Randomly Noted

Anyone living in Singapore has known for a while that the economy is coming back. Restaurants and bars are full, shopping centres are humming, and it’s harder to find an available taxi.
We had confirmation of that Wednesday with the release of first quarter gross domestic product data showing growth of 32.1% from the previous quarter in annualized, adjusted terms, after a 2.8% contraction in the fourth quarter of last year.

That’s the fastest growth since the data series began in 1975, and much better than economists expected (and perhaps the government, too–it has revised up its 2010 growth forecast to 7.0% to 9.0%, from 4.5% to 6.5%).
The data are good news for the rest of Asia. Singapore is first off the mark in releasing GDP for the region. It, like many of its neighbours, is a trade-dependent economy, relying heavily on its tech and pharma industries. Things are coming off a low base, but it does indicate real demand is there for Asia’s goods, especially from within the region itself.
Such readings are likely to reassure governments as they ponder how much, and how fast, to roll back some of the fiscal largesse that has been in the system for some time.
But quick growth also spells potential headaches. The Singapore data were so strong, they led the Monetary Authority of Singapore into an unprecedented double-barreled policy tightening.
The MAS shifted up its targeted trading band for the Singapore dollar and at the same time said it is now aiming for a “modest and gradual appreciation” of the currency–its main policy lever–against a basket of currencies. It previously had a neutral policy stance.
Other central banks in Asia, including India and Malaysia, have been moving also to tighten policy, while China is among those acting to mop up liquidity in targeted steps.
Things could become more complicated from here. Authorities in Asia ex-Japan are starting to grow more nervous about the inflation outlook. In Singapore, officials lifted their consumer price index growth forecast for this year to 2.5% to 3.5%, from 2.0% to 3.0% earlier.
Continuing to support growth while counteracting the effects of very loose liquidity and jumping pre-emptively on inflation will prove tricky. Authorities may not want to act too aggressively to tighten policy, but act too late and there will be even greater problems to fix down the road.

There’s also the ongoing question of China. It has been growing nicely and demand from that country has shielded many others from the worst effects of the global economic slowdown. But even officials there are warning against being too optimistic on the growth outlook going forward.

To understand why Indonesia is moving forward and Malaysia isn’t, consider this horrifying story, “Malaysia Court Canes Three Women.”

The recent canings of four Muslim men and, for the first time, three Muslim woman, for having sex out of wedlock come after last year’s caning verdict – still not carried out – against a 32-year-old Muslim woman caught drinking beer in a hotel bar.

The only conclusion one can reach is that radical Islam’s influence is growing in this lush southeast Asian country of rich natural resources. Will Malaysia’s forward-thinking Muslims, and its ethnic Chinese and Indian minorities, permit this drift to continue? Have a look at colleague James Hookway’s piece, in which he notes that the main moderate Muslim opposition leader, Anwar Ibrahim, is on trial for alleged sodomy – “a charge that he denies and that he says was fabricated to destroy his political career.”

Meanwhile, Indonesia, with its own Muslim majority, is enjoying robust economic growth and there are signs it’s becoming easier to do business there. Just this week, an Indonesian court issued a ruling that in effect will let France’s Carrefour keep a majority stake in a local retailer. As colleagues Edhi Pranasidhi and Reuben Carder write, “the decision will give a filip to Carrefour’s aim of competing for market share in Indonesia” as incomes and consumption rise. This is Indonesia’s moment, as I’ve written before.

Malaysia’s economic prospects have been hampered by the market-constraining aspects of a long-standing affirmative action program designed to improve the prospects of the country’s ethnic Malay majority. Now, the country’s new prime minister, Najib Razak, has made an initial bold move to unravel the policy. It’s very canny of him, given the feisty political opposition nipping at the ruling party’s heels. To be sure, the New Economic Policy isn’t being dismantled – far from it. But, as my colleagues report, Najib has “outlined a package of measures to spur foreign investment in the Malaysian economy” at a time when some experts think GDP could shrink as much as 5% this year. Najib, who is also Finance Minister, knows that if he doesn’t do the right thing to jump-start economic growth, his political future will be in jeopardy. As long as he ignores  retrograde  forces within the political establishment, Najib’s interests will be aligned with growth. One new proposal: Permit 100% foreign-owned fund management firms in Malaysia for the first time while allowing foreigners to own up to 70% of stock broking firms (the current is 40%.) Malaysia’s affirmative action policies, introduced in 1971 after violent race riots, were designed to help ethnic-Malays, who comprise 60% of the population, catch up economically with ethnic-Chinese Malaysians. As colleagues James Hookway and K.P. Lee report, the fundamental “target of putting 30% of the economy in Malay hands remains intact” according to the Prime Minister. “But this 30% figure is now a macro target, not a micro target,” Najib said. Here’s coverage of Najib’s announcement by the official wire service, Bernama: http://www.pmo.gov.my/?menu=newslist&news_id=203&news_cat=13&page=1731&sort_year=&sort_month=