, or reduce taxes, during a recession or before an election to try to boost growth. This “fiscal stimulus” is financed by issuing sovereign debt – using rakyat2 money.

On the other hand, these reasons cannot typically be explained by the high level of debt seen in many other countries. The frequent economic expression lies in the political motive to borrow so as to “invest in the future for a better and greater nationhood”.

Governments might borrow large sums to build a major new interstate highway, power plant, or a mass rail transit system – typically, in this country to benefit intermediary contractor cronies as part of an ethnocapital clientelship praxis.

Even though the up-front costs can be extremely high (rationalised with “these investments boost longer-term growth, justifying the borrowing“), the repayment is spread over many years – much to the glee of toll-collection and port-franchise operators. Besides the physical capital, national governments also invest in human capital, like in education and health. Again, the long-term benefits should outweigh the cost pof borrowing, provisio, the appropriate – determined and required – skilled human endowment is generated and that the health services, for instance, spread to outlying hinterlands’ communities, too.

Needless to say, effective dealing with sovereign borrowings, requires timely, fair and considered action, designed to prise economies out of debt rather than squeezing subsequent repayments through brutal politico-economic means. Any delays often increase the size of the problem and would only add to rakyat misery and suffering.

Further, forcing austerity and ‘budget balance’ on countries already suffering from falling economic activity and employment merely exacerbates the decline and puts even greater pressure on already devastated people, (Jayati Ghosh, 2023, How not to deal with a debt crisis).

3 WHO DO WE BORROW FROM ?

A Government can be very creative in finding potential lenders, as it seeks out those who might charge them the lowest interest rate. There are often trade-offs between choice of lender and terms of repayments, however.

For example, sovereigns can borrow from within their own country or from abroad.

Domestic borrowing – from local banks and asset managers or directly from households (EPF employees’ money or PNB owners’ trust units) could likely be a steady and reliable source of financing. However, there is a limited amount of money available and repayment maturities tend to be short. Not infrequently, governments also borrow from international capital markets, in larger amounts and usually at longer maturities. These markets can be fickle, however, especially for lower-income countries. It can be dangerous to assume that these lenders will always provide a readily available source of finance, (read IMF’ed).

Otherwise, there is a wide and diverse range of private sector entities willing to lend to sovereigns, too. Asset managers, such as pension funds, typically hold a large amount of government debt. They need relatively safe long-term assets to match their long-term liabilities.

Further, banks also hold large amounts of sovereign debt, especially of governments in the countries where they are based. However, this mode of “bank-sovereign nexus” has caused problems in the past. During the 2010–12 euro area sovereign debt crisis, for instance, troubled banks reduced their funding to governments, raising sovereign borrowing costs. This led to a vicious cycle of further tightening of financial conditions that aggravated the economic recession and problems in the banking system.

Finally, governments can borrow from other governments or international organizations. Often, this form of lending is not motivated primarily by commercial objectives (although a lender like the IMF may not say this in practice).

Then, there is an approach where one government might lend to another to strengthen bilateral ties. The World Bank or African Development Bank might lend money to a country to help build a waste-disposal system, to fund pandemic vaccinations, or reform the power-generation sector. And, always, the global along IMF will provide financing if a country finds itself facing balance of payments difficulties.

4 HOW DO WE BORROW?

There are various contractual ways for a government to borrow. Loans are a familiar form of financing. They are normally arranged bilaterally, or through a syndicate of lenders, and repayment is often spread out over several years.

By contrast, bonds are issued to hundreds or thousands of creditors, and the entire amount normally needs to be repaid at once.

In addition, there are many exotic instruments through which a sovereign can borrow, but these tend to be much smaller in scale.

Governments seek (hopefully) to minimize the cost of their borrowing – the interest rate – while preventing the structure of their debt from becoming too risky. For example, many governments find it cheaper to borrow in US dollars or euros than in their own currency. However, this finanancial method can cause problems if their currency depreciates, as this increases the real burden of the debt – as in the 1MDB case.

Similarly, some governments prefer to pay a fixed rate of interest on debt, as this ensures debt-service costs are stable. Oftentimes, this is seen or perceived as being cheaper (at least initially) to issue debt that is linked to a variable interest rate or consumer price inflation. However, this undertaking can be risky if these variables move in an unexpected and unfavorable direction.

Overall, though a prudent public debt structure can help keep sovereign costs low over the long run, there are many other factors that can also influence a sovereign’s creditworthiness and its borrowing costs, such as its level of economic development, the size of its financial markets, its record of honouring its obligations, and its vulnerability to external shocks, as well as global financial conditions.

As many of the above-mentioned factors are beyond the control of governments, this is where financial barons and financial vultures in the guise of sovereign rating agencies and international institutions, including the IMF, maintain elaborate models that continuously assess sovereign creditworthiness.

5 WHAT HAPPENS WHEN WE CAN’T PAY?

Like ordinary people and business companies, sovereigns can struggle to repay their debt. This could be because they borrowed too much or in a way that was too risky – or because they were hit by an unexpected shock, such as in a sub-Saharan deep recession, a Pakistan flood disaster or a Malaysian 1MDB financial fraud.

In these circumstances, the sovereign needs to restructure its debt. However, unlike people and companies, there is no bankruptcy court for sovereigns that can compel the debtor and its creditors to resolve the issue. Instead, it becomes a negotiation: creditors want to recover as much of their money as possible, while the borrowing country wants to regain “normal” status in financial markets, without paying out too much.

These restructurings are often costly for both the debtor and for creditors.

Well-known examples include Russia (1998), Argentina (2005), Greece (2012), and Ukraine (2015), Sri Lanka (2023 ongoing).

Costs are normally much smaller when an agreement can be reached before a sovereign state defaults, by missing a payment on its debt. These preemptive restructurings are usually resolved quickly and have smaller spillovers to the rest of the economy and financial system. However, once a sovereign defaults on its debt, the subsequent restructuring process can be long and expensive – or deadly

EPILOGUE

The Economic Hitman

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Digitalisation, Capitalism and SMEs

16th. January 2023

PROLOGUE

Amid slowing global growth, promoting technological adoption and closing digital divides can help the region boost aggregate productivity and economic output, (IMF Blog, 9/1/2023).

According to a study published by Ascential Digital Commerce, eCommerce sales in Southeast Asia are projected to grow 18% in 2022, reaching up to USD$38.2 billion.

1] DIGITALISATION

Digitalization is defined as the process “in which many domains of social life [including businesses] are restructured around digital communication and media infrastructures” (Brennen and Kreiss 2016).

The digitalisation of business entities can cover many sub-sectors:

By right, a SME digitalization initiative is often regarded as key to their long-term sustainability in an increasingly digital economy, but there is digital divide between Big Corporations under capitalism and small-scale firms with scarce financial means that present the contradictory challenge, (see Big Tech, Large Gig, 2022).

2] CAPITALISM

Yanis Varoufakis once stated, “Capitalism has morphed itself into what I call Techno Feudalism.” There exists in techno-feudalism the modern version in the formation, and foundation, of infrastructural platforms which have:

• Sheer Computing Power

• Unprecedented Concentration of Economic Power in a few private hands

• Ability of tech-aristocracy to shape the society.

It comes at a time when printed money has replaced private profit as the driver of economies, and markets are giving way to platform-based fiefdoms.

Digital infrastructural platforms are not unlike colonial ‘forward movement’ activities where lands are waiting to be discovered and conquered. Whoever gets there first, and holds fast and tight, shall get their information server-riches. The infrastructural platform kings (colonial-feudal lords) positions themselves above users (the colonised), and their data surfing activities (serfs’ farm cultivation), thereby giving them overwhelming privileged access (lordship) to record and retrieve (dictate and dominate) endusers (the serfs) as and when demanded (as surplus value expropriation) under an information-commodity chained monopoly-capital environment (via routers and cloud servers) .

To gain, and accumulate, capital on behalf of the infrastructural platform kingdoms are the telecommunication intermediary knights riding on their Internet of Things to provide, partition and protect, information services to their surfing serfs. It is the emergence of a new business model of large monopolistic firms on digital platforms that are capable of extracting immense amounts of data overwhelming legacy enterprises and suppressing labour empowerment, (Paul Langley and Andrew Leyshon, Platform capitalism: The intermediation and capitalisation of digital economic circulation, 2020).

Some have named this praxis as “netarchical capitalism” , where infrastructure is “in the hands of centralized privately owned platforms”, (Nick Srnicek, Platform Capitalism, 2017; read also Talk about Telecommunications).

3] SMEs

The SMEs are the backbone of Malaysian economy

Small and medium enterprises (SMEs) make up 99% of the 920,624 business establishments in Malaysia. In 2018, SMEs employed 66.2% of the workforce in Malaysia, contributing RM$522.1 billion, or 38.3%, to the Malaysian GDP. They are classified into three categories: micro, small, and medium, defined by industry, sales turnover, and the number of employees. Micro-enterprises make up 76.5% of Malaysian SMEs. In contrast, medium-sized enterprises comprise only 2.3% of SMEs.

Despite being the backbone of Malaysia’s business environment, SMEs perform relatively poorly in digitalization. There exists a digital divide among businesses in Malaysia”, write Amos Tong, an economics undergraduate at UCLA, and Rachel Gong, a researcher at the Khazanah Research Institute in Kuala Lumpur.

A study by the University Consortium of Malaysia found that the use of digital technologies would significantly improve SME productivity. SMEs that used social media experienced a 26% increase in productivity while those that engaged in e-commerce saw productivity increase by 27%. Moreover, the application of advanced digital technologies such as data management solutions could increase SME productivity by up to 60% (Huawei Technologies, 2018).

4] CHALLENGES

The biggest challenges to SME digitalization are financing, employee skillset and inadequate technology. Despite government assistance, about 50% of SMEs in Malaysia cite funding as a key hindrance to digitalization, while 60% of SMEs are unaware of their financing options, exacerbating this problem. Only a small proportion of SMEs sought payment restructuring assistance for their internet service during the pandemic Mandatory Control Order (MCO). 

Compounding this problem, 44% of SMEs cited broadband issues – high price and low speed – as a key barrier to using cloud services (Huawei Technologies, 2018, ibid; read also Digital Serfs, 2023; Digital Labour, 2020).

Also, 48% of SMEs cited ill-suited employee skill sets – for example: the need to develop sales and marketing, business management and IT technical skills among employees – as a major challenge to digitalizing their businesses.

Technological expertise is also lacking among employers as many SMEs do not know how and where to digitalize.

Thus, the lag and slack in SMEs’ endeavours toward digitalization during pre-COVID has significant implications for SME business performance and survival when the Covid-19 pandemic emerged.

To aggravate the national digital economy effort, there were uneven economic development – and digitalisation initiatives and implementation – between states, too (see Sabah: development of underdevelopment)

5] WAYS AHEAD

With the above-mentioned challenges, government policies are needed to bridge the digital divide between firms. The goal of these policies is to build an inclusive digital economy that benefits all parties. To attain this mission objective, the present unity governance could possibly, and more probably, consider a four-pronged approach:

• Ensure affordable and high-quality digital infrastructure. 

Public-private partnerships to reduce the price of basic digital infrastructure should be developed and maintained to reduce the financial barriers to SME digitalization. These efforts can be expanded to accelerate the development of affordable, high-quality digital infrastructure and services nationwide.

• Encourage the digitalization of more advanced back-end processes. 

72% of SMEs do not know how to automate their business operations while 42% of businesses that are aware of cloud computing services “do not know how to leverage cloud computing to transform their businesses” (Huawei Technologies, 2020). In addition to raising awareness of the benefits of digitalizing back-end processes, worker training and upskilling could improve SME employee technical competencies and spur digitalization from within SMEs.

• Engage SMEs regarding the availability of government initiatives and incentives. 

Many SMEs are likely unaware of government initiatives and  incentives for digitalisation. As identified, 60% of SMEs that cited funding as a barrier to digitalisation were unaware of their financing options. Further engagement efforts, such as direct outreach to individual SMEs to alert them to skills-based training programmes, for example, could help increase SME digitalisation rates.

• Expand digitalization incentives to all interested SMEs. 

The Malaysia Digital Economy Corporation (MDEC) undertakes various programmes to promote SME digitalisation.

However, these programmes have some restrictions. For instance, the SME Business Digitalisation Grant is limited to 100,000 SMEs. Though the enrolment of these programmes had been low because many SMEs might be unaware of or uninterested in such programmes.

Nevertheless, it is vital that the present Government could, and should, endeavour to expand these digitalisation programmes to all interested SMEs that are supporting in various enterprising activities so that many rakyat2 livelihood is enlarged within a shared, and common, prosperity community.

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content material from Techno-Feudalism and Platform of Thrones; and excerpts from blog.lse.edu.uk