Volume 11, Number 12, December 2014 (Serial Number 110)

Journal of US-China Public Administration Volume 11, Number 12, December 2014 (Serial Number 110)

David Publishing

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Publication Information: Journal of US-China Public Administration is published every month in print (ISSN 1548-6591) and online (ISSN 1935-9691) by David Publishing Company located at 240 Nagle Avenue #15C, New York, NY 10034, USA. Aims and Scope: Journal of US-China Public Administration, a professional academic journal, commits itself to promoting the academic communication about analysis of developments in the organizational, administrative and policy sciences, covers all sorts of researches on social security, public management, educational economy and management, national political and economical affairs, social work, management theory and practice etc. and tries to provide a platform for experts and scholars worldwide to exchange their latest researches and findings. Editorial Board Members: Andrew Ikeh Emmanuel Ewoh (Kennesaw State University, USA) Beatriz Junquera (University of Oviedo, Spain) Lipi Mukhopadhyay (Indian Institute of Public Administration, India) Ludmila Cobzari (Academy of Economic Studies from Moldova, Republic of Moldova) Manfred Fredrick Meine (Troy University, USA) Maria Bordas (Corvinus University of Budapest, Hungary) Massimo Franco (University of Molise, Italy) Patrycja Joanna Suwaj (Stanislaw Staszic School of Public Administration, Poland) Paulo Vicente dos Santos Alves (Fundação Dom Cabral—FDC, Brazil) Robert Henry Cox (University of Oklahoma, USA) Sema Kalaycioglu (Istanbul University, Turkey) Manuscripts and correspondence are invited for publication. You can submit your papers via Web Submission, or E-mail to [email protected]. Submission guidelines and Web Submission system are available at http://www.davidpublishing.com Editorial Office: 240 Nagle Avenue #15C, New York, NY 10034 Tel: 1-323-984-7526; 323-410-1082 Fax: 1-323-984-7374; 323-908-0457 E-mail: [email protected]; [email protected] Copyright©2014 by David Publishing Company and individual contributors. All rights reserved. David Publishing Company holds the exclusive copyright of all the contents of this journal. In accordance with the international convention, no part of this journal may be reproduced or transmitted by any media or publishing organs (including various websites) without the written permission of the copyright holder. Otherwise, any conduct would be considered as the violation of the copyright. The contents of this journal are available for any citation, however, all the citations should be clearly indicated with the title of this journal, serial number and the name of the author. Abstracted / Indexed in: Chinese Database of CEPS, Airiti Inc. & OCLC Chinese Scientific Journals Database, VIP Corporation, Chongqing, P.R.China Database of EBSCO, Massachusetts, USA Google Scholar Index Copernicus, Poland Norwegian Social Science Data Services (NSD), Norway ProQuest/CSA Social Science Collection, Public Affairs Information Service (PAIS), USA Summon Serials Solutions Subscription Information: Print $560 Online $360 Print and Online $680 (per year) For past issues, please contact: [email protected], [email protected] David Publishing Company 240 Nagle Avenue #15C, New York, NY 10034 Tel: 1-323-984-7526; 323-410-1082. Fax: 1-323-984-7374; 323-908-0457 E-mail: [email protected]

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DAVID PUBLISHING

David Publishing Company www.davidpublishing.com

Journal of US-China Public Administration Volume 11, Number 12, December 2014 (Serial Number 110)

Contents Public Policy and Policy Analysis Adaptive Governance Policy for Societal Resilience and Community Empowerment

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Robert Hall Bureaucratic Stagnation Versus the New Hope of the President of the Republic of Indonesia Joko Widodo

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Bambang Istianto

Education and Training Customizing English Language Program for EFL Learners

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Abdul Halim Ibrahim, Khalid Ismail, Abdul Halim Ali, Philip Wee Thought and Practice of Cultivating Young Talent in China From 2002 to 2012

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Wu Xia, Tang Bin, Luo Hongtie

Economical Issues in Public Administration Analysis of the Optimum Currency Area for ASEAN and ASEAN+3

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Sylvia Alvarado The Formation of the Custodian and Settlement Infrastructure of the Russian Financial Market 1005 Karine Adamova Client Orientation as a Form of Spiritual Needs of Personnel in Labor Irina Kotlyarevskaya, Evgeniya Yazovskikh

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Journal of US-China Public Administration, December 2014, Vol. 11, No. 12, 949-959 doi: 10.17265/1548-6591/2014.12.001

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Adaptive Governance Policy for Societal Resilience and Community Empowerment Robert Hall Global Ecovillage Network of Europe, Artieda, Spain This paper reviews current thinking on flexible policy-making and participatory methods to empower communities to handle the challenges of climate change and other global shocks. Adaptive Governance for Resilience—designed to effectively increase societal resilience to external shocks while facilitating wellbeing and reducing both poverty and environmental degradation—is an innovative approach which teams cutting-edge policy-making with community empowerment. Using a 9-step methodology of the Adaptive Governance Cycle, resilience in communities can be strengthened as the communities are themselves empowered to increase wellbeing, address poverty alleviation, and strengthen environment protection. The approach facilitates governments to partner with local communities to calibrate the coordinated mix of flexible, adaptive policies to facilitate community resilience through participatory action. The author sees expanded use of Adaptive Governance as an approach for maintaining good governance and building social capital in the face of external and internal pressures and uncertainties which may become more widespread in the future. Keywords: policy development, wellbeing, adaptive governance, resilience, sustainable development

The now-famous term “Gross National Happiness” of the King of Bhutan, King Jigme Singye Wangchuck, used first in 1972 has prevailed. He stated, “Gross National Happiness is more important than Gross Domestic Product”. Forty years later, governments in Europe and Asia have begun to discuss the need for national wellbeing strategies as overarching policies to see that governments deliver what citizens really need in the long term (Hall, 2015). Development policy-makers and planners must have an integrated approach giving equal importance to non-economic and non-material aspects of social wellbeing. In 2011, the United Nations (UN) unanimously adopted a General Assembly Resolution, calling for a “holistic approach to development” aimed at promoting sustainable happiness and wellbeing. This was followed in April 2012 by a UN High-Level Meeting on “Happiness and Wellbeing: Defining a New Economic Paradigm” designed to bring world leaders, experts, civil society, and spiritual leaders together to develop a new economic paradigm based on sustainability and wellbeing. Even if all agree with the need to achieve sustainable development, it is important to understand that there are varying motives and objectives. Key to delivering wellbeing and health sustainably is ecosystem services, indispensable to people everywhere. In addition to providing life’s basic needs, changes in the flow of ecosystem services affect livelihoods, income, local migration, and societal conflict. The resulting impacts on economic and physical Corresponding author: Robert Hall, BSocSc, Lund University, BA, University of California, MSc, Royal Institute of Technology (KTH) Stockholm, managing director, Global Ecovillage Network of Europe; research field: sustainable development. E-mail: [email protected].

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security, freedom, choice, and social relations have wide-ranging and interdependent impacts on well-being and health. For example, over half of the world’s population continues to rely upon solid fuels for cooking and heating. These fuels including wood, crop stubble, and animal dung are a direct product of ecosystems. Alternative uses of dung or trees have significant impact on well-being. Indoor air pollution potentially produced by the combustion of these biomass fuels as well as coal in poorly ventilated heating and cooking environments, causes significant mortality and morbidity from respiratory diseases, particularly among children. Dung as fertiliser and soil improvement or trees as erosion and flood control would lead to other outcomes for the poorest. Policy-making for sustainability and wellbeing is thus extremely complex and hard to foresee from the national or international horizon. It requires local contextual sensitivity, follow-up and adjustment which are not currently practiced. Compounded by unpredictable effects of climate change and instability of finance, health, security, migration, and supply-chain systems, conventional national policy-making’s ability to deliver top-down societal resilience to the degree expected by citizens is doubtful. A new way of looking at policy formulation is needed which in itself builds the social capital needed for societal resilience to system shocks. Resilience was originally defined as the ability of a system to withstand disturbances and remain within the same stable ecological regime (Holling, 1973). It has later been applied in social science defined as the “transition probability between states as a function of the consumption and production activities of decision makers” (Brock, Mäler, & Perrings, 2002, p. 273) or “the ability of the system to withstand either market or environmental shocks without losing the capacity to allocate resources efficiently” (Perrings, 2006, p. 418). Combined with the concept of institutionalism (North, 1996), social systems that learn and experience, solving new challenges have been shown to have an adaptive capacity or resilience (Berkes & Folke, 2002). A component of resilience, the adaptive cycle, originally conceptualised by Holling (1986) interprets the dynamics of complex ecosystems in response to disturbance and change, moving slowly from exploitation (r) to conservation (K), maintaining and developing very rapidly from K to release (W), continuing rapidly to reorganisation (a), and back to exploitation (r). As resilience research moved from ecological systems to include social dimensions and later social systems, they were referred to as Social-ecological Systems or SESs (Berkes & Folke, 1998). More social scientists adopted this SES approach and the inherently transdisciplinary field of SES researchers has focused on resilience of SESs and ways to govern resilience of SESs. Ostrom researched on the commons approached from an SES perspective where natural resources and social systems have equal representation and equal detailed analysis (Anderies, Janssen, & Ostrom, 2004; Ostrom, 2009). Policy-makers are often faced with problems of complexity, uncertainty, change, and fragmentation. The response to this is the call for flexible, ever-learning, adaptive governance of the SES.

Adaptive Policy Approach to Societal Resilience There have been numerous attempts to use sector policy to achieve social wellbeing, deal with multi-dimensional poverty, and retain or restore ecosystem services. While recommending specific actions as a priority intervention, these single sector approaches do not bring a cohesive and integrated “holistic” approach into mainstream to dealing with the wellbeing environment interconnection into a broader set of development policies and planning. Given the cross-cutting nature of wellbeing and its opposite—poverty—which both cut across economic sectors, geographic and administrative boundaries, and time scale, it is essential that natural

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resource management, poverty reduction policies, and wellbeing strategies are formulated as part of broader policies for sustainable development. Implementing specific one-off measures geared to localised problems, specific economic sectors or population subgroups may be effective in certain circumstances, but in the long run, a project-based approach to integrated development planning and financing may not produce the scale of results that is needed to meet long-term objectives. In this respect, efforts to formulate a coherent set of national sustainable development objectives will need to be supported by a cross-cutting, integrated policy approach that allows geographic diversity. Policy formulation requires a good understanding of the issues, clear policy goals, a system of performance monitoring, and policy options. Having this level of information at the national level is however challenging and local/regional specificities do not allow homogeneous policy application. Adaptive governance is an emerging research framework for analyzing the social, institutional, economic, and ecological basis of multi-level participatory governance so as to build resilience for the immense sustainability challenges connected to more complex and adaptive SES (Folke, Hahn, Olsson, & Norberg, 2005). Most research has been on case studies of sub-national and transnational jointly managed resources—“the commons”, stakeholder dialogue, and policy adjustments. Human institutions encourage dialogue between different levels of government (local, regional, national, and international) to govern common resources, while involving a broad set of stakeholder perspectives, e.g., from civil society and the population. The adaptive governance approach is a predominantly “bottom up” strategy, focusing on community-based actions and multi-level dialogue. However, insufficient research has been done in the social science on multi-level governance in transitioning society to resilience (Janssen, 2011). The prerequisites for adaptive governance are integrated, forward-looking analysis, broad stakeholder involvement across scales and monitoring systems of performance which automatically activate adjustments in policy. In order to cope with the uncertainties, shocks, and unknowns, adaptive governance of complex SESs requires the ability of self-organization and social networking capacity of communities, decentralizing decision-making, encouraging diversity in policy response, and permanent mechanisms for formal policy review and continuous learning (Swanson & Bhadwal, 2009). Mainstreaming adaptive governance for resilience can be seen as requiring three levels of intervention. The first level consists of making development efforts consciously aimed at increasing wellbeing of those with low wellbeing, reducing social vulnerability while avoiding continued destruction of ecosystem services. This can be seen as strengthening the knowledge base for such interventions, addressing the opportunities, and increasing the overall resilience of the country and population. The second level is about ensuring that sustainable development is considered in the decision-making of relevant government agencies so that policy measures catering to sustainability are developed. This means not only environment protecting policies but also those addressing the potential creation of increased wellbeing with eco-livelihoods supporting the regeneration of ecosystem services in differing geographical areas. The third level calls for specific policy measures targeting issues that the first two levels have not yet tackled. Each of these levels requires changes in the way, government deals with policy-making, budgeting, implementation, and monitoring at national, sector, and subnational levels so that wellbeing is augmented and social capital is created. Adaptive governance for resilience must be a flexible response to policy change requirements based on the real needs of those with low wellbeing to improve their quality of life while strengthening the ecosystem services around them to secure their long-term well-being and livelihood.

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Tools for Adaptive Government Policies for Resilience To facilitate creation of adaptive policies for resilience to address low wellbeing and environmentally-related poverty, a set of policy tools is needed. The three key policy tools are: (1) Establishing country- and district-adapted integrated and forward-looking participatory and empowering methodologies for policy analysis: use permaculture analysis and integrated solutions to increase social well-being, include scenario planning, and create action-oriented and decisive multi-stakeholder deliberation and community dialogues to avoid pitfalls and unintended policy consequences; (2) Policy advocacy partnerships: build up multi-level domestic capacity and ally with local like-minded civil society in-country; (3) Creation of in-country monitoring of key performance indicators to trigger automatic policy adjustments and build an evidence base to support the local communities to help the poorest individuals and families. These tools are the basis of flexible adaptive policy creation. They require coordination among state and district governments, civil society, the private sector, and the local communities. The particular requirements of each policy tool are described below. Tool 1: Participatory and Empowering Methodologies for Policy Analysis Using a policy analysis process in a participatory way to empower local stakeholders to learn, offering a way to generate local/indigenous policy analysis in the midterm as well as local development scenarios and solutions. Communities and policy-makers can jointly partake in the immanent learning and capacity building experience. Integrated and forward-looking analysis requires comprehensive investigation with both historical review and forecasting leading to scenario planning. A scenario planning approach demands understanding of important factors and risks from uncertainties that could affect policy performance. Policies created using a scenario planning approach are tested against a set of scenarios and contingency plans. Adaptive policies are robust enough to work in all plausible scenarios. If conditions develop which create scenarios which “break” the policy, so-called “triggers” to adopt alternative policies or contingency plans are set off, preferably automatic adjustment mechanisms. Community dialogue needs to dovetail into multi-level and integrated deliberations with the scales of governance involved and other key stakeholders. Policy-makers and their local representatives need to fully understand local conditions and history, unexpected trajectories of preference, and social response to change. Thus, not only opinions and different perspectives are of interest but unexpected sources of knowledge, e.g., local and historical data that do not arrive through standard channels. The added value of such broader dialogue fora is to build trust, consensus, and identity among stakeholders and policy-makers. This collaborative learning process needs professional facilitation but participation must otherwise be representative, voluntary, transparent, and meaningful. Tool 2: Policy Advocacy Partnerships The adaptive policy cycle requires active participation, dialogue, and learning continuously. For this dynamic to occur, there needs to be a balance between civil society and community structures and that of the state. Change happens mainly within communities and organisations, and that it comes from shifts in relationships of power and accountability. Openness on information and transparency supports citizen agency and good governance. However, in many countries, there are no dialogue partners for resilient communities and the dialogue quality between the central state and local communities is not possible. Thus, partnerships with

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national and district-level civil society which focus on resilient communities are needed. Creating this requires some additional interventions. There are often existing social and environmental NGOs (non-governmental organizations) in-country which can be supported and their members further trained to support a domestic transition to resilience. Such individuals and organisations should be involved in policy advocacy partnerships as well as any interventions in-country to guarantee continuity of support and domestic networking. Tool 3: Joint Monitoring, Learning, and Adjustment Adaptive governance for resilience focuses on enabling policy-makers and government outreach services to work with and through local communities. Local communities need to participate in selection of indicators and their monitoring. Real-time feedback loops from those most affected are key to quick adjustment and fine-tuning. Planning the monitoring system needs to be understood and accepted by the communities so that the system contributes with structured experiential learning. If they participate actively in these goal-oriented processes where mutual learning takes place among those stakeholders, critical adjustments in projects and policies can be suggested early on. Recalibration or even automatic dismantling of policies should be directly connected to the monitoring system.

Designing in Adaptivity to Cope With Uncertainties While use of these above-described three tools is a good basis for effective and adaptive policy for building resilience, they are not enough. Adaptive policies need to strengthen the policy environment to respond to unforeseeable situations that happen during the policy cycle. Healthy complex adaptive systems have other characteristics of resilience which good policy and processes can encourage. Adaptive policy needs social capital and one show of social capital is self-organisation without external inputs, which often surfaces in crises. Self-organizing capacity is a free good that can be valuable in producing innovative solutions to problems. Policy should not directly try to encourage self-organization but instead remove barriers to self-organisation by encouraging and supporting social networking. Policies must safeguard that they never destroy social capital. Decentralisation to the lowest juridical unit is important to shorten feedback loops and ensure that policy is created and implemented with as much correct and precise information as possible to achieve desired results. Decentralisation can mean devolution of power to a lower level and deconcentration of decision-making to dispersed field offices. In those cases where diverse local conditions impact on policy results, decentralisation is essential and facilitates community dialogue. Decentralisation focus can be effectively combined with a national integrated adaptive policy approach for resilient communities where supportive learning networks can be coupled with informed strategic interventions and support is provided for the replication of the best practices and success stories and efforts in scaling up. Diversity of policy responses is the logical continuation with decentralisation and uncertainties of complex adaptive systems. A greater number of experiments will logically increase the chance of finding effective solutions. In some areas and regions, this might be eco-system restoration or provision of clean and more accessible water while in other areas, it may be transiting to agro-ecological practices and organic agriculture. In other regions, it might be investing in new renewable energy technologies or providing access to investment monies. Policy pilots could be a unique mix of several of these types of interventions. The important thing is that each community and region need to look at the most immediate and intense challenges that they face along

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with those things that might bring them the most value initially and then develop a comprehensive holistic plan accordingly. To facilitate diversity of responses, hinders to creative solutions such as lack of awareness, education, inequity, lack of resources, and appropriate institutional structures and governance mechanisms need to be alleviated while innovation and local capacities need to be encouraged with subsidies and information. Reviewing the relevance of current polices and piloting test policy instruments are part of a learning process required to adjust policy to continue to be effective. Systematic or regularly scheduled formal policy review is a mechanism for identifying and dealing with unanticipated and emerging conditions not known at policy inception. Experimental policy pilots can then be designed to test the likely impact of a potential policy, impact pilots, or to test processes related to implementation, process pilots.

Community Empowerment for Adaptive Governance Using the local community (rural village or urban neighbourhood) as the main vehicle to address environmentally-related poverty offers great potential for scaling up successful policy pilots to national policy but presents some challenges as well. Communities are seldom uniform throughout a country. Ethnical and cultural differences, geographic variations, and social diversity require that policy implementation is adapted to each particular situation by extension services interfacing with the local context. Recreating social cohesion previously eroded by exposure to and dependence on the globalised culture and foreign concepts of individualism make the restoration of community interdependence a challenge. However, using the community as its own local experts, social workers, and internal change agents is by far a more promising methodology for sustained and comprehensive impact that should be pursued. Thus, adaptive governance for resilience focuses on the community empowerment and national policy reform in concert to make significant strides in increasing local social wellbeing and social capital, combating environmentally-related rural poverty, and strengthening ecosystem services. Adaptive policies for resilience need to support four change enabling strategies in parallel: (1) Rekindle Community Social Cohesion; (2) Empower Communities to Affect Change; (3) Prevent Further Degradation of Ecosystem Services; (4) Increase Social Wellbeing/Alleviate Poverty Through Regenerative Livelihoods. These strategies require empowering the local level and increasing interaction within and between the communities. The sectoral delineation of responsibilities for social mobilization, natural resource management, and enterprise development does not resonate with a communities-based perspective. Synergy and coordination between the above-mentioned strategies and their activities solicit fundamental change in how governments work with the communities. Brokering the best opportunities to the greatest need, the community is best suited to determine the optimal choices to raise the general level of welfare of the community as a whole which indirectly benefits all inhabitants. Adaptive and flexible policies will facilitate the community empowerment to take action while policy-makers and communities will jointly learn what the most effective choices are to achieve policy goals.

The Adaptive Governance Cycle for Resilient Communities The Adaptive Governance Cycle (see Figure 1 below) for resilience contains nine steps for strengthening resilient communities by participatory and adaptive governance at the community, district, and national levels.

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At the community-level stage, the cyclical process starts with shifting perspectives, planning a new pathway together, and acting to change structures to allow for this pathway. At the district level, it is important to disseminate the best practice, involve all actors, and inform upwards to obtain supportive policies. Finally, national policies supportive of resilient communities are introduced, impact of this shift is coordinated, nation-wide policies are reviewed and adjusted.

Figure 1. The 9-step process of the Adaptive Governance Cycle.

Starting at the community-level, the cycle facilitates the mobilisation of the community. Shift Perspective The first step begins by identifying key resources, stakeholders, organisations, and hot-spot communities/districts where efforts should be focused. Geographic focus is initially preferred limiting efforts to

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one district or province. Participatory rural appraisal of the selected communities needs to be an integrated natural resource emphasis as well as self-analysis involving the community with its local and traditional knowledge. Key questions at this initial point in time are about knowing the whole community, what are its problems as a whole and facilitating a common vision of how the community would like to be. Once analysis has been made of the local situation, it needs to be presented to the community, building consensus and group identity. It is important to have cohesion before opening to a multi-stakeholder deliberation. The objective of the step is to produce new perspectives of community participants regarding how the community functions and how to address its problems. With a new perspective, the community supported by the external expertise of district officials, politicians, and experts will identify strength and leverage points available and low input, high impact “low-hanging fruits” entry points, or simply “low-hanging fruits” that can quickly provide success and solidify the community’s desire to attempt more change. Plan Change Slowly, the community is confident to produce a Community Resilience Plan and in this way design their own pathway to the future. The Community Resilience Plan lists efforts to eliminate problems and threats to the community, including that of livelihood challenges, to its poorer members. The first determination in any planning process should include addressing the most immediate and important community needs, while also looking at those types of things that could be done that would be the most likely to result in benefits and resources that would support the ongoing development processes. The plan offers the means to inform local and district development plans about local community priorities. Act Jointly Crucial to adaptive policies for resilience is not to restrict the community’s ability to act. Initial implementation of the Community Resilience Plan should be possible even without external support of district bodies. Changes in community and individual behaviour, new community norms, deliberation structures, and improved basic infrastructure should be possible with local resources. If district authorities are responsive, greater achievements are possible. The community becomes a demonstration site which can even be seen as a policy pilot. Then the communities are ready to influence the district-level and enable a scale up stage. Disseminate Good Practice Drawing lessons learned from the communities, the “best” or rather good practice solutions of different categories can be highlighted at a district-level. These good examples can be disseminated and community-level practitioners can exchange experience with each other. The point is to avoid linear scale-up replication without local adaptation. The process of pilot design needs to be evolutionary, taking what seems to work for the local problems to be addressed. It is positive to pilot a diversity of solutions showcasing different responses to variations of local conditions. Involve Society Building on the base of the district-wide experience of communities, multi-sector and multi-level stakeholders need to be involved in discussions about barriers and incentives to transition toward resilience. There needs to be an emphasis about the role of seamless multi-level governance to coordinate efforts and reform policies and structures that may prevent needed change. National networking of communities-oriented

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resource persons should be mobilised, even connecting with global links. The district can build so-called “communities of practice” creating identity among resilient communities. District and national actors thereafter can function as multipliers. The result of such overarching coordination is a Regional Action Plan for Resilience Communities. Inform Policy The Regional Action Plan for Resilience Communities can function as an instrument for inputting ideas for policy adjustment. These inputs need to find an adaptive governance environment at the national-level receptive to the district-level experience. At the national-level, policy-makers need to formulate resilience-stimulating policies and programmes. Introduce Resilience Thinking Based on input from the experience of demonstration and policy pilot communities and districts, a new form of adaptive policies to encourage resilience communities can be formulated. This requires multi-stakeholder deliberations, so an incentive for one sector does not damage sustainable behaviour in another sector. Agricultural pricing, transport and energy subsidies, health care and education accessibility can have both positive and negative impact on community resilience efforts. Coordinate Across Sectors Policy-makers from all line ministries need to coordinate their adaptive policies so as to reinforce and not to contradict each other. Existing local, regional, and national environmental action plans (leap, reap, neap) as well as National Sustainable Development Plans in light of Rio+20 include Climate Change Adaptation/Mitigation Plans need to be coordinated with resilient community thinking. This articulation is best supported by inter-ministerial National Strategy for Resilient Communities which combines international environmental commitments with social responsibility and cohesion. Such a cross-cutting national strategy needs to have the equal status as line ministry strategies and influence budgetary distributions. This integrated, multi-sectoral approach to planning and implementation will provide multiple benefits that may not even be evident at first. For example, sanitation and waste system management can provide valuable resources to build soil quality and provide cooking fuel, while cleaning up the water and preventing diseases. When coupled with permaculture practices and the development and use of biochar, such things as soil productivity, water retention, ecosystem health, and income opportunities can all be increased dramatically. Review Impact Adaptive policies explicitly linked to and in support of the national strategy need regular integrated policy reviews. While some policies should contain automatic adjustment mechanisms to quickly adapt governance for changing situations, all policies supporting the national strategy need planned regular review exercises to keep the policy effective. These reviews should be connected to input to the annual budgetary cycle so as to be able to combine policy and budgetary instruments to encourage resilience.

Conclusions This paper suggests that the best national response to the global challenges to stable provision of wellbeing lies in encouraging bottom-up community involvement which builds local social capital to better respond to unforeseen change. By operating diverse policy experiments at the local level which are closely followed up

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and adjusted, learning from the best practice can be spread quickly to other regions where applicable. Local community empowerment combined with flexible policy-making from the central level is the key to multi-level adaptive governance that can deliver the resilience needed for an uncertain future.

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Perrings, C. A. (2006). Resilience and sustainable development. Environment and Development Economics, 11, 417-427. Redman, C., Grove, M. J., & Kuby, L. (2004). Integrating social science into the Long Term Ecological Research (LTER) network: Social dimensions of ecological change and ecological dimensions of social change. Ecosystems, 7(2), 161-171. Rockström, J., Steffen, W., Noone, K., Persson, Å., Chapin, F. S. III, Lambin, E., … Foley, J. (2009). Planetary boundaries: Exploring the safe operating space for humanity. Ecology and Society, 14(2), 32. Swanson, D., & Bhadwal, S. (Eds.). (2009). Creating adaptive policies: A guide for policy-making in an uncertain world. Retrieved from http://idl-bnc.idrc.ca/dspace/bitstream/10625/40245/1/128804.pdf Wenger, E. (1998). Communities of practice: Learning, meaning, and identity. Cambridge: Cambridge University Press.

Journal of US-China Public Administration, December 2014, Vol. 11, No. 12, 960-972 doi: 10.17265/1548-6591/2014.12.002

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Bureaucratic Stagnation Versus the New Hope of the President of the Republic of Indonesia Joko Widodo Bambang Istianto STIAMI, Jakarta, Indonesia The process of bureaucratic services that is slow and complicated, is an administration malpractice even up to bureaucratic stagnation. An interesting phenomenon is done by the populist government leader Joko Widodo, the President of the Republic of Indonesia, when serving as the Governor of Jakarta to carry out supervision by way of “blusukan”. This method attracted the attention of one of the richest men from the United States, the founder of “Facebook”—Mark Zuckerberg. When he came to Indonesia to meet Joko Widodo in October 2014, he was invited by Joko Widodo to perform “blusukan” to Tanah Abang market. “Blusukan” is a surveillance method to the field on the right target and directly provide solutions to any problems that are found. The blusukan inspired him with the making of various policies such as health cards, smart cards, and others. The method of direct supervision on the fields is a quite powerful way to cut off the stagnation of bureaucracy. Joko Widodo who has started his steps as the President of the Republic of Indonesia, gives new hope to the people through the mental revolution and Trisakti doctrine policies in order to improve the welfare of the people toward the great Indonesia. Keywords: mental revolution, trisakti doctrine, bureaucracy, public policy, public services

Within the scope of the paradigm of public administration, “public policy” is the focus, while “government bureaucracy” is the locus of the public administration. This means that the government bureaucracy is an organ and instrument of carrying out the state policy and the government in order to achieve the state’s goals efficiently and effectively. The government bureaucracy as a system according to Istianto (2011), consists of elements which are the human resources of the apparatuses, government organizations, mechanisms and procedures or management as well as infrastructures or working facilities. While the “bureaucracy” according to Mas’ud Said (2007), Is a system of administration and execution of daily tasks structured in a hierarchical system that is obviously done with the written rules (written procedures) carried out by a particular section separated from another section by the chosen person because of the ability and expertise in their field.

Furthermore, according to Almond dan Powel (1966), “The govermental bureaucracy is a group of formally organized offices and duties, linked in a complex, regarding subordinates to the formal role makers”. Similar with Lance Castles (Priyo, 1993), beraucracy is mean clanked people who are charge with the function of government, the army officer, the military beraucracy, are of course included. Corresponding author: Bambang Istianto, Ph.D., lecturer, Department of Public Policy, the post graduate program of Mandala Indonesia Science Administration Institute (STIAMI); research fields: public administrator, public policy, public management, governance political bureau, and public private partnership. E-mail: [email protected].  

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The explanations of the bureaucracy in the implementation process of administration essentially cannot be separated from the basic element, namely human resources. Therefore, the human resourses of the bureaucratic apparatuses have a central role toward the good or bad profile of the government bureaucracy. The implementation of bureaucratic services which is efficient and effective or facing the bureaucratic stagnation is highly dependent on the quality of the human resources of the bureaucratic apparatuses. The criteria and quality standards of the human resources of the bureaucratic apparatuses are competent for the position, having integrity, honest, unpretentious, living simply, and close to the people they serve. As described in the abstract that the main problem of governance, especially in bureaucratic services is “bureaucratic stagnation”. “The stagnation of bureaucracy” means a failure in the duties and functions of public sector services optimally for example: in education, health, public space, public housing, and other public facilities. The stagnation of bureaucracy resulting in excesses among others: first, the proliferation of slums in big and medium cities; second, the health and nutrition of people are low; third, the wild squatting of many locations and even along the river which passes through the city of Jakarta; fourth, the spatial arrangement is irregular; fifth, the city environment is in disorder, tremendous traffic congestions in Jakarta and suburbs; sixth, the proliferation of street children and school dropouts; seventh, the increase of the urban poor, especially squattering on the slums in Jakarta. During his tenure as the governor of Jakarta, Joko Widodo made a breakthrough with a very popular style called “blusukan”. The method of “blusukan” is actually to directly supervise the location of the target and directly provide the solutions. By the way of this blusukan, several populist policies were made such as “The Villages of the Row Houses”, the rehabilitation of the lakes and reservoirs with landscaped gardens, the health cards and the smart cards, and others. With the breakthroughs, in fact, they are powerful enough to cut off the bureaucratic stagnation. Joko Widodo’s blusukan style that lasted for two years was ultimately increasing his popularity and delivering him to becoming the President of the Republic of Indonesia. New hope has emerged from all the people who pin their hopes on the policies of “mental revolution and Trisakti doctrine” which are expected to make changes toward a more prosperous people in a fair and equitable way. As described in the abstract, “mental revolution” is an attempt to fundamentally change the mentality of the Indonesian people, especially the leaders at all levels. The mental change will result in Indonesian people who are friendly, polite, virtuous, honest, tenacious, hardworking, having strong integrity, competent, and professional. The doctrine of “Trisakti” is the three steps of the strategic policy, namely: political sovereignty, economic self-sufficiency or self-reliance, and cultured personality. The future goals and new expectations of the above are almost certain to face a lot of obstacles and challenges from the political, economic, and socio-cultural aspects especially the bureaucracy. In the context of this topic, it focuses on the aspects of the bureaucratic stagnation with the new president’s hopes. As described above which explains some of the actual phenomena that come from a result of “bureaucratic stagnation” that affects the appearance of negative effects as mentioned above. The reality of the condition will be faced by the Indonesian President, Joko Widodo, who has given new hope to the people: “The Mental Revolution and the Trisakti Doctrine”.

Bureaucracy and State Ideology On the other hand, the bureaucracy is a sub-system of the state and the government, so the profile of bureaucracy is in line with the set policy along with the state ideology. The profile of bureaucracy is a form or  

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characteristic in carrying out the government in accordance with the policy of the state and state ideology so, it becomes the identity which is able to distinguish from others. For example, if a country adheres to the ideology of liberal capitalism, the profile of the bureaucracy will be congruent with the wishes and the spirits of that ideology. One of the characteristics of the ideology of liberal capitalism is the “Freedom” of the people in running their daily life such as in political, economic, and socio-cultural aspects. Therefore, the profile of bureaucracy is characterized as follows: democratic, decentralized, transparent, egalitarian, active-creative, independent, participatory, secularistic, top-down without any gaps. Similarly, if a country adheres to the ideology of socio-communism, the profile of the bureaucracy will be concurrent with the ideology. The ideology of communism as the antithesis of the liberal capitalism ideology so surely the profile of the bureaucracy in that country will be different even contradictory. For example, the profile of bureaucracy in communist or socialist countries in general is characterized as follows: closed, authoritarian, and centralized. As it is known that both ideologies above have expanded throughout the countries of Europe, Asia, and Africa. These ideologies are certainly coloring the ideology of the states that once were their colonies or their satellite regions. Therefore, both the profiles of government bureaucracy are often used as a comparative study in the science of the state administration. In general, countries that follow the ideology of liberal capitalism with the open, democratic, and decentralized profile of bureaucracy have high performance in organizing and providing public services to their citizens. Therefore, the level of their well-being and economic ability is better than the countries that follow the ideology of socio-communism which in general are poor. For example, South Korea’s level of well-being and economic ability is very much different from North Korea’s, in South Korea, most of the economic life of the people is much better than that in North Korea. Indonesia, as a major country in Asia, historically has experienced Dutch colonialism for 350 years and Japanese colonialism for 3.5 years. In the colonial era of Dutch, the lives of indigenous people also experienced a variety of influences of the major ideological struggles among the liberal capitalism, socio-communism, and religions, especially Islam, Catholicism, and Protestant. As known in the annals of the “founding fathers” fighting for the independence of the Republic of Indonesia and having experienced “contemplation” from the various influences of the world’s major ideologies. So when building a sovereign state with the wisdom of the “founding fathers”, we have been successful to put the strong state ideology, namely: “Pancasila”. Pancasila is the five basic principles of the Republic of Indonesia: first, the believe in one God; second, humanity that is just and civilized; third, the unity of Indonesia; fourth, democracy guided by the wisdom of representative deliberation; and fifth, social justice for all Indonesians. The originator or the giver of the name of Pancasila ideology is Ir. Sukarno who had colored the history of Indonesia was the proclamator of the independence of the Republic of Indonesia. The contents of the state political doctrine: first, political sovereignty; second, economic self-sufficiency; and third, cultured personality. According to Istianto (2014), the ideals of “Trisakti” were ever realized through several policies when Sukarno came to power after “The Presidential Decree” in 1959 as the head of state and head of government namely: first, in 1960, Indonesia was out of the United Nations (UN) and established Ganevo as the embryo of the non-aligned movement; second, in 1964, a policy of “nationalization” of foreign companies and also to renegotiate the contract with PT. Freeport, struggling for 50% (fifty-fifty) of the result for the Indonesian government; third, at the same time, Sukarno issued a policy refusing foreign aids with a very famous speech of “Go to Hell With Your Aids”; fourth, in 1963, Soekarno’s policy repatriated the expatriates of Chinese citizens to their country. Some of above policies were the attempts of Soekarno to realize  

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the idea of Trisakti in order that Indonesians could be a great country which would have a political sovereignty and economic independence as well as the personality of the Indonesian culture. However, the new ideas had not been realized because in 1965, a great revolt broke out and rocked the world and it was known as the September 30 Movement of the Indonesian Communist Party (PKI). The tragedy of the killing of a hundred thousand or more people ended the power of Soekarno as the President of Indonesia. In the history books, the tragedy was written by many historians and individuals in various versions according to their political points of view. The discussion of the bureaucratic relations with the ideology described above tries to determine the extent of a state policy based on the ideology carried out by the government leaders influencing the profile of the bureaucracy. Because the era of the present Indonesian Government has reintroduced the doctrine of “Trisakti”. As it is known that the doctrine of Trisakti has reappeared and become well-known in many scientific discussions because of being the main material of the vision and mission of the presidential candidate in the debate held for the 2014 presidential election. The conveyors of the Trisakti doctrine were Joko Widodo and Mohamad Yusuf Kalla, who were the elected president and vice-president of the Republic of Indonesia. Thus, the thesis that can be submitted is the bureaucratic profile substantially influenced by the ideology brought by the leaders of the government. If the elected government leaders are professional and competent as well as having statesmanship, so they will influence the bureaucracy profile. This means that the quality of the government leaders is the primary capital to build a profile of efficient and effective bureaucracy. In turn, when the profile of the bureaucracy has its healthy performance, it will certainly be able to melt back the stagnation of the bureaucracy. Thus, the provision as well as the implementation of public services which are fast, cheap, saving, comfortable, and high-quality can be better achieved. For the next discussion, there will be an explanation of the relationship between the profile of bureaucracy and the government leaders.

The Profile of Bureaucracy and the Government Leaders The development of Indonesian history has certainly influenced the character or the profile of bureaucracy. Therefore, in the context of the development of the bureaucracy, Indonesia also has a long history with characteristics appropriate to the time. It started from the “colonial bureaucracy” during the reign of the Dutch East Indies, the bureaucracy of the Japanese reign, the bureaucracy during the reign of a sovereign government, the bureaucracy in the new order era, and bureaucracy during the reform era. The development of bureaucracy profile in Indonesia has been empirically less encouraging. As it is known that the profile of the bureaucracy of the government has so far been characterized as closed centralized, less responsive to serving the community (people), and the bureaucrats have still been feudal and corrupt. Although in the reform era, there have been some changes in the openness, decentralization, and democracy. But the practice of democracy in Indonesia is still procedural and superficial or “face democracy” (Haynes, 2000). At the time of implementing direct democracy in selecting the public officials for 10 years’ time, the result has not satisfied the public at large. As described above that the public officials as the leaders of the government either nationally, regionally, or locally have a strong influence on forming the profile of the bureaucracy of the government. Based on the fact, the results of the practice of direct democracy of the elected heads of the regions were not more than 10 people which were great and populist. While other regional heads of more than 320 went to jail or were suspected of corruption. Theoretically and conceptually direct democracy  

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is very good and praised and hoped by public and considered able to prosper the people. Foundered when the negative implications have emerged, e.g., money politics, transactional politics, high-cost politics, and social conflicts. The elected regional heads were less competent and professional in managing the government. There was something wrong in the practice of direct democracy, the mistakes included: First, starting from the upstream, the political parties did not perform the function of the political recruitment well but became a power trading (transaction); second, actually, the condition of the people was not free from a political stance as a result of the floating mass period policy during the new order, so the awareness and political education were not normal; third, the people’s political participation was still low but the real politics that happened was mass mobilization; fourth, the majority of Indonesian people still had a strong feudal culture and patronage, so they lacked political and rational independence; fifth, Indonesian people tended to be more emotional than rational and sportsmanlike; sixth, in the context of the election organizers, it was not a public secret that manipulation and vote buying were massive at the district election committee level; seventh, organizing a campaign that had not been efficient and effective. The seven variables above and still many other variables that influenced the occurrence of a negative impact on the results of direct democracy became the anomaly. The phenomenon of the reoccurrence of the polemic between direct democracy and representative democracy is a natural thing in order to find the best solution and the best format to implement democracy in Indoneisa. The political temperature became hot when the regional head elections backed to the system of representation that was supported by the political parties under the red and white coalition in the legislative body for the period of 2014-2019 in a deliberation of the bill of the regional head elections. The explanation of the above mentioned bureaucratic developments from the historical perspective and the perspective of the government leadership, if studied systematically, will be an interesting topic that will be discussed in this paper. Welcoming the new government (from 2014 until 2019) of Joko Widodo and Jusuf Kalla as president and vice president, the Indonesian people will certainly see that the governance will be colored by the policy of mental revolution and the doctrine of “Trisakti”. Therefore, this paper focuses on the discussion of the bureaucratic profile that is being stagnated and dealing with the mental revolution and Trisakti doctrine policies that will guide the mission and vision of the governance in the “Working Cabinet”. Toward the realization of the new steps and hopes, President Joko Widodo understandbly determined his ministers very carefully by asking for clarification from the Corruption and Eradication Commission (KPK) and the Financial Transaction Reports and Analysis Centre (PPATK).

The Development of the Profile of Bureaucracy in Indonesia The above description of the practice of “bureaucracy” from time to time shows that the bureaucracy can be regarded as a science and an art. Bureaucracy as a science is continuously being studied with various researches and scientific discussions or forums at universities so as to produce books of scientific studies of bureaucracy. While the bureaucracy as an art has been practiced since humans began to cooperate in joint activities to achieve the goals. Therefore, the bureaucracy was born in public life which began on the days of the kingdoms until the time of today’s modern states. Studying the development of bureaucracy profile in Indonesia is inseparable with the historical context of the Unitary Republic of Indonesia (The Republic of Indonesia), which has wide areas stretching from Sabang in the Aceh Province to Merauke in the Papua Province. Areas of Indonesia that have been integrated into the Republic of Indonesia in the past largely had a  

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form of kingdom. In the record of history, Indonesia also has a name called “Archipelago” and the name is still often referred to as an Indonesian (national) identity that had ever been triumphant and had become a sovereign empire. Therefore, discussions on “bureaucracy profile” will be associated with the history of the nation and Indonesia. In the context above, so on this occasion, the bureaucracy profile will be described from time to time. By following the thought of Mason C. Hoadley (2006) based on the results of his research on the practice of “state-administration” in Indonesia by allocating the periodization of the development of the state administration, namely: first, the profile of bureaucracy in the “sovereign kingdom”. The profile of bureaucracy in this period can be described based on the latest document in “The Archives of Yogyakarta” (Carey & Hoadley, 2000). The profile of bureaucracy portrayed in this period was when the kingdom had sovereignty in Yogyakarta. In the royal government, the Java government structure dominated by a two-pole bond (kawula and gusti) with a highly centralized system and being bonded (tied) in the tradition of law contained the great values which must be complied by all the people and had existed before the state formed. The profile of bureaucracy during the sovereign kingdom, the relationship between the government leader (King) and the people was very far (kawulo and gusti). The highly centralized system of government demanded the totality of people’s adherence to the predefined rules of the king. Every saying and decree and order of the king were the policies that must be followed by the people. People were very obedient to the king’s commandment and policies and they regarded him as a fair king. Therefore, the leader (king) or the elected leader was a person who was considered as a god and should not be the slightest flaw or blemish in him. Second, during the imperialism from 1816 to 1942, in the period of imperialism or colonialism of Dutch East-Indies, it was the transitional period of VOC (Verenigde Oostindische Compagnie) power in the event of the bankruptcy of the VOC trade mission in 1799 followed by a power that was directly controlled by the Dutch Government. According to Hoadley (2006), “This system was later replaced by the structures and norms that were more adapted to the purpose of the colonial government of the nineteenth century that was oriented to generate money for the Dutch Government”. Differentiation through ethnic exclusivism was done by legislation practically carried out through two different administrative systems. The office of public services of white Europeans, the Dutch East Indies, (Binnenlands bestuurs) was using Weberian bureaucratic paradigm. It was completely different from the native administrative service office (Inlands bestuurs) which was built upon the cosmology of the gentry or nobility bureaucrats. During the colonial administrative system, there were two different public services between white Europeans and the indigenous people. The system of administration of public services toward white Europeans was called “Binnenlands beesturs” using the laws made by the Dutch East Indies Government with the paradigm concept of bureaucracy of Weber. As it is known that the bureaucracy according to Max Weber has some characteristics, among others: First, each apparatus is promoted based on the certain competence and professionalism in every position he is in; second, any government action based on a clear and firm rule seems so stiff; third, the relationship between superiors and subordinates or fellow employees is impersonal; fourth, the bureaucratic organization is highly hierarchical; fifth, the possession of official goods with personal items is separated very clearly. Weberian bureaucratic paradigm yields a more orderly, organized, systematic, and corruption-free public services. Unlike the system of administration of public services for the natives (inlands bestuurs), the governance of the natives by the colonial government was maintained by a government system of nobility bureaucrats.  

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On the basis of the appreciation of the obedience and loyalty toward the colonial government, the nobelities were appointed as “regents and district heads”. The services to the natives based on “the common law” that is the rule based on the daily habits of the local communities. As it was known in the sovereign kingdom, the relationship among the government leaders (king, regent, and district head) was called “Kawulo lan Gusti”. People were submissive and obedient to the commandments or orders of the government leaders. The compliance of the people to pay tribute of the crop to the leaders, based on the emotional closeness of the relationship between the people and their leaders, the habit was allowed to happen to the natives by the colonial government in the system of the administration of public services. Third, during the Japanese occupation from 1942 to 1945, the Japanese Government did not have a document that described the history of the government bureaucracy, because it was the Japanese as the colonialist not giving (without giving) any opportunities to the natives to do the usual activities. The Japanese colonialists did an offensive military aggression, so the people were made frightened and tremendously miserable. Even our parents often tell the extraordinary suffering when our country was colonized by Japan. Our parents ever wore clothes made of gunny sacks full of lice. People were not allowed to store rice and other staple foods. If caught storing the staple foods, they would be seized by the Japanese army. Although the Japanese only colonized 3.5 years, but in that time, the starvation was rampant. Our parents were evacuated from one place to another place. In short, during the 3.5 years, practically there was no government as well as no administration system of public services for the natives. Perhaps slightly positive history was recorded ahead of independence in 1945, some of the people were trained militarily by the Japanese soldiers and later they (the trained natives) formed an organization called “Defenders of the Homeland” (PETA). In the military history, the forming of the Indonesian people army and then changing into the Indonesian National Army, in which Peta was part of the combined elements of society who were armed, for example: the elements of the former KNIL (The Dutch Colonial Army and Its Members) and the Moslem fighters of Hisbullah and others formed “the Indonesian Armed Forces” (ABRI) and now becomes TNI & POLRI. Fourth, the administration system at the time of the Republic of Indonesia, two transitional periods of government bureaucracy, especially during “the sovereign Kingdom” and “the period of imperialism” certainly influenced the efforts to build bureaucracy during the reign of the Republic of Indonesia. According to Hoadley (2006), about the profile of bureaucracy is as follows: The discussion is focused on the issue of how the state administration has been built on a system of colonial administration. The period can be said to be the era of experimentation with integrating the Western administrative structure suiting the reality of the life of the Indonesian people. At the same time, Indonesia became open for the global forces. Because before this, Indonesia had not become a sovereign state, but only a part of the Dutch government department. As one part, the result could be worse or even better. They provided protections to the people of Indonesia when Indonesia had to deal directly with the social transition of the world economy. At the Indonesian national level, it essentially exceeds the format of “centralization” of the traditional country (state) that has ever existed. Because at this time, it is indicated by the presence of a pair of new pseudo-traditional praxes. The observation of Hoadley (2006) is quite keen to see the condition of the transitional period after the colonization. Indonesia has turned into a country which is free and independent to determine its government. As it is known that the Republic of Indonesia is as a sovereign state and by the time of running the government, it will face the theoretical and  

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practical matters. The influence of the two poles between the traditional values of the empire and the colonial administration is faced with the reality of adapting the Western administration which is adjusted to the desires of Indonesian people. The combination of the two paradoxical conditions causes an anomalous profile of the government bureaucracy. On the one hand, applying the rational Western administration as the Weberian bureaucracy, but on the other hand, the bureaucratic apparatuses still have the mentality of nobility or aristocracy, so the authority or power on their positions as if as their own possession and as a source of seeking/getting wealth for themselves and political parties where they affiliate to. In the reign of the old order, KKN (corruption, collusion, and nepotism) were running systematically, structurally, and massively although during the reign of the old order from 1945 to 1959, the system of the government was parliamentary and democratic, but the profile of bureaucracy was still feudalistic. During the reign after the presidential decree of 1959-1967, the system of government was based on the guided democracy and the profile of bureaucracy at that time was more controllable under the direct command of President Sukarno. The system of the government was presidential with the profile of bureaucracy more centralized to the authority and the charisma of the leader of the government as well as the head of the state, Soekarno. In view of the very strong and dominant character of the leadership of Soekarno, actually at that time, Indonesian people were more easily directed in accordance with the leader’s will. If we look meticulously at some of the controversial policies of Soekarno, he was still conducting experiments or proving the Trisakti doctrine he had concepted, namely: political sovereignty, economic self-sufficiency, and cultured personality. The events written in this era actually prove that there is a strong relationship between the profile of bureaucracy and the character of government leader. This means that the profile of the bureaucracy can be a reform agent (a reformer) and a perfect public servant if directed by a strong and character leader in carrying out the state’s missions, therefore a government leader must understand, comprehend, and master the state’s ideology and the direction of the state’s policy. Fifth, the profile of bureaucracy in the new order, when Suharto became a president in 1967, he immediately carried out the cleaning and purifying of the ideology by launching the implementation of “genuine and consistent Pancasila”. In the political field, all elements that smelled “the old order” should be eliminated, including all of the teachings of Bung Karno and of tending to be left-radical and the people who were very close to him. Even Soekarno was exiled in “Yaso house” until his death in 1971, still in the field of politics, Suharto implemented a restructuring policy of the number of political parties from 10 more parties to three parties, namely: PPP (The United Development Party), PDI (The Indonesian Democratic Party), and Golkar (The Functionary Group Party) called a forced fusion. Similarly, the existence of political parties was only at the district level and people were kept away from the political activities or the so-called “Floating Mass” along with the orientation of the development priorities and widely opening for investors at home and abroad as well as foreign loans to finance the development, there should be followed by a renewal in the field of state administration. The policy in the field of bureaucratic apparatus became more intensive to guard the continuity of the implementation of development to be more on target. Therefore, an adjustment demand to the Western structure was a necessity. The introduction of a wide range of innovations in the field of modern management is improved concurrently with the technical assistance as part of a package of foreign loans to the national development. However, the efforts to change the bureaucracy faced a culture that was less appropriate with the  

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demand of the international administration which was more democratic and decentralized. The Javanese culture, which was strong with the great aristocratic style and was still fostering feudalism, gave most of the apparatus important positions in the government structures. In fact, it hampered the process of democratization and decentralization in the governance. The Western culture facing the traditional local demands resulted in the profile of bereaucracy which was closed, centralistic, and positioning themselves as the big and small kings in accordance with their positions, the approach tended to be top-down rather than bottom-up, bossy rather than as public servants, more self-image rather than being close to people. During the New Order Era from 1967 to 1998, the government more prioritized experts in the cabinet, but the profile of bereaucracy was as described above. As it was known that the effort to reform the state administration (administrative reform) was less satisfactory for the people. Even the phenomenon emerging was the acts of KKN which were systematic, structured, and massive among the bureaucratic apparatus. When the top of the iceberg melted in conjunction with the financial crisis in some countries of Asia and also affected Indonesia then resulted in the collapse of the New Order regime which had been in power for 32 years. Sixth, the profile of bureaucracy in the reform era, the reformists intensively made fundamental changes and even in 2000, they amended the constitution of 1945. The result of the amendments was able to provide significant changes in politics. Some fundamental changes were: First, the president and vice president tenure was limited by only two terms; second, the president and vice president were democratically elected by direct election; third, providing reinforcement to the house of representatives, especially in terms of legislation and budgeting; fourth, setting up new institutions, namely the Constitutional Court (MK) and the Regional Representative Council (DPD). In the reform era, since 1998 up to the present, the reformists have made changes to respond to the demands of Western structure and international administration which are democratic and decentralized. In principle, the changes (amendments) of the laws in politics and government have been supporting the democratization and decentralization. The objective of democratization and decentralization is an attempt to get closer to the interests and aspirations of the people that have been considered being gaps and discriminatory. The reinforcement of the laws against the disclosure of public information and public services is also an attempt to improve the image of bureaucracy which is more responsive toward the aspirations of the people. Therefore, the profile of bureaucracy in the reform era has begun to be open, responsive, democratic, and close to the lower strata/levels of people (grassroots) whom they have so far thought of being taboo. Changes in the government have begun to bring results, namely the emergence of populist figures as government leaders who are close to the people and from small towns/regions/villages. And even there has spectacularly been a president. Although the emergence of populist figures from small towns/regions/villages has so far been a small number (not so many), it has become the embryo that is rolling toward the leadership consolidation more perfectly. The great and excellent figures such as Joko Widodo (Jokowi) as a president, Ganjar Pranowo as a Governor of Central Java, Basuki Tjahaya Purnama (Ahok) as a Governor of the greater Jakarta, Risma Trimaharini as a Mayor of Surabaya, Nurdin Abdullah as a Regent of the Bantaeng, Ridwan Kamil as a Mayor of Bandung and so on are the evidences of the results of the process of democratization and decentralization. Thus, it becomes an additional note in the study of the state administration that the organizers of the public administration or public officials who are empirically qualified are able to overcome the “bureaucratic stagnation”. This means that the government leaders are the keys to making changes and innovations in the public administration, especially in facing the malpractice of administration or the stagnation of bureaucracy.  

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Bureaucratic Stagnation Versus Mental Revolution and Trisakti Doctrine: Opportunities and Challenges As it has been explained above that the profile of the bureaucracy will follow and be influenced by a country’s ideology and policy that have been outlined in them. Therefore, in the context of the plan to form a new administration, the President of the Republic of Indonesia, Ir. Joko Widodo and the Vice President M. Yusuf Kalla for the period of 2014-2019 have launched or proclaimed the mental revolution and Trisakti doctrine as the state policies. Of course, the “bureaucracy profile” will become a trade mark of the experimentation of the policies of mental revolution and “Trisakti doctrine”. The policy of “mental revolution” is an effort toward the total changing of the Indonesian people, especially the leaders on the attitudes, behaviors, actions, and ways of thinking to the problems of the state and nation of Indonesia which is undergoing a multi-dimensional crisis. For example, the profile of government bureaucracy is being stagnated in performing the functions of public services which have the impacts on the people at large: First, many poor people who are sick get less attention; second, many unhealthy and slum houses in big, medium, and small cities in Indonesia; third, the scarcity of public spaces in the cities and villages for the people who want to relax; fourth, most of the growth of the cities in Indonesia is disorderly and results in uncomfortable environments; and fifth, poor basic infrastructure such as roads and irrigation, resulting in high costs of transportation and food needs. Therefore, if the mental revolution is able to change the mentality of the government leaders toward the behaviors of being polite, friendly, unpretentious, honest, and professional, undoubtedly, the government will be able to cut off the bureaucratic stagnation. The attempt to elucidate comprehensively each item of “Trisakti doctrine” to realize the political sovereignty of the state and government needs prerequisites: first, creating a stable political stability; second, building the high political participation of the people; third, the government has a strong public legitimacy; fourth, the government has a strong role in the international association stages; fifth, the government has a high bargaining power against the developed countries; sixth, the high political consciousness of the people; and seventh, a high supporting sense of the nationalism and patriotism from the people, if the seven prerequisites can grow and develop positively, the political sovereignty will be realized. And building “economic independence” requires prerequisites, namely: First, the state and government have a strong role in making the regulations, doing the “allocations”, distributions, and stabilization of resources widely and evenly to the public; second, being able to build food sovereignty; third, the national economy has a high competitive position; fourth, realizing the love of domestic products by the people; and fifth, the government has the ability to control the economic chains from upstream to downstream. If the five preconditions realized, the economic independence can be well achieved. Then building “the personality and culture” needs prerequisites: First, the leaders at all levels should have “a strong statesmanship”; second, the people are able to build the strong values of morality; third, the government is able to implement the program of nation and character building which is well-planned, programmed, and organized; and fourth, building a tradition of populist leadership. As described above, the prerequisites to realize the doctrine of the “Trisakti” are difficult to achieve, although the prerequisites have a high value of idealism, but as a country that has a goal and spirit of the proclamation should be supported by all the potential of the nation. Similarly, the support of the governent itself through the “red tape” needs to be done in order to build the government bureaucracy which is better

 

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(excellent) and corruption-free. Therefore, the “bureaucratic profile” which is effective will support the success of the doctrine of “Trisakti” in the governance in order to achieve the prosperity and social justice of the people: first, the profile of democratic bureaucracy; second, transparency, accountability, and responsiveness; third, being democratic to the bottom level, public services are oriented to the grassroots; fourth, the bureaucrats are the public servants who are human not robotic; and fifth, the profile of bureaucracy belonging to the “working cabinet” will be successful if it is supported by the strong government leaders who have the strong legitimacy and statesmanship. As explained above, the bureaucracy and government leaders have a positive correlation. Joko Widodo and Yusuf Kalla elected as the president and vice president for the period of 2014-2019 are the populist figures and have a strong commitment to results oriented government (result-oriented) as well as practical thinking which is effective and efficient. Therefore, the populist leadership style and public servants as well as being results-oriented are able to change the bureaucratic performance optimally. Some of the strengths of the working cabinet as mentioned above, namely: first, the populist leadership; second, the strong commitment and integrity; third, the supports of the people are significant from either the polital supra-structure or political infrastructure; and fourth, having the concept of the personification of the strong national ideology with the “Trisakti” doctrine. The four strengths are great potential to consolidate power toward the improvements and changes in all sectors in the pursuit of the “opportunities” and “goals” to build political sovereignty, economic independence, and cultured personality. Then, the weaknesses of the working cabinet among others: First, the support of political forces in the parliament is not optimal yet and popularly known/called as “fit and limited”; second, the concept of “Trisakti” doctrine is still in the realm of idealism which is in paradoxical condition to the reality; third, the working cabinet ministers still reap the pros and cons from the people, because they cast doubt on many of them (the ministers), the economic ministers are considered weak, there are some ministers having a pale-yellow record (corruption-suspected) from KPK; fourth, the support of bureaucracy is still weak because there is still a lot of bureaucratic stagnation in various government agencies; and fifth, the global environmental conditions that are less conducive to the economic, political, and cultural aspects. Then, some “threats and challenges” identified are faced by the “Working Cabinet” in the governance and development in the tenure of his presidency, as follows: first, the ideological aspect, as if the Indonesian people have forgotten the ideology of Pancasila in the implementation of their daily lives. For example, many systematic structured and massive practices of corruption, collusion, and nepotism, as if they were not watched by God; second, in the political aspect, the spread of money politics, money-around politics (all about money politics), transactional power, anarchy in politics, the practice of democracy is still procedural or democracy only belongs to the elite, it has not been able to provide the welfare for the people, the conflicts of the executive and the legislative tend to be latent; third, in the economic aspect, the inequality of the people’s income is getting sharper and higher, the Gini ratio has reached the point of 0.4, the GNP (Gross National Product) just reached 3,500 US dollars, the influx of foreign products both primary and secondary goods, the dependence on the foreign markets is high, the external (foreign) debts are still a burden on the state budget, the higher the budget deficit, the economic growth is relatively getting down (5.6%), the food sovereignty is increasingly fragile; fourth, the social aspect, the fading sense of the social solidarity is increasing, the social conflicts often occur with a variety of backgrounds such as arable land disputes, fights between people, and religious conflicts still often happen; fifth, the cultural aspect, the character building is getting weaker, the value of unity, patriotism and statesmanship are increasingly fading away, the identity as a nation is getting weaker, the lack of  

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love of the domestic products, the strong cultural influences from outside are getting higher, the pornographic influences are getting greater; sixth, the security aspect, the sense of security of the people is getting lower, more uncontrolled drug trafficking, more sadistic criminal acts; and seventh, defence aspect, alutsista (the primary tools defence system) conditions are inadequate if compared with the geostrategic and geopolitical developments which are rising, the annexation from outside is still going on, the condition of the outer islands and border areas is still concerned. The four main aspects that have been identified above, namely: the aspects of the strengths, weaknesses, opportunities, and threats or challenges. These aspects are the analytical tools that can comprehensively explain the success of the thesis prediction of the “Working Cabinet” in the Jokowi’s administration (2014-2019). The thesis of “Trisakti” doctrine is the welfare and prosperity of the Indonesian people that can be realized toward a strong, superior, modern, and great country which is able to bulid political sovereignty, economic independence and personality of a civilized nation. When the four aspects are examined, one of the threat or challenge aspects is greatly potential and dominant, therefore, if the strengths and opportunities are less effective in the process of the implementation of governance and development, it will tend to fail to achieve the goals of “Trisakti” doctrine. On the contrary, if the strength aspect can be optimally driven, for example: First, the populist leadership is able to mobilize and raise the awareness and political participation of the people to support the government policies; second, the results-oriented leadership (mission-driven and result-oriented government), David Osborn and Ted Gaebler (1992) are able to realize the government’s policies on target; third, the practical-thinking orientation on the effective and efficient basis is able to develop the government’s policies optimally; fourth, monitoring the implementation with the “blusukan strategy” is able to reduce the mismanagement and distortion at the operational level; fifth, Jokowi as an agent of reform in bureaucracy reform is able to build the trust of public and improve the public services widely and evenly. The five operational strategies out of many other strategies which are owned by the leadership of Joko Widodo and Jusuf Kalla will give the optimistic hope for the success of implementing the “Trisakti” doctrine as already elaborated into several dimensions of operational policies above, namely: political sovereignty, economic independence, and cultured personality which can surely be carried out in accordance with the possessed leadership ability and wide-open opportunities. The explanation above is in regard to the new hope that has been awaited by the Indonesian people and has been offered by President Joko Widodo. On the other hand, it will face the bureaucratic stagnation. But when the SWOT (Strenght Weakness Opportunity Threat) analysis is done, it will give the optimistic hope, which is to carry out the policy of the “mental revolution and Trisakti doctrine”. Despite the biggest obstacle or challenge is on the political aspet because of the weakness of the supporting force of the “working cabinet” in the parliament, but if the ministers have the strong supports to him and have the characteristics as their president’s such as: a lobbyist, an excellent political communicator, they will undoubtedly overcome the political obstacles well. The political problems can be well resolved if the conflicts between the legislative and executive bodies will not be wild (worse) and the economic climate will surely be more conducive. If the political and economic problems can be well controlled by all the potential of the “Working Cabinet” of Joko Widodo’s government, his government will be safe until the end of his term. The facing of the bureaucratic stagnation is also a great barrier for Joko Widodo’s government, but the way of “blusukan”, Joko Widodo’s typical style can be a role model for his ministers who are expected to be able to push the bureaucratic services faster or at least on time and more responsively.  

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Conclusions Based on the above description, it can be concluded that: First, the profile of the government bureaucracy has a relationship with the ideology and policy of the state; second, the bureaucratic profile is also influenced by the leadership style of the government; third, the history of the bureaucracy in Indonesia from time to time has the characteristics that each is different, but they still have the same essence, which is the profile of the Indonesian bureaucracy which still has a strong influence on the feudalistic style, this condition has contributed to the bureaucratic stagnation; fourth, the connections among the profile of bureaucracy, the mental revolution policy and the Trisakti doctrine are the political sovereignty, economic independence, and cultured personality which are able to build the profile of bureaucracy which is open, accountable, responsive, public-services oriented, grassroots-democracy oriented (top-down democracy oriented), no gaps oriented. The government leaders should have the competency of the strong leadership so as to be able to overcome the bereaucratic stagnation; fifth, Joko Widodo’s and Jusuf Kalla’s administration based on the SWOT analysis has stronger potentialities than its weaknesses. Though the adequately sizeable obstacles and threats on both the political and economic aspects, it has the great opportunities to implement the policies of the mental revolution and the Trisakti doctrine successfully; sixth, Joko Widodo and Jusuf Kalla each has a distinctive character of leadership that can be a role model for his ministers so as to be able to overcome the bureaucratic stagnation.

References Almond, G. A., & Coleman, J. S. (1960). The politics of the developing areas. Princeton, N.J.: Princeton University Press. Carey, P., & Hoadley, M. C. (2000). The archive of Yogyakarta. Oxford: Oxford University Press. David Osborn, D., & Gaebler, T. (1992). Reinventing government: How the entrepreneurial spirit is transforming the public sector. New York: Addison-Wesley. Haynes, J. (2000). Democracy and civil society in the third world: Politics and new political movement. Cambridge: Cambridge University Press. Henry, N. (1975). Paradigms of public administration. American Society for Public Administration. Hoadley, M. C. (2006). The Indonesian state administration. Quovadis, Yogyakarta: Yogyakarta Press. Istianto, B. (2011). Democratizing bureaucracy. Jakarta: Mitra Wacana Media. Istianto, B. (2014). The vague potrait of Indonesian politics. Jakarta: Mitra Wacana Media. Mas’ud Said, M. M. (2007). Bureaucracy in bureaucratic state. Malang: Muhammadiyah University Press. Priyo, B. S. (1993). New order government administration beraucracy, structural and cultural perspective. Jakarta: PT. Raja Grafindo Persada.

 

Journal of US-China Public Administration, December 2014, Vol. 11, No. 12, 973-980 doi: 10.17265/1548-6591/2014.12.003

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Customizing English Language Program for EFL Learners Abdul Halim Ibrahim, Khalid Ismail, Abdul Halim Ali Universiti Pendidikan Sultan Idris, Tanjung Malim, Malaysia

Philip Wee UCSL, Kuala Lumpur, Malaysia This paper discusses the importance of having a customized instructional approach specifically for students who are learning English as a Foreign Language (EFL) in the foreign language setting. Most of the innovations introduced by the Education Ministry of Malaysia such as the Communicative Language Teaching (CLT) and phonics are suitable for ESL (English as a second language) learners, while the EFL learners are still left behind. A suitable teaching approach which customizes the needs of the students in EFL setting, especially in the state of Terengganu should be introduced. The main focus of the program exploits reading and writing skills in providing language input since these two skills are more dominant in terms of utility and functions among the EFL students as compared with the ESL students who are enable to exploit speaking and listening skills because of the natural setting. The research investigates the prospect of developing a suitable language teaching program based on 10 basic sentence patterns (10SP) which are exploited through the principles of transformational generative grammar and customized learning experiences focusing on reading as a bridge in acquiring other language skills such as writing, listening, and speaking. Keywords: language learning settings, linguistic cues, sequencing input, sentence patterns

Choosing one teaching strategy to suit all students from various backgrounds is bound for failure, because students are individuals with a lot of differences and studies have shown that students respond to teaching strategy in different ways, the same strategy can be accepted, refused, or ignored by the same or different groups of students in different situations. In Malaysia, the Ministry of Education provides one English language syllabus for all teachers to follow, one textbook for the whole population (e.g., Year 1) to use, a suggested teaching approach for teachers to apply and usually teaching is monitored by the education district officers. The practice has not contributed much to the improvement of English language achievement among EFL (English as a Foreign Language) students in the rural areas, even though the students in ESL (English as a second language) setting especially in the urban areas benefited from it. It can be concluded, innovations made by the

Corresponding author: Abdul Halim Ibrahim, Ph.D. (TESL), Universiti Pendidikan Sultan Idris; research fields: second language acquisition, reading skills, and pedagogical grammar. E-mail: [email protected]. Khalid Ismail, Ph.D. (accounting), Universiti Pendidikan Sultan Idris; research fields: management and economics. E-mail: [email protected]. Abdul Halim Ali, Ph.D. (Malay Literature), Universiti Pendidikan Sultan Idris; research field: contemporary Malaysian literature. E-mail: [email protected]. Philip Wee, M.Ed. (TESL), UCSL; research fields: reading skills and second language acquisition. E-mail: [email protected].   

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ministry so far have only benefited one group of students but have neglected majority of students who are in the EFL setting especially in the rural areas.

Problem Statement Malaysian students in the rural areas who are learning English in EFL setting have very poor command of English language. Their recognition of linguistic cues and ability to construct sentences and phrases such as noun phrase are still very problematic. Ibrahim and Mohamed Nor (2011) reported that the reading skills of majority students in the rural areas were below their grades because they had poor recognition of linguistic cues such as phrases and clauses even though their command of vocabulary was good. The inability to recognize linguistic cues such as phrases, clauses, and sentences levels caused difficulties in processing meaning at discourse level, especially when long or complex sentences were being used in passages. Hence, the majority of students in Year 5, Form 1, 2, and 4 were unable to read textbooks provided by the Malaysian Ministry of Education because of high readability levels. In addition, Ibrahim and Abu (2009) reported that many Malaysian students faced serious problem in producing and understanding sentences. In a study on 600 rural/urban lower secondary students, they observed that students were unable to construct simple sentences and forming questions. They believed that the problem was attributed to the fact that teachers did not address grammar such as sentence construction and recognition of knowledge of linguistic cues in their lessons but rather focused on topics which suit the ESL students.

Customizing Lessons and Instructional Materials The Malaysian Government has spent a lot of money in introducing new teaching innovations like the communicative approaches to improve instruction and learning, but the effectiveness of the innovation is very limited and benefits only the ESL students in the urban areas while high percentages of ESL students in the rural areas are still left behind. Customized instruction should be introduced to suit the majority of the students in Terengganu and local authority must take the responsibility for implementing new innovations. The state of Terengganu has provided students with personal computers, a very positive step forward in customizing instruction specifically for the students in Terengganu. Computer is a powerful learning tool and should be fully utilized by introducing suitable approach to customize learning among the students. Teachers are very important in determining the success of any innovation. Teachers should be encouraged to perform their task without being stressed or forced, but sadly teachers are being burdened with a lot of teaching time and managerial or clerical works which made them exhausted, unable to be creative in planning their lessons. It is important for local authority to intervene by hiring external experts to give teachers a helping hand by introducing new ideas and to lessen the burdens of teachers. Innovations which utilize internet as the source of teaching are very feasible in Terengganu since many of students possess a computer. Free resources from the internet can be exploited without much cost if only teachers are trained to customize their materials from the internet. They only need a little help, people who can show them how to exploit resources such as ebooks, audio books, video clips, and application such as Google apparatus in customizing their lesson which will determine learning among their students. Competencies of teachers in customizing their lessons are by developing their own learning materials for their students. Customizing their teaching to suit individual differences is very important in ensuring learning in the classrooms. The ability of teachers in providing salient input, which is customized to the needs of the  

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students in EFL setting is very important, because teachers are the only source of exposure to the language. In customizing, teachers must be able to make selection of relevant reading texts, speaking stimulus, listening texts (similar to reading), and writing stimulus (similar to speaking), and process them to suit the target students. The fundamental objectives of teaching English in EFL setting must be on the acquisition of sentences which is the central knowledge of language. Teaching of sentence construction requires teachers to plan their lessons in way that students learn to construct a full sentence or parts of sentence such as phrases and clauses, and topics should be used to grade the language units in the lessons. In addition, lessons should also include acquisition of vocabulary.

Learning Settings Second language learning can occur in three settings: (1) a natural setting where second language (L2) is used normally for everyday interactive purposes, just like the L1, there are no failures when learning takes place in a naturalistic setting; (2) second language setting (ESL), environment where English is the main language and students learn formally in the classrooms and informally outside the classrooms; and (3) a foreign language setting (EFL), students learn and use English only in the classrooms. In the EFL setting, there is no support from the environment that permits students to use the L2 purposefully in a natural interactive communication, thus teachers play a very important role in determining the success of learning by providing salient language input. In the Malaysian context, students come from mixed language backgrounds and are being exposed to the English language in different ways; the urban setting has higher similarity to the ESL setting where students have a lot of support from the environment especially in the use of L2 in interactive communication outside their classrooms. This enables the students to practice and improve their language, especially through conversational interaction. The rural setting on the hand is similar to learning of L2 in a foreign language setting (EFL) which limits students’ exposure to the input provided only by the teachers and the opportunities for natural use of the language such as conversation is constrained only with teachers through classroom and textbook experiences. With different quality of exposure to the target language (TL), urban students normally have richer language input as compared with rural students and these differences affect the rate and route of learning English as a second language. In addition, students from different settings employ different learning strategy (Ibrahim, 2009), for example, the ESL students are immersed in the language setting and employ listening as a receptive skill and speaking as a productive skill while EFL students are not able to utilize these oral/aural skills. As a consequent, teaching an L2 the same way as L1 (e.g., communicative approach) is like submerging the EFL students in learning how to swim: swim or sink, learn or fail. It is obviously agreeable that approaches such as the communicative and phonics approaches are suitable for Malaysian students in the natural and ESL settings but they are not suitable for students in the EFL setting. Learning an L2 in the EFL setting invites many constraints as compared with the natural or ESL setting. Jiang (2000) suggests two important constraints which are: (1) the poverty of input; and (2) the presence of an established conceptual/semantic system with an L1 lexical system. Language learning in naturalistic environment provides rich contextualized input, but EFL learners often lack sufficient contextualized input, which makes L2 learning difficult because there is no integration among semantic, syntactic, and  

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morphological specifications about a grammatical unit (e.g., word) to provide concrete information to the lexical entry of that word. In addition, an established semantic system or prior L1 knowledge may discourage meaning extraction and L2 learners may tend to rely on this system which may cause fossilization or reach a stage where learners unconsciously stop perfecting their L2 or are unable to fix ingrained errors due to the false rules becoming permanent. This constraint prevents many L2 learners from achieving complete L2 language development, because they memorize grammatical items or choose to use L1 translation which may prevent understanding and acquiring meaning as well as other properties of the word. The issue of what is the positive input for the EFL learners in learning grammar may not be the same as those of ESL learners. Selecting a suitable approach in providing positive input and to increase exposure to a target language in the development of an L2 competence is a challenge for any language teachers. In countries, where decision-making is centralized, it takes a strong commitment from local authorities, to decide what best for their own community. Thus, it is high time for the state government to evaluate whether the approaches adopted by the ministry are the right choice for the students in Terengganu, for example, the communicative and phonics approaches are both adopted from the natural and ESL settings which may only benefit students in the urban areas.

Second Language Learning Model Gass’s SLA model (1985) proposes a cognitive model of second language acquisition involving a six-step process: input, apperception, comprehension, intake, integration, and output. The process of language acquisition occurs in six overlapping stages but distinguishable sets of processes. Firstly, not all input is perceived by the learners, only selected aspects of the input are comprehended and considered as intake for further processing for learning. Through the processes of hypothesis formation, testing, modification, confirmation, and rejection, the intake may subsequently be integrated into the developing system. Finally, learners selectively use their developing system in their output. The output process is not only a product of learning, which is an active component in the overall acquisition processes. In teaching, the apperception of grammatical units is the first most important step in determining a successful teaching and learning program. To ensure apperception, input has to be made salient through a planned process which can be arrangged in three parts: show, do, and apply. Before the show part, teachers need to select the grammar items through a process of grading, sequencing, determining prerequsites, selection of materials, selection of techniques of presentation, and evaluation. In grading, for example, Myers-Scotton’s 4M Model (1999) suggests that lexical words are more salient than structure words, Pienemann (1984) suggests that word order of simple structure should be mastered before the complex ones, Ibrahim (2009) suggests there is a difficulty order of copula be and auxiliary be in sentences which can be graded based on the complexity of their strutcures.

Grading Instructional Materials Grading of grammatical units helps teachers to determine difficulty order of grammatical items and also their prerequisites. This knowledge helps teachers to select suitable instructional materials which are relevant in providing language experiences for the students. Miller (1995) suggests that learning materials can be categorized into three types: independent, instructional, and frustrational materials. Not all instructional materials are instructional in learning sense. Firstly, independent materials require no instruction and students  

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can recognize and understand them on their own, for example, for extensive reading books and enrichments. Independent materials are suitable for teaching generic skills such as higher thinking order because students are able to comprehend and therefore would be able to react on them such as evaluating the text. Secondly, instructional materials are materials that can be used to teach or show new contents, for example, certain phrase or sentence strucures. These specific targeted grammatical items must be the new item which is specified in the learning objective and usually the most difficult in the text, thus requires instruction from the teachers. Thirdly, frustrational materials are materials which students will not be able to understand, no matter how hard the teacher tries to teach, for example, in a reading lesson, teacher chooses a text of high readability index and consequently ends up translating the whole text, which defeats the whole purpose of teaching reading skills. The stages of teaching require students to practice and a test to evaluate how much has been learned. When the students are ready (tested), they need to apply the grammatical items in real life situation. In application stage, teacher can evaluate the success of the lesson (e.g., the quality of show, do, and apply stages) and suggest new language contents for the next lesson. Figure 1 shows the process of providing salient input which overlapps show and do stages, which focuse on recognition of grammatical units by integrating all language skills, a very important stage for further enrichments.

Ten Sentence Patterns (10SP) Grammatical terms can be very confusing, redundant, and problematic which many teachers want to avoid, one reason why many teachers do not like to teach grammar explicitly and leave grammar entirely, and if they were to teach grammar, they only focus on the simple grammar rules. For example, relative clause, adjective clause, subordinate clause, and dependent clause can refer to the same grammatical units, besides teachers find very difficult to explain why certain relative pronouns, e.g., whom or who should be used, or when a is referred to an article or a determiner, or should noun phrase be referred as subject, object, or complement, or whether it is in the subjective, accussative, or dative cases, or whether teacher should consider future tense as the third tense in teaching the aspects of the verb, since English does not have future tense, even though there are many ways of talking about the future. English grammar is full of irregularites which makes it difficult for teachers to explain. Additionally, grammar is a very big area of study, therefore, it is impossible for teachers to teach everything, as a result determining what is relevant for teaching is very imporatnt and will be very beneficial, if teachers can focus on reliable grammar prototypes that help students to generate simple grammatical units and transform them into complex grammatical units based on certain principles such as generative and transformative grammar. The process of generating and transforming helps the students to acquire the skills of hypothesis formation, testing, modification, confirmation, and rejection which enhance the system of L2 acquisition. The grammatical prototypes, for example, the sentence patterns (SP) will be the main focus of teaching objectives which act as the core syllabus of teaching grammar. Focusing on SP enables teachers to plan their lessons and prepare resources economically. As a results, teachers can prepare their teaching materials which would be easily shared among themselves. For example, in teaching SP1 (NP + be + NP), the choice of selecting an NP will depend on the level of the students and if one set of materials is not suitable for one group then it can be used with other groups that meet their needs.

 

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The time of teaching of rules/grammar will be minimal because all the 10SPs apply the same principles—generative and transformative. These similar principles can be applied from the first SP to 10th SP, so teachers can expect that by the time they reach half of the SPs, students would have understood the grammar and would be able to apply the principles in constructing sentences and utterances on their own. The acquision of these principles would empower students and make them more confident in using the language. The generative principle enables the possibilities of sequencing, the sentence patterns and transformative principle and provides the learners with the tools of changing the language from large to small and vice versa. All lessons are organized in such a way that these transformative and generative principles will be integrated in all language skills such as reading, listening, speaking, and writing as shown in Figure 2. Implementation of the 10 sentence patterns (10SP) using materials is provided by consultants from UPSI (Universiti Pendidikan Sultan Idris). The teachers will be trained with methods and techniques of teaching 10SP adopting action research model of instruction. The 10SP syllabus will be exploited explicitly through three stages: (1) proper explanation and practices; (2) recognition and discrimination in reading; (3) question and answer activities; (4) retelling the text; and (5) writing. The 10SP in teaching of English Language is: (1) NP + be + NP; (2) NP + be + AdjP; (3) NP + be + PreP; (4) There + be + NP + PrepP; (5) SV (Adv); (6) SVO; (7) SVO (Adv); (8) SVOdOi; (9) SVOdOi (Adv); (10) Passives and Modals. 10SP introduces all grammatical units and empowers students with the skills of generating and transforming principles of English as a second language. The transformative principles allow students to perform skills such as questioning Yes/No, Tag, Whq, active-passive, subordination and generating larger language units such as compounding, noun phrase (adjective and adjectival) and verb phrase (verbs and adverbials). The generative principles allow students to generate basic grammatical structures to the complex units such as complex noun phrases, adverbials, and long cumulative sentences. These two principles enable students to apply soft skills of second language acquisition by hypothesis formation, testing, modification, confirmation, and rejection into their L2 development system.

 

 

Recognition in Reading • SP1 • Principles and rules

10 SP

Recognition in Listening • SP1 • Wh-q and answers • Evaluation

• SP1 • Listening & reading • Parsing

Language Forms and Functions • SP1 • Wh-q and answers • Cosolidation

• SP1 • Parsing • Reinforcement

Production in Speaking

Production in Writing

Figure 1. The process of providing salient input.

Reading

Speaking

Communicative Activities

Writing

Listening

10 SP

Generative & Transformative Principles

Figure 2. Integration of language skills in the acquisition SP.

 

• Production • Application • Communicative activities

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References Chomsky, N. (1986). Knowledge of language: Its nature, origin and use. New York: Praeger University Press. Ellis, R. (2006). Current issues in the teaching of grammar: An SLA perspective. TESOL Quarterly, 40(1), 83-107. Grabe, W. (1986). The transition from theory to practice in teaching reading. In F. Dubin, D. E. Eskey, and W. Grabe (Eds.), Teaching second language reading for academic purposes. Reading, M.A.: Addison-Wesley. Greenbaum, S., & Nelson, G. (2002). An introduction to English grammar (2nd ed.). Great Britain: Pearson Education Ltd. Ibrahim, A. H. (2009). English morpheme acquisition order of Malay secondary school students. Ph.D. thesis. UPSI. Ibrahim, A. H., & Abu, A. G. (2009). Construction of English grammar syllabus: Focus on the construction of simple sentences. UPSI Unpublished Research Report. Ibrahim, A. H., & Mohamed Nor, M. (2011). Students and teachers’ practices in the teaching of reading skills. Malaysian Journal of ELT Research, 7(2), 148-190. Jiang, N. (2000). Lexical representation and development in a second language. Applied Linguistics, 21(1), 47-77. Klammer, T. P., Schulz, M. R., & Volpe, A. D. (1999). Analyzing English grammar (4th ed.). New York: Barnes & Nobles. Long, M. H. (1985). Input and second language acquisition theory. In S. M. Gass and C. G. Madden (Eds.), Input in second language acquisition (pp. 377-393). Rowley, M.A.: Newbury House Publishers. Long, M. H. (1996). The role of linguistic environment in second language acquisition. In W. C. Ritchie and T. K. Bhatia (Eds.), Handbook of second language acquisition (pp. 413-468). San Diego: Academic Press. Mager, R. F. (1997). Making instruction work. Atalanta: The Centre of Effective Performance Inc. Miller, W. H. (1995). Alternative assessment techniques. Reading and writing. San Francisco: Jossey-Bass. Pica, T. (1983). Adult acquisition of English as a second language under different conditions of exposure. Language Learning, 33, 465-497. Pienemann, M. (1984). Psychological constraints on the teachability of languages. Studies in Second Language Acquisition, 6(2), 186-214. Rumelhart, D. E. (1977). Toward an integrated model of reading. In S. Dominic (Ed.), Attention and performance. Hillsdale, N.J.: Lawrence Erlbaum.

 

Journal of US-China Public Administration, December 2014, Vol. 11, No. 12, 981-994 doi: 10.17265/1548-6591/2014.12.004

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PUBLISHING

Thought and Practice of Cultivating Young Talent in China From 2002 to 2012 Wu Xia, Tang Bin, Luo Hongtie Southwest University, Chongqing, China The goal of building a well-off society to benefit the majority of all people, and undertaking national construction and development, need more young talents to play intellectual role and show business skills. So Hu Jintao and Communist Party of China (CPC) put a large number of thoughts and practice of cultivating young talents. This paper consists of three parts: the thoughts of cultivating young talents, the practice of cultivating young talents, and the conclusion. The quantity and quality of training young talents have improved by leaps and bounds through these thoughts and practice. The young talents who get the attention of the world and contribute their due share to the development of the world have become a group. So the thought and practice of cultivating young talents are not only the wealth for China, but also the important wealth for the whole world. Keywords: young talent, cultivate, Communist Party of China (CPC), building a well-off society in all-round way

Definition of a well-off society, with Deng Xiaoping’s sentence and simple words, is: To make the distribution of national income to benefit all people, not too rich man, nor too poor people, life in general better, what is more important is that GNP (Gross National Product) can enter the ranks of the countries which have more than one trillion US dollars at that time.

Based on the national conditions of China, looking to the development trend, the Communist Party of China (CPC) has even written “well-off society” into the conference report, to become a new target of party development. Since the 16th Party Congress, the CPC Central Committee with Hu Jintao who as the core of collective leadership, focusing on the new features of the times, the new changes, new problems, on homeopathy proposed new perspectives which contain the ideas, new theories, and new theoretical systems of young talent. And on this basis, in close with the connotation of a well-off society, CPC has actively practiced the strategy which would benefit efforts to build a higher level socialist society. This society will be more comprehensive and more balanced development from the economic, political, and social development. The goal 

The paper is supported by “The National Social Science Funds” (2011 & ZD069), “The Fundamental Research Funds for the Central Universities” (SWU1409304), and “Humanities and Social Science Research Funds in Education Commission of Chongqing” (14SKZ06). Corresponding author: Wu Xia, Ph.D., lecturer, Institute of Marxism, Southwest University, China; research fields: ideological and political education, psychological education, and talent education. E-mail: [email protected]. Tang Bin, Ph.D., lecturer, Institute of Marxism, Southwest University, China; research fields: ideological and political education, talent education. E-mail: [email protected]. Luo Hongtie, professor, doctoral tutor, Institute of Marxism, Southwest University, China; special allowance by the State Council, academic committee member in the National Research Council of Ideological and Political Education, executive vice president in China Talent Research Society; research fields: ideological and political education, talent education. E-mail: [email protected].

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of building a well-off society to benefit the majority of all people, and undertaking national construction and development, need more young talents to play intellectual role and show business skills.

Thought of Cultivating Young Talents in CPC During the Period of Building a Well-Off Society in All-Round Way With the new changes in the international and domestic development, collective leadership with Hu Jintao increasingly emphasizes on the role of young talents, and pays attention to the discovery, training, selection, and evaluation of young talents in the whole process. According to the change of era and the new features of young talents, they have proposed the rich thoughts of young talents. Scientific View of Talent “Adhere to the principle of morality and ability integrity, and make character, knowledge, ability, and performance as the primary measure of talent”. In Conference of National Talent Work in 2003, Hu Jintao systematically explained the theory of talent, and specifically clarified a new standard of talent. He said: To adhere to the principle of morality and ability integrity, and make character, knowledge, ability and performance as the primary measure of talent, we should have eclectic selection of talent, and not have restrictions in educational background, title, seniority, and identity. (Important literatures since the 16th committee, 2005, p. 575)

This standard defines talent pro and con. On the obverse side, talent should have the knowledge, ability, and basic qualities. On the reverse side, the measure system of talent should not simply focus on one factor of educational background, job title, qualification, and identity. This new standard of talent puts forward important development of growing up of young talent. Firstly, morality is the core factor of young talent. Only to establish a correct world outlook, outlook on life and values, and have a good social ethics, professional codes of conduct, family virtues and individual morality, youth may have the chance to be talent. So morality is the premise character of talent. Secondly, young talent should pay attention to get a variety of knowledge, both theory and practice. Youth must learn and absorb knowledge to enhance their self-qualities. So knowledge is the condition of the growth of young talent. Thirdly, the youth must practice closely. Only to put knowledge and quality of their own into practice, youth have the chance to constantly upgrade and improve their ability, and transfer their knowledge into the ability to serve the community. So transforming knowledge into ability is the most key part of the growth of young talent. Finally, under the guidance of good morals, in the role of their knowledge and ability, youth must make contribution to social development, and achieve certain results which are the basis for future development. So in practice, to have new and greater achievements constantly is the ultimate destination for young talent. “The idea must be firmly established in which everyone can be taught to talent”. The view which is everyone can be taught to talent was put forward by Hu Jintao in Conference of National Talent Work in 2003. Hu said: We should firmly establish the idea that everyone can be taught to talent. The great cause of socialism with Chinese characteristics creates a vast world for each individual development. To promote the comprehensive development of man, we should practice policy measures in favor of the growth of talent, and create a favorable structure, mechanism, and environment of growth of talent, which could inspire potentiality and play value in each individual youth. The view must be established which is both youth with wealth of practical experience and skills and youth with higher level of knowledge and innovation are talents. We should create a lively situation in which we have a wealth of young talent. So harder to

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learn, more courage to practice entrepreneurship in this era, the one will be able to get more opportunities to play intelligence, and become the useful talent for the country, the people, and the nation. (Important literatures since the 16th committee, 2005, p. 575)

The idea which is everyone can be taught to talent broadens the traditional concept of extension of talent. This idea measures up to the sense in which people are creator of history. So that more and more youth with enthusiasm puts into the construction of socialism. In the Second National Conference on talent in 2010, when he discussed the key work of talent, Hu Jintao first talked the subject in which everyone can be taught to talent. He said: We must support everyone to have contribution, everyone to become talent. So we should promote the growth of talent in different urban and rural, region, industry, trade, and ownership. Also we should coordinate the development of all types of talents, and promote the all-round development of people. (Important literatures since the 17th committee, 2011, p. 719)

Thus, we can draw such a conclusion: The view about everyone can be taught to talent is a specific performance in Marx’s theory of “all-round developed human”, and an expansion in the field of talent on scientific development vision that centers on people. Specifically this view refers to both people with wealth of practical experience and skills and people with higher level of knowledge and innovation are talents. The view which shows everyone can be taught to talent has great significance for the development of young talent. It gives the majority of young people a wider platform for development. Under the guidance of the view, more and more young people who can join the real case of oneself become certain aspects of talent. At the same time, the view which shows everyone can be taught to talent can broaden the way of becoming young talent. The majority of young people through their own efforts, among it is to have a high level of knowledge, have great creative ability, and have rich practical experience and skills on ordinary post, can be called talents who can make its own contribution to society. Young talent is inseparable from the accumulation of knowledge, a wealth of experience, and enhancement of ability. But the youth must also recognize that it is not difficulty to become talent. Working persistently and accumulating a wealth of experience, the youth can be called talent, young people should establish a view of “doing one job, loving one job, and professional work, proficient work”. Based on this career outlook, it will bring up so many talents in each job, who can make a contribution to society and show the value of labor (The CPC Central Committee Organization Department Personnel Work Bureau, 2012, p. 114). The “Talent Strategy” In 2002, in the new situation after China enters into the WTO (World Trade Organization), facing economic globalization and the competition of comprehensive national strength, Central Committee of CPC and the State Council issued the document about “the plan of talent team building of national among 2002-2005”, in order to ensure the healthy development of building socialism with Chinese characteristics. In this document, it firstly proposed the “Talent Strategy”, took an overall plan for the talent team building in new era, and clearly clarified the guidelines, objectives, tasks, and key policy measures for construction of Chinese talent in current and future period. After such a process, the “Talent Strategy” was identified as a national strategy to become the highest strategy of the party and the country in the field of talent. In the first national conference of talent work, the specific content of Talent Strategy has been explained. Hu Jintao said in his speech:

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THOUGHT AND PRACTICE OF CULTIVATING YOUNG TALENT IN CHINA Talent Strategy is to bring up hundreds of millions of high-quality workers, tens of millions of specialists, and a large number of innovative talents. Moreover, this strategy is to create a talent team with large-scale, reasonable structure, and high-quality which will play the enthusiasm, initiative, and creativity. So that will bring about a new situation with a wealth of young talent and full scope of talents. That will vigorously improve the national core competitiveness, and provide an important guarantee for building a well-off society and realizing the great rejuvenation of the Chinese nation. (Important literatures since the 16th committee, 2005, p. 569)

Hu Jintao also emphasized the talent resources: “The full implementation of Talent Strategy needs to fix the concept in which human resources are the primary resources, the view in which everyone can be taught to talent, and the idea of people-oriented” (Important literatures since the 16th committee, 2005, pp. 574-575). Hu Jintao valued the implementation of “Talent Strategy”, and repeatedly stressed the importance and problems that should be paid more attention to the strategy. Discussion of Young Talent Quality “About morality and ability, the first is morality”. About the quality of talent to both morality and ability, Hu Jintao puts forward at the first national conference of talent work. He said: To adhere to the principle of morality and ability integrity, and make character, knowledge, ability and performance as the primary measure of talent, we should have eclectic selection of talent, and not have restrictions in educational background, title, seniority, and identity. (Important literatures since the 16th committee, 2005, p. 575)

This view has been further developed and interpreted in the second conference of talent work. Hu Jintao said: We should foster correct overlooks on the world, life, and values, promote patriotism, collectivism, and socialism into the whole process of talent work, educate and guide all kinds of talents to fulfill the socialist core value system. The high-quality talent must adhere to learn the latest achievements of localized Marxism in China, to keep the faith of socialism with Chinese characteristics, to promote patriotism as the core of the national spirit, to emphasize the innovation as the core spirit of the times, to practice the socialism concept of honor and disgrace, and to become a trusted talent in the party who has both morality and ability. (Important literatures since the 17th committee, 2011, p. 725)

With special emphasizing the “morality”, it clearly pointed out the main content of talent qualities in the “morality” which contained the overlooks on the world, life, values, patriotism, collectivism, socialism, socialist core value system, the achievements of localized Marxism in China, socialism concept of honor and disgrace. So if the youth want to become talent with both morality and ability, they must closely follow the points of “morality” content when they plan development in their life. “The fundamental purpose of education is to cultivate socialist builders and successors with all-round development of morality, intelligence, physics, and arts”. Hu Jintao repeatedly took the opportunities of the Teachers’ Day to issue a call in which the majority of teachers must work in accordance with the requirements of all-round development. On the eve of Teachers’ Day in 2007, Hu Jintao had a speech in the forum of outstanding teachers. He said that: We must adhere to student-centered education, moral education first. So we should enhance education in patriotism, ideal, and beliefs. Especially, the combination of the socialist core value into the entire process of national education will guide students to foster correct outlook on world, life, values, honor, and disgrace. The party should strive to cultivate socialist builders and successors with all-round development of morality, intelligence, physics, and arts. (People’s Daily, 2007)

In 2010, Hu Jintao had a speech at the National Education Conference. He said:

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The fundamental purpose of education is to cultivate socialist builders and successors with all-round development of morality, intelligence, physics, and arts. So promoting the healthy growth of students must be the motive and target of all educational work. In that we must adhere to the education for the socialist modernization, serve the people, combination of productive labor and social practice. (People’s Daily, 2010)

On the Teachers’ Day in 2011, Hu Jintao came to No. 80 High School of Beijing to visit staff and students. At that day, he emotionally said to teachers: “Over the years, you have devoted yourselves to the cause of education, diligent and endlessly patient work, and paid a lot of efforts to promote all-round development of students. We pay tribute and express sincere thanks to you!” (People’s Daily, 2011). This series speech of Hu Jintao has the common ground. That is, the teacher plays an important role in educating and cultivating a large number of young talents with all-round development only in accordance with the requirements of development in morality, intelligence, physics, and arts. One side for teachers, they must train young talents in the requirement of all-round development. On the other side for students, they must improve their quality in standard of all-round development. So the words of Hu Jintao actually picked up to both teachers and students. He appealed to students to become young talents with all-round development of morality, intelligence, physics, and arts. Colleges and universities do the job of training all-round development of young talent that is becoming more important. In 2011, Hu Jintao had an important speech at centenary of Tsinghua University, he said: The fundamental task of higher education is to cultivate talent. So promoting the healthy growth of students must be the motive and target of all educational work. And we must adhere to student-centered education, moral education first, the ability important, and all-round development. That focuses on enhancing the social responsibility of student to serve to the state and people, the spirit of innovation, the ability of practice. The ultimate goal is to cultivate the socialist builders and successors with all-round development. (People’s Daily, 2011)

Colleges and universities are important places for the training of young talents. Only to clear the goal, universities can effectively train more young talent. Again, the school mission is an external factor which influences young talent, and the key factor of success is the youth themselves. So only the youth adhere to the goal of all-round development of themselves, they can grow into young talent with the help of teacher and the exposure of school environment. The Training of Young Talents “The key of doing Talent Strategy is the party”. In the National Talent Conference in 2003, Hu Jintao proposed the principle of talent management in which the talent must be managed by the party and the Talent Strategy must be organized by the party. Hu Jintao pointed out: The key of doing Talent Strategy is the party. The results of talent work directly relate to the future and destiny of the development of the party and the state. So the extreme importance of talent work decides that we must put it in a more important strategic position, to further strengthen and improve the organization of talent work. (Important literatures since the 16th committee, 2005, p. 584)

This speech emphasized the importance of talent work, which is related to the future development of the party and the state. Of course, this work must be placed in a very important strategic position and directly managed by the party. Especially, the development of young talent in the work of talent, which is related to the construction of socialist modernization, the completion of the goal of well-off society, and the realization of Chinese dream, are the great importance of the party and the state. Also, that must be directed and

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administrated by the party. About the cultivation of young talents, it must be principled by the party which manages the talent. Only in this way, it can ensure that the growth of young talent keeps consistent with the basic system of socialist, and can support the development of young talent overall the state. The principle in which the party must manage the talent is the deepening and extension the principle in which the party must manage the cadres. Also that is new development of Marx’s theory about the cadre management by CPC, and an important part of Chinese characteristic talent theory of Marxism. Indeed, that is the basic principle and the structure of Chinese system of talent management (Xu, 2006, p. 298). The management of talent by the party is not the management in all aspects of talent work. Hu Jintao pointed out: The management of talent by party mainly means the management of macroscopic, policies, coordination, and services. So we should focus on doing the policy, integration of forces, and creating environment. Ultimately, we must be engaged in making talent by career, attracting talent by environment, motivating talent by mechanism, and protecting talent by legal system. (Important literatures since the 16th committee, 2005, p. 585)

In this speech, Hu Jintao clearly made the specific content of management of talent by the party. Management of macroscopic is to strengthen the overall macro-guidance and macro decision-making of talent work and grasp the initiative in talent work. Management of policies means that the party should develop and improve policies which relate to the talent work, including the development and planning policy of the growth of young talent. Management of coordination means that the party must have the overview of the global development. The party should coordinate all capabilities and advantages to promote the development of talent work, coordinate the internal structure and hierarchy of talent, and coordinate the various undertakings involved in the training and development of young talents in education, science, and culture. Management of services means that the party should provide a full range of services for all types of talent, especially for the young talents who need more encouragement and supporting. From the above four aspects, the principle in which the talent must be managed by the party effectively promotes the building of young talent team and provides favorable conditions for the development and improvement of young talent. In the Conference of National Talent Work in 2010, Hu Jintao emphasized that we must take opportunities to cultivate young talent. He pointed out: Party committees and governments at all levels should strengthen the education and guidance of youth. In the whole society, it should form a good atmosphere to love and care the youth, to encourage and support the career of young talent. (Important literatures since the 17th committee, 2011, p. 722)

In the speech of the 90th anniversary of the Chinese Communist Party’s Congress in 2011, Hu Jintao further stressed: An important task of management of talent by the party is to cultivate young talents. The reason is that cultivating a large number of outstanding young cadres is a fundamental strategy which related to the future and generation of the party and people. All comrades in the party and the whole society should adhere to respecting labor, knowledge, talent, and innovation. Especially, we must take opportunities to cultivate young talents and experts. Then we can form a vivid situation in which there have so many talents in generation and they make the best use of ability. (Important literatures since the 17th committee, 2013, pp. 440-441)

In this speech, Hu Jintao clearly combined the principle of management of talent by the party and the cultivation of young talent. We can find the following important information. Firstly, young talent is an

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important part of the principle of management by the government. Secondly, young talent is related to Talent Strategy and national development. So the young talent must be managed on a uniform by the party. Thirdly, cultivation of young talent in generation is a significant protection of the career of the party which retains youthful vitality. Therefore, in the principle of management of talent by the party, young talent must be an important object of management. “To focus on strengthening the education of ideological and political, and promoting the all-round development of all types of talent”. For the process of cultivating young talent, the ideological and political education is an extremely important part. Hu Jintao had a clear understanding of this point. In the first conference of national talent work, Hu Jintao said: We should strengthen and improve basic education, continue to popularize nine-year compulsory education, positively develop the high school education, promote quality education, and further strengthen rural education. Then we should accelerate innovation in higher education, promote higher education and development of economic and social to become combination close, adjust specialty and discipline structures, innovate training model of talent, establish an effective mechanism for education and training of talent, and play the role of universities as an important base for talent training. So we must focus on strengthening the ideological and political education, and promoting the all-round development of all kinds of talent. (Important literatures since the 16th committee, 2005, p. 577)

In 2005, the conference about strengthening and improving ideological and political education of college students has been meeting. In this conference, Hu Jintao delivered an important speech. He pointed out the importance and urgency of ideological and political education in college students, the main content of ideological and political education, the work of ideological and political education, and opening new situations for ideological and political education in college students. He emphasized the ideals and beliefs of education, patriotic education, basic moral education, and quality education for college students which had importance for ideological and political education. Hu Jintao said in earnest: “The youth represent and create the future. So only to win the power of youth, it can win in the future” (Important literatures since the 16th committee, 2006, p. 646). Form an Atmosphere of “Respecting Labor, Knowledge, Talent, and Innovation” to Cultivate Talent Report of the 16th National Congress formed a view of “respecting labor, knowledge, talent, and innovation”, and requested the view as a major policy of the party to be implemented in the whole society. The 17th National Congress further emphasized the need to implement this policy. And the report noted: We must implement the policy of respecting labor, knowledge, talent, and innovation, adhere to the principle of management of talent by the party, and coordinate a good job of cultivating talents which specially focus on the talent with high level and skilled. Then we must adopt innovative system and mechanism of talent work, stimulate the creativity and entrepreneurial passion of all kinds of talents, and form a new situation in which there have so many talents in generation and they make the best use of ability. (Important literatures since the 17th committee, 2009, p. 41)

From raising two respecting from Deng Xiaoping, to raising four respecting in the 16th National Congress, along raising again this respecting in the 17th National Congress, the view of “respecting labor, knowledge, talent, and innovation” to cultivate young talent is here to stay. Also, there is corresponding atmosphere of cultivating young talent. In this four respecting, the premise is the respecting of labor. According to the view of “everyone can be talent”, the majority of young can become talent in all walks of life. So it is necessary to give full respect and recognition of work in all walks of life. Respecting of knowledge is the foundation. Young talent must have basic knowledge, skills, and the overall quality of labor. In the whole society to respect

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knowledge, it can be more attentive to promote the youth to learn the knowledge and improve their quality and ability. Respecting of talent is the key. Only to form the atmosphere of respecting talent in the community, the youth can be more firmly established the ideals and beliefs of talent, strived to talent. Respecting of innovation is the importance. In order to build an innovative country and to inspire innovation and vitality in a whole of country, it is necessary to form atmosphere of respecting innovation. Only in this atmosphere, young talent can have more innovative awareness and ability. The Selection and Use of Young Talent “Revolutionary, young, well-educated, and professionally competent”. “Revolutionary, younger, well-educated, and professionally competent” is the criteria for the selection of young talent. At the fourth session of the seventh conference of CPC, Hu Jintao pointed out that: We must adhere to the principle of management of cadres by the party. And we must promote the cadres to be revolutionary, younger, well-educated, and professionally competent, adhere to the principle all over the nation for the selection of cadres, broaden the training way of cadres, care cadres enthusiastically, manage the cadres strictly, and gather various talents to the party and the state. (People’s Daily, 2009)

Also, it is the purpose of cadres. The content which regards the selection of young cadres has reference for the selection of young talents. We can summarize the thought of young talent selection in Hu Jintao above the speech. First, young talent selection must adhere to the basic principle of democracy, openness, competition, and merit, which also is the selection principle of all types of talents and cadres. Second, talent selection must adhere to the principle of revolutionary, younger, well-educated, and professionally competent. The principle of younger promotes young talents to stand out. The principle of revolutionary, well-educated, and professionally competent but also provides clear selection criteria for young talents. Third, it must care warmly and mange strictly for young talents. That is put forward in the actual characteristics of young talents. Because young talents are often strong self-esteem, anti-frustration weak, and weak-willed, which need care warm. While young talents are active thinking, respecting for freedom, and distinct personality, which need strict management. “Identify and find talent in practice and the masses”. In the conference of talent work in 2003, Hu Jintao puts forward: “We must deepen the reform of talent work, adhere to the principle of morality and ability, adhere to the mass line, improve the evaluation criteria of talent, and focus on the way of practice to test talent” (Important literatures since the 16th committee, 2005, p. 578). In the conference of talent work in 2010, Hu Jintao pointed out: We must establish a scientific and socialized devaluation mechanism of talent which based on the duty of occupation, and orient the morality, ability, and performance. We must focus on the practice and contribution to evaluate talent, and adhere to identify and find talent in practice and the masses. (Important literatures since the 17th committee, 2011, p. 723)

Hu Jintao stressed an important selection criterion, which is merit and recognition by the masses. Merit emphasizes quality and ability is the basis of selection for young talent. Recognition by the masses reflects the view of Marxism in which the masses are the creators of history, and can promote young talent to have the view of the masses and the consciousness of rooting and serving for the masses. For the use of young talents, the leader of party attached great importance. In the conference of talent work in 2010, Hu Jintao stressed:

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For the use of young talents, we must take a more appropriate way to promote and facilitate. It should cultivate young talent as an important strategic task of talent development. We should increase efforts to improve the work system, take early to select, focus on support, and keep track of training. So a large number of young talents can be continued to stand out. Then we must be eclectic, invite wise people, and get rid of the view of demanding seniority and perfection. The best way is in practice to find talent, cultivate talent, exercise talent, use talent, and promote the growth of talent. (Important literatures since the 17th committee, 2011, p. 722)

In this speech, it mainly emphasized two points. First, it is necessary to boldly use talent. Second, it is necessary to make foundation for the use of young talent in the ways of taking early selection, focusing on support, and keeping track of training. In academicians’ congress in 2012, Hu Jintao made the appeal to academicians for boldly using of young talent. He said: If we want to build a good team of academic talent, we must boldly use the outstanding young talent, invite excellence with a more open mind, provide stage for the innovation of young talent, pave the way to accelerate the growth of young talent, and promote young talent to stand out and develop in practice. (Important literatures since the 17th committee, 2013, p. 978)

In this speech, Hu Jintao called for the older generation of scientists to provide help for young talents and give a bigger stage to display talent. Above all, the content of the young talent thought of Hu Jintao is very rich. Not only the theoretical contents of the view of scientific talent and quality of young, but also the practical contents of cultivating and using of young talent have been contained. Not only the care for young growth and success, but also the contents of mobilization of the community to help young talent have been contained. So the thought of young talent not only enriches the Marxism for young talent, but also deepens the idea of young talent of the party. That has great theoretical and practical significance.

Practice of Cultivating Young Talents in CPC During the Period of Building a Well-Off Society in All-Round Way In May 2002, the CPC Central Committee and the State Council issued the “National Plan of Talents During 2002-2005”, and proposed the implementation of Talent Strategy. Then in December 2003, the Conference of National Talent Work had been held, the State Council issued the “decisions on further strengthening the work of talent work”. Both opened the curtain and started the further reform of Talent Strategy. Practical Training of Young Business Management Talents Firstly, we improved the circumstances, and gathered young business management talent. In 2011, the Central Organization Department and other five departments jointly issued the “the long-term plan of cultivating management talent (2010-2020)”. In this plan, until 2015 we will train 35 million outstanding entrepreneurs and a high level of management talents, who will have global strategic vision, spiritual of market development, management innovation ability, and social responsibility. In this plan in 2020, the total of talents will increase to 42 million. Secondly, we improved the mechanism, and trained the quality and ability of business management talent. Beginning in 2004, the State-owned Assets Supervision and Administration Commission of the State Council organized state-owned enterprises to recruit senior managers from domestic and abroad. In addition, we established a comprehensive appraisal system of talent to evaluate the performance of business management talents. In October 2003, the State-owned Assets Supervision and Administration Commission of the State

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Council issued the “interim measures for evaluating performance of central enterprise”, which evaluated the annual results and business performance in term. In this measure, the business talents must sign letters of responsibility for the operating results. And the results of evaluation will be an evidence for talent selection and appointment, salary distribution, and professional development in the future. Practical Training of Young Professional and Technical Talents It expands the scale of the young professional and technical talent. After the first conference of national talent work held in 2003, the whole nation paid more attention to the comprehensive training, the number of expansion and quality improvement of the professional and technical talents which be seen as the most importance in the talent work. Firstly, the state has established project of the talent construction, created social environment of strength professional and technical skills. “Millions of Talents Project” has been born out. Academician system has highlighted the meritocracy. The special government allowance system has highlighted the dedication. Secondly, the growth in the number of professional and technical talent appeared a small peak. As of 2008, total professional and technical talent in China has reached 46.86 million, of which contained 28 million talents in state-owned enterprises, five times of the total in 1978. And high-level professional and technical talent has been increased. In 2008, there are 1,378 academicians, 5,206 outstanding experts, 158,000 experts who enjoy special government allowance, 4,100 talents who selected to be candidates of National Talents Project, 70,000 postdoctoral researchers, and 497,000 talents who returned from overseas (People’s Daily, 2010). In this period, a large number of technology leaders and talents with high innovation capacity have emerged, who become pillars of technological, economic, and social development of our country. Also, a large number of young talents with the potential ability and creative skills have emerged, who become the reserve force leader of high-level talent. It made innovation for high-level training mechanism of young talents. First of all, the party and state created a “Millions of Talents Project” in 2004, which aimed to cultivate academic and technology leaders in the younger generation. The goal of this project is to cultivate and bring up hundreds of outstanding scientists who can be up to the level of the world frontier science and technology, foster thousands of leaders in various technical fields with the leading domestic level, and cultivate tens of thousands of excellent young talents who have achievements and development potential in various fields. Secondly, based on the concept of West Development, it had to create the talent plan of “Western Light”. In this plan since 2004, it has annually selected more than 260 professional and technical talents from the western area as a visiting scholar to do research and train in eastern institute, colleges, and universities, which promoted exchanges and common development between west and east young talents. Since 2011, based on the “Western Light” project, it has started the training plan to abroad which promoted west young talent to become international level of professional and technical talent. Finally, in 2012, the state has started “high-level talents plan for special supporting” (also known as the “Million Plan”) which faced all talents in the country. This plan has ready to use about 10 years to select and support a number of outstanding talents and young talents in natural science, engineering technology, and the field of philosophy and social science. This plan will create a strong force of innovation for our country, create massive high-level innovative talents, and provide talent to support construction of innovative country. It attracted the foreign intelligence to gather young professional and technical talents. “National Long-term Talent Development Plan” pointed out that we “must vigorously attract high-level and urgently needed talents

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from overseas, focus on the independent cultivation and introduction of overseas talents simultaneously”. Through international cooperation and exchanges, the state can obtain the necessary scientific research talents, science and technology information, in order to create a high-quality and technical talents, to achieve the exchange and sharing of intellectual achievements. Since the first conference of national talent work, the state has taken a team of talent back to China for introduction of overseas talents. In 2008, Central Committee formulated “the view of the implementation of overseas high-level talents introduction” (as the “Thousand Talent Plan”). The Central Organization Department jointly with the Ministry of Human Resources and Social Security, the Ministry of Education, Ministry of Science and Technology, the People’s Bank, State-owned Assets Supervision and Administration Commission, the Chinese Academy of Sciences, and other departments, imported 662 overseas high-level talents in three batches. From 2011, the state has started the “Thousand Young Talent Plan”, in order to explore and attract young professional and technical talents who have active thinking, creative passion, and innovation ability. Domestic colleges and universities, research institutes, the central enterprises had the introduction of 1,035 overseas talents. Through layers of screening, the state first identified 143 talents to provide support, most of them came from Harvard University, Massachusetts Institute of Technology, Princeton University, Stanford University, University of Oxford, University of Cambridge and other schools in the world, as well as Germany Max-Planck-Institute, Volkswagen and other well-known research institutions and enterprises. They have settled and worked in University of Science and Technology of China, Peking University, Tsinghua University and other domestic famous universities, research institutions, the central enterprises. As of 2008, the state has had more than 140 various overseas scholars pioneer park. And more than 20,000 returned students from abroad have worked in the park. Above all, they have become an important force in promoting independent innovation and shortening our advanced technology gap with the world. Practical Training of Young High-Skilled Talents The government promoted the training system of young high-skilled talents which combined with the social support. The state has developed occupational education, started the national training project of high-skilled talents, and paid more attention to cultivation of high-skilled talents. At the same time, the state has given full play to the role of various social groups in the cultivation of high-skilled talents, and established the staff training system in modern enterprise, and school-enterprise cooperation training system of high-skilled talents. In 2002, the national conference of occupation education has been held and promulgated the “decision on promoting the reform and development of occupational education” held on vigorously promoting the reform and development of vocational education. That has clearly accelerated the training of high-skilled talents who urgently needed by production and service. Then the state has established national example secondary vocational schools, the national training base of high-skilled talents, the national project of focusing on the construction of 100 higher vocational education institute, and a series of projects to promote the cultivation of high-skilled talents. At the same time, the support power of enterprises, companies, and other social groups has injected to the development of occupational education, promoted high-skilled talents to be exercised and grown in the practice of production and technology. In addition, new technology and new equipment have been contained in the process of teaching through the practice in enterprises. So the training content has been more advanced and distinctive. Practical Training of Young Rural Talents Since 2003 in National Conference of Talent Work, the State Council has strengthened the construction of

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rural talents as an important starting point of the development of modern agriculture and promotion of the building of new socialist countryside, as a basis for consolidating the ruling foundation of the party in the countryside, and as an important way to strengthen the construction of the party’s governing power and advancement. So the construction of rural talents has been put in a prominent position on the agenda, taken a variety of ways to carry out work, and achieved positive results. By the end of 2008, the total number of national rural talents has reached 8.2 million, an increase of 42% from 2005. In this situation, it has basically formed five teams of talents which contained production talents, management talents, skills talents, technology service talents, and social service talents. It encouraged college graduates and other young talents to go to work in the village, and gathered intelligence to support the development of the rural areas. It was a scientific way followed the Marxist concept to cultivate talents in practice and in vast rural areas. On February 25, 2006, the Central Organization Department and other eight ministries jointly organized college students to work in rural, who engaged in teaching, agriculture, medical support, and poverty reduction (referred to as “three supports and one help” program). This program guided young intellectual elite with the view of scientific development to countryside to undergo practical training, healthy growth, and rich agricultural knowledge, in order to promote the development of rural basic education, agriculture, health, poverty, and the construction of new socialist countryside, a socialist harmonious society. Every year, around 2,000 college graduates added to the team of talents, who had the good moral quality, highly-educated, and showed admirable spirit of dedication in the posts of rural. Some of them had excellent assessment, who entrusted with the township deputy secretary and other important duties. Others had financial support of the government, and carried out scientific farming with village labor together. In addition, the project of “one village with at least one undergraduate”, the project of “thousand schools and 10 thousand teachers to support rural education”, the project of “thousands of physicians to support rural health”, and the project of college graduates of village official gathered intelligence elite to serve rural. Practical Training of Young Social Work Talents It had extensive pilot program to explore and experience. In early 2003, the Ministry of Civil Affairs issued “the notice on the strengthening of the construction of social work team”, which actively promoted the conditional provinces bold to carry out the construction of professional system of social work. In July 2004, the Ministry of Labor and Social Security Department promulgated the national occupational standards, provided social work profession’s requirements, theoretical knowledge and skills to operate, in order to positively respond the urgent requirements of the social work talents training. On the basis of standards, more than 170 regions and 260 units around the country carried out the pilot of the construction of social work talents team. It improved policies to have a solid foundation. The growth of talent is greatly influenced by the social environment. So individuals only stay in the process of interaction with the social environment, in order to achieve individual socialization and become talents. Even effect throughout the whole process in the growth of talents and value realization, party and the state policies in order to train talents reflect the political environment which belongs to the social environment. These policies guide the growth of talents, and reflect a culture guidance of the growth of talent (Luo, 2006, p. 102). By the beginning of 2007, the central government has organized the “Research on the Construction of Social Work Talents Team”. On the basis of finding out the real situation and predicting the future, the party has made on strengthening the social work talents team. After

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this decade, “social worker continuing education”, the “social worker professional level certificate registration”, “guidance on the promotion of the social security system and service system for people with disabilities”, such as other documents which are relevant to the construction of social work talents team have been issued. Not only the central government, but also the local governments have strengthened the construction of social work talents team, proceeded to develop social work documents and supporting policies, and had a solid foundation of talent training. It expanded better ways to construct the talents team. In the “Task of the Communist Youth League”, Lenin stressed: In order to reform our national institutions, we make sure to give ourselves this task: firstly, to learn; secondly, learning; thirdly, still learning. And then we must check learning which is really deep into our flesh inside, truly and completely become an integral part of life, rather than making learning provision into a dead or fashionable rhetoric. (Lenin, 1960, pp. 699-700)

So learning and training have increasingly become the starting point of expansion of young social work talents. It developed a lot of young talents through the set of professional social work in which recruits college students. At the same time, the government has actively promoted the development of professional education of social work. The Ministry of Civil Affairs has put social work training into “the 10th Five-Year Plan for the Development of Civil Affairs”. It has set the bachelor degree, master degree, and doctoral degree of social work. There currently are more than 240 colleges which can offer bachelor degree of social work and more than 10,000 graduates every year.

Conclusions Thought and practice of young talent in CPC during the period of building a well-off society in all-round way cultivated a large number of young talents, who became a force of building a well-off society. At the construction of the “world high-speed rail first high tunnel”, the command was a young technical team who had average age of less than 30 years old. In the China Aerospace Science and Technology Corporation, technical young talents who are 35 years are more than 50%. Chinese aerospace science technical talents are 10 years younger than USA, 20 years younger than Russia. By the end of 2010, there had had 36,000 undergraduate village officials who had supported the rural economy in the first line of all country. Through the thought and practice of young talents of Hu Jintao and Communist Party, the quantity and quality of training young talents have been improved by leaps and bounds. The young talents have showed unusual abilities in the construction of material and spiritual civilization, political civilization, social civilization, and ecological civilization. They have become a youth group who get the attention of the world and contributed their due share to the development of the world.

References Important literatures since the 17th committee (first part). (2009). Beijing: People’s Publishing House. Important literatures since the 17th committee (second part). (2011). Beijing: People’s Publishing House. Important literatures since the 17th committee (third part). (2013). Beijing: People’s Publishing House. Important literatures since the 16th committee (first part). (2005). Beijing: People’s Publishing House. Important literatures since the 16th committee (second part). (2006). P. 646. Beijing: People’s Publishing House. Lenin. (1960). Works of Lenin (Vol. 4, pp. 699-700). Beijing: People’s Publishing House. Luo, H. T. (2006). Study on the talent environment (p. 102). Beijing: Chinese Personnel Publishing House.

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People’s Daily (2nd ed.). (2010, May 20). People’s Daily (2nd ed.). (2010, September 9). People’s Daily (2nd ed.). (2011, April 25). People’s Daily. (2007, September 1). People’s Daily. (2009, September 19). People’s Daily. (2011, September 10). The CPC Central Committee Organization Department Personnel Work Bureau. (2012). The view of scientific talents (p. 114). Beijing: People’s Publishing House. Xu, S. T. (2006). The Marx doctrine on talent (p. 298). Beijing: Chinese Personnel Publishing House.

Journal of US-China Public Administration, December 2014, Vol. 11, No. 12, 995-1004 doi: 10.17265/1548-6591/2014.12.005

D

DAVID

PUBLISHING

Analysis of the Optimum Currency Area for ASEAN and ASEAN+3 Sylvia Alvarado Universidad Andina Simón Bolívar, Quito, Ecuador This paper performs an analysis of the optimum currency area (OCA) for ASEAN (Association of Southeast Asian Nations) and ASEAN+3 for the period of 2003-2012. The applied method is based on the model developed by Bayoumi and Eichengreen for the European countries. Regarding the two groups of study, the document contents the integration roots as well as some theories and empirical data about the currency areas. The obtained results based on the OCA indexes showed that nearly half of the country members have moved symmetrically, although the effect of the four independent variables was found different in each case. In conclusion, the monetary convergence is significantly influenced by the output disturbances and the trade linkages in both regions; while the size of the economy only becomes significant in ASEAN+3 and the synchronic advantage is not contributing and even insignificant for ASEAN+3. Keywords: OCA (optimum currency area), OCA indexes, ASEAN (Association of Southeast Asian Nations) integration, ASEAN+3 integration

On the way to the formation of the ASEAN (Association of Southeast Asian Nations) Economic Community (2015) and considering the Chiang Mai Initiative (CMI) (2000), it is interesting to analyze the economic integration between the ASEAN and ASEAN+3 members. In spite of the European Community (EC) trajectory, ASEAN has not discussed the introduction of a common currency, not even at the ASEAN+3. However, the employment of some of the techniques originally used for the European Market Union (EMU) could be useful to determine the regional symmetric movements for the period under investigation, analyzing it in terms of the model proposed by Bayoumi and Eichengreen (1997).

ASEAN and ASEAN+3 Integration Roots Pike (2011) wrote that in 1961, the leaders sought to develop regional relationships through the creation of the Association of Southeast Asia (ASA). This organization later changed its name to the ASEAN after the inclusion of Indonesia and Philippines in 1967. Eventually, it would be ASEAN rather than Southeast Asia Treaty Organization (SEATO), which becomes the more important regional forum in the area. But the Charter of the ASEAN was only ratified by 2007 and was followed by the elaboration of the Roadmap for the ASEAN Community 2009-2015, whose three major areas are: ASEAN Political-Security Community (APSC), ASEAN Economic Community (AEC), and ASEAN Socio-Cultural Community (ASCC). Corresponding author: Sylvia Alvarado, Eng. Mgr., food engineer, Universidad Técnica de Ambato, magister in international economic relationships, Universidad Andina Simón Bolívar; research fields: international economic relationships, economic integration, and food economy. E-mail: [email protected]; [email protected].  

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In the Economic Community Blueprint, the leaders affirmed their strong commitment to accelerate the establishment of the community by 2015. They particularly agreed to hasten the establishment of the AEC by 2015 and to transform ASEAN into a region with free movement of goods, services, investment, skilled labor, and free flow of capital. Regarding the ASEAN+3 group, the CMI indeed refreshed the boundaries among the members when, after the crisis of 1997-1998 and since May 2000, the finance ministers of ASEAN plus Japan, China, and Korea announced that they had agreed to develop a network of currency swap and repurchase agreements, known as the CMI (Hamilton-Hart, 2006). It is necessary to consider that prior to this crisis, all East Asian economies generally limited the movements of their currencies against the dollar. Most responded very little to changes in other currencies, such as is the case of the yen as reported by Gordon De Brower (2001). Afterwards, all major countries in the region have already accepted some significant limits on their autonomy in order to reach the benefits of economic integration and therefore, and opened the chances of closer monetary integration in East Asia on the grounds of unyielding political rivalry and sovereignty concerns (Hamilton-Hart, 2006). Ogawa and Kawasaki (2007) confirmed that since the Asian currency crisis of 1997, the monetary authorities of East Asian countries became responsible for regional monetary coordination to prevent and manage currency crises. After the ASEAN+3 Financial Ministers Meeting, the currency swap arrangements have been strengthened under the CMI. Indeed, after the Asian financial crisis, East Asia has already tried to deepen regional financial cooperation and become the second example for financial regionalism after Europe, according to Shimizu (2013). Furthermore, paralleling the AEC negotiation, another step was accomplished in November 2012, when ASEAN, Australia, China, India, Japan, South Korea, and New Zealand (ASEAN+6) announced the beginning of the Regional Comprehensive Economic Partnership (RCEP) as reported by the Ministry of Economy, Trade and Industry of Japan.

Some Theories About Currency Areas Mundell (1961) proposed a system of national currencies connected by flexible exchange rates. For him, the optimum currency area (OCA) is a region. If regions cut across national boundaries or if countries are multiregional, then the argument for flexible exchange rates is only valid if currencies are reorganized on a regional basis. An essential ingredient of a common currency, or a single currency area, is a high degree of economic factors mobility. The monetary unification reached by the European Community in 2000 is the deepest level of economic integration and several authors have proposed models to study the feasibility of OCA among its members. Bayoumi and Eichengreen (1997), for example, developed an equation where the bilateral currency proximity was the function of four variables [real output differences, dissimilitude in merchandise trade, fraction of exports in GDP (Gross Domestic Product), and size of the economies], which will be applied in this study. But as long as the determination of OCA depends on a complex web of variables and interactions, different models result, although the most important topic remains to determine how seigniorage is allocated and whether transfers between members of a union are feasible, which Alesina and Barro (2002) have observed. The economic benefits of a higher economic integration are the reduction of the transaction costs and the higher levels of trade and investment as a result of the exchange rate stability; the costs are the loss of monetary  

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autonomy which limits the macroeconomic policy options available to stabilize activity in the face of unexpected macroeconomic shocks as noted by Bayoumi and Mauro (1999), among others. Because of the disadvantages and by studying the exchange rates in emerging countries, Edwards (2011) concluded: (1) that different regimes are likely to be appropriate for different countries; (2) that rigid approaches to defend a specific currency value are dangerous; (3) that more flexibility is conducive to better performance; and (4) that the fear of flexible rates leading to high inflation is misplaced. Even under floating rates, it is possible for the real exchange rate to become overvalued and overvaluation is very costly, etc. But above all, it is political will that is shaping the integration process. In the case of the ASEAN, Bayoumi and Mauro (1999) in 1999 saw a firm political commitment as the key ensuring that an attempt to form regional currency arrangement shall not be viewed as simply another fixed exchange rate regime, open to speculative crises. In general, developing countries feel it necessary to maintain greater control over exchange rate movements in order to manipulate the current account. According to Obiyathulla Ismath Bacha (2008) cited by Thiumsak (2014), this argument applies to ASEAN countries where central banks did not adopt free floating exchange rate system and the correlation of several ASEAN currencies to the US dollar to be as high as 70%. By 2006, Eichengreen (2006) observed that Asian countries possess neither the willingness to subordinate other policies to imperatives nor the solidarity needed to offer extensive financial supports. For him, a system of Asian currency pegs would consequently be fragile and crisis prone. He suggested the governments should create an Asian Currency Unit (ACU), constituted as a weighted average of Asian currencies and allow it to circulate alongside their national currencies. There are many recommendations from the academic point of view based on research—some are included in Table 1, and there will be more as far as the relationships among these groups of countries in many areas tighten.

Some Conclusions and Suggestions of the Currency Approaching Analysis of the ASEAN Members Table 1 Results of Research Regarding the Currency Approaching Analysis of the ASEAN Members Countries and periods

Author

Method

Results

Indexes comparable to Western Europe: S-M, S-T, S-HK, S-W, HK-W. But I, K, and P did not rank well and the M-T East Asia pair displays a very weak score OCA indexes 1968-1998 More or less plausible candidates for internationally harmonized monetary policies while do not satisfy all the standard OCA criteria Asian trade structures are less similar than the West European. Asian: K, W, HK, OCA as correlation of Kwan (1998) cited By inflation rates, East Asia qualifies as an OCA as West Europe. S, I, M, P, T, H, J economic structures and by Lee and Azali Low inflation countries (S, W, M, T, K) which also have 1982-1996 of policy objectives higher income are more appropriate for forming a yen block Countries with higher bilateral trade have higher business cycle synchronization; the ones with more asymmetric Study if OCA indexes are structures of production have smaller business cycle Calderón, Chong, 147 countries the same for developing correlation. The impact of the integration on business cycles is and Stein (2002) 1960-1999 countries when cyclical higher for industrial countries. The impact of trade intensity on asymmetries occur cycle correlation is smaller when the production structure asymmetries between the countries are greater. Bayoumi and Eichengreen (1999) cited by Lee and Azali

 

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Table 1 continued Countries and periods

Author

Method

Results

1990s region common shocks are comparable to European ones, then East Asia is well prepared for regional currency East Asia 10 Judge prospects of union. Two most important determinants of business cycle countries, Europa forming currency union in Lee, Park, and synchronizations are intra-region trade share and trade 16, East Asia, focusing on Shin (2003) structure similarity which shall put more pressure on forming North America 2 trade integration and a currency arrangement. Financial liberalization has rapidly 1978-1999 financial liberalization occurred in East Asia and leads to more global integration rather than regional one. Closest to fulfill OCA: M-T, S-T, and S-M. Most converged: M. Most divergence: P Telisa Aulia ASEAN-5 OCA indexes OCA means are bigger to EMU means. (2008) 1971-2003 By the pair wise method Endogeneity exists. Economic convergence shall increase. Leader country (S) varies depend on the bench-mark country and the period of research. Kraiwinee and ASEAN may not be suitable to form a single currency area. Eugene (2003) Convergence model to Suggest to start with a sub-group OCA arrangement of ASEAN cited by Thiumsak determine OCA ASEAN-6 (B, I, P, T, M, and S), which have similar level of (2014) income and supporting framework. Not ready for an OCA (maybe gradual) Suggest policy dialogue on exchange rates, adoption of Ogawa and East Asia OCA index managed floating exchange rate system (G3 currency basket Kawasaki (2007) 1999-2005 which becomes the Regional Monetary Unit) and coordinated intervention in foreign exchange markets intra-regionally. Feasibility of a single currency by symmetry of Vu Tuan Khai A group of I, M, P, S, and T with high correlation of structural ASEAN less shocks analysis (2008) cited by shocks and high speed of adjustment to those shocks is Brunei D. [Structural Vector Thiumsak (2014) appropriate to form an OCA Autoregressive (VAR) and OCA] Obiyathulla Possibility of an OCA by Region-wide monetary union for ASEAN and ASEAN+5 may Ismath Bacha ASEAN, VAR and synchrony not be possible and that the integration should begin with (2008) cited by ASEAN+5 analysis correlation paired clusters: M-S, J-K, I-T, and A-Z Thiumsak (2014) Exchange rate volatility has a negative impact on the exports East Asian five Examined the impact of of emerging countries. Increase in competitiveness has Moe Chint, Rizov, countries: H, I, M, bilateral real exchange positive impact on exports, but the magnitude is relatively and Willenbockel P, and T rate volatility on real inconsequential. Should focus on stabilizing their exchange (2008) 1982-2006 exports by gravity model rates vis-à-vis rather than solely pursuing regional monetary and exchange rate policy cooperation in the short run. Very small and open economies of the region (HK and S) J and its 19 most appealing to peg to other East Asian ones. OCA index leading trading approaches West European: S-M, S-T, S-HK, S-T, and HK-T. Volz (2010) OCA indexes partners Meanwhile I, SK, and, P indexes are weaker. Attempt for a 1976-1995 common peg by first five East Asian Countries would be complicated. The integration process would start by unifying Singaporean Dollar and Malaysian Ringgit followed then by Japanese Yen, Achsani and ASEAN+3, OCA indexes related to Chinese RMB, Korean Won, Philippines Peso, and Thailand Partisiwi (2010) 1997-2007 US dollar and clusters Bath. Indonesia may be the only country not ready yet for ASEAN+3 currency integration and Singaporean Dollar is the most stable currency in the region. ASEAN+5 are considered not really ready to form OCA. The Wiranata and Exchange rate volatility different economic structure and policies are becoming some ASEAN+5 Putranto (2010) (ERV) to form OCA barriers and challenging area to synchronize in the following time

 

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Table 1 continued Countries and periods

Author

Method

Results

Approach may start with homogeneous small sub-groups beginning with M, S, and HK or with these 3+T or with this Han and Lee The composite index of 4+W and B (they showed sufficient degree of convergence). In (2010) OCA criteria the process of forming a currency area, political factors are important. Monetary union by ASEAN founders are not ready to adopt a monetary union. Khan P. Ngo descriptive statistics using Despite evidences of increase in economic integration from (2012) cited by ASEAN 5 trade for OCA criteria, ASEAN at the moment, the group should pursue more Thiumsak (2014) ordinary least square and effective policies that aim to increase labor and capital Granger causality mobility and trade within the region. The combination of the ASEAN 5 (I, M, P, S, T) +1—K or J can form the common currency area, the combinations ASEAN 5+ Kawasaki (2012) OCA ASEAN 5 +2—H and J, or K and J, or H and K can form a 2000-2010 common currency area; and that ASEAN 5 +3 have come closer to OCA Examined the symmetry Regional factor is largest for K, M, S, and T, then coordinated in business cycles as policy could respond to economic disturbances. The increased Lee and Azali East Asia satisfying one importance in the regional factor could be due to financial and (2012) 1970-2007 precondition for forming trade integration deepening. Regional cooperation initiatives an OCA could lead to the right track if monetary union becomes a goal. Neither the whole East Asia fulfills the OCA criteria or the sub-groups of interconnected economies (J-SK, M-S). The exchange rates correlation among some leading ASEAN+3 Shimizu (2013) East Asia OCA criteria and the rivalry between H and J for regional leadership motivate to collectively defend the regional financial and exchange rates stability emphasizing a regular regional surveillance. Although all the members are different when talking about GDP, population, merchandise exports, services exports, employment population ratio, and GDP per capita; the Least significant ASEAN variation of these indicators is alike. It is pointed out that the differences and OCA Alvarado (2014) 2001-2012 stronger differences were found for employment and indexes criteria population. According to the OCA analysis for 2007-2010 these economies converge or tend to converge to a single currency. There is a structural break for most conditional correlation of country pairs of the two variables (industrial production index Feasibility of OCA by the and short term interest rate) after the implementation of ASEAN 5 Thiumsak (2014) Dynamic Conditional integration policy in 2008 and that most of the conditional 2001-2013 Correlation (DCC) model correlations decrease over time. The feasibility of OCA has decreased. Notes. B—Brunei Darussalam, C—Cambodia, H—China, I—Indonesia, J—Japan, L—Lao PDR, M—Malaysia, N—Myanmar (Burma), P—Philippines, S—Singapore, K—South Korea, T—Thailand, V—Viet Nam, HK—Hong Kong, W—Taiwan, A—Australia, Z—New Zealand. East Asian monetary integration 1965-2005

Method The model proposed by Bayoumi and Eichengreen (1997) for the European Community is the following: ∆

∆

(1)

Where SD(eij) is the standard deviation of the change in the logarithm of the end-year bilateral exchange rate between countries i and j, SD(∆i-∆j) is the standard deviation of the difference in the logarithm of real output between i and j, DISSIMij is the sum of the absolute differences in the shares of agricultural, mineral, and manufacturing trade in total merchandize trade, TRADEij is the mean of the ratio of bilateral exports to

 

ANALYSIS OF THE OPTIMUM CURRENCY AREA FOR ASEAN AND ASEAN+3

1000

domestic GDP for the two countries, and SIZEij is the mean of the logarithm of the two GDPs measured in US dollars. For the European Community 1983-1992, estimation yielded the data reported by the authors that are included in Table 2 with the results calculated for ASEAN and ASEAN+3 period of 2003-2012. Table 2 Terms of the Equation Proposed by Bayoumi and Eichengreen (1997) for OCA Indexes Toward the EMU and the Ones of ASEAN and ASEAN+3 EMU

ASEAN

ASEAN+3

1983-1992

2003-2012

2003-2012

210

45 Significant F0.05 0.5056 0.010959 0.23424

78 Significant F0.05 0.4080 0.011466 -0.01562

1.46 0.21

0.017621 0.012392 Significant T0.10

0.012142 0.017662

0.022 0.006

-0.00072 0.282545 Significant T0.10 -0.47622 0.000755 Significant T0.10 0.000462 0.031918 Not significant

Bayoumi and Eichengreen Samples “n” Model R2 Standard error “α” Standard error “β1” SD(∆i-∆j) Standard error Effect to the model “β2” DISSIMij Standard error Effect to the model “β3” TRADEij Standard error Effect to the model “β4” SIZEij Standard error Effect to the model

0.51 0.027 -0.09 0.02

-0.054 0.006 0.012 0.001

Significant T0.11 -0.0000011 0.42993 Not significant -0.26109 0.001594 Significant T0.11 0.003714 0.061634 Significant T0.11

Data sources and calculations are as follows: (1) The quarterly exchange rate of each of the countries as SDR (Special Drawing Rights) was retrieved from the International Monetary Fund (IMF) except for Philippine Peso, Lao Kip, Burmese Kyat, and Vietnamese Dong that were obtained from XE web1. With these values, the annual average was determined later the bilateral rate expressed in logarithms, its change and finally the standard deviation value of the period SD(eij); (2) GDP values retrieved from the World Bank except for Myanmar (IMF) were used to calculate the real output of the countries, the bilateral differences expressed in logarithms and finally the standard deviation of the period SD(∆i-∆j); (3) The shares of agricultural, mineral, and manufacturing trade in total merchandize trade reported by the World Trade Organization (WTO) [except the ones for Laos PDR calculated with data form OEC (Observatory of Economic Complexity) Massachusetts Institute of Technology (MIT) as well as Myanmar 2003-2007 and for all members 2003] were used to determine the absolute bilateral differences and to plus them for all the period; 1

  The World Favorite Currency Site. Retrieved from http://www.xe.com/.   

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(4) The bilateral exports values are reported by the OEC with this and the GDP from the World Bank (Myanmar IMF) allows calculating TRADEij the period mean of the fraction of total bilateral exports over the total GDP; (5) SIZEij data were calculated with the GDP data from the World Bank and IMF for Myanmar.

Results In Table 3, the results for OCA indexes for ASEAN and ASEAN+3, period of 2003-2012, calculated with the model by Bayoumi and Eichengreen are reported in ascendant order. Criteria of “convergence” respected the one proposed by the authors, therefore only the pairs with OCA indexes up to one model standard error (MSE) are considered converged and are in bold characters; meanwhile, the pairs with values no bigger than 2.5 times MSE that could be considered as converging ones are in italics. Table 3 OCA Indexes for ASEAN and ASEAN+3 Calculated for the Period of 2003-2012 by the Model Proposed by Bayoumi and Eichengreen (1997) ASEAN

ASEAN+3

Pairs

OCA

Pairs

OCA

MT IS

0.005512 0.012284

LS IP

MS PS NT

0.012354 0.017527 0.018947

ST BM BT

Pairs

OCA

Pairs

OCA

Pairs

OCA

0.027324 MS 0.027772 MT

-0.00072 0.01523

CN LP

0.02739 0.027434

BH NS

0.029753 0.029778

NS LM PT

0.027866 PS 0.027966 IS 0.028002 ST

0.021767 0.022058 0.02257

LN IL LK

0.027602 0.027671 0.02772

KT BL HT

0.029911 0.029963 0.030223

0.019946 0.020163 0.020197

CM CS LP

0.028145 SV 0.028177 CV 0.028647 NT

0.022736 0.022894 0.024225

BI PT CP

0.027752 0.027788 0.027984

HN HV PK

0.030303 0.030424 0.030574

BS BC SV

0.020209 0.020214 0.02026

PV IV NV

0.029211 LT 0.030143 LV 0.030464 CL

0.024626 0.024651 0.025072

BK CI CK

0.028055 0.028061 0.028133

KV IP HP

0.0307 0.030731 0.030742

BV CV IM

0.021282 0.021608 0.023183

IL IN MP

0.030705 CT 0.030717 BC 0.031327 CS

0.025219 0.025246 0.025707

IK NP NK

0.028158 0.028562 0.028935

MP HI BN

0.03098 0.031485 0.031697

BP LT BI

0.023802 0.024085 0.024515

LN CP BL

0.033004 BS 0.033158 MV 0.033578 LM

0.025888 0.025962 0.025987

HS IN PV

0.02896 0.028966 0.028979

JK JT JM

0.032102 0.032817 0.033034

MN MV CN

0.025357 0.025481 0.025558

BN TV

0.035081 BV 0.035969 LS BM

0.025989 0.026076 0.026097

HL HJ BP

0.029083 0.029174 0.029299

TV JN JV

0.033941 0.034289 0.034749

NP CI LV

0.02556 0.025922 0.025975

CM HK BT

0.026232 0.027035 0.027101

NV IT CH

0.029408 0.029456 0.029519

JP CJ JL

0.035023 0.035184 0.035292

IT CT CL

0.02611 0.026663 0.026878

IM SK MN

0.027207 0.027218 0.027273

MK IV HM

0.029699 0.029723 0.02975

JS BJ IJ

0.035701 0.035784 0.038158

Notes. B—Brunei Darussalam, C—Cambodia, H—China, I—Indonesia, J—Japan, L—Lao PDR, M—Malaysia, N—Myanmar (Burma), P—Philippines, S—Singapore, K—South Korea, T—Thailand, V—Viet Nam.

 

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Discussion For both groups and for the considered period of 2003-2012, the applied model is statistically significant at F = 0.05. In the case of ASEAN with a response of 51% of the variables change, the closeness of the currencies is indeed affected at t = 0.10 by the output disturbances, the dissimilitude of the merchandise specific shares and the importance of the trade linkages and it is not affected by the size of the members. In the case of ASEAN+3, the variable change response was less (41%) and the closeness of the currencies is significantly affected at t = 0.11 by the output disturbances, the importance of trade linkages and the size, but not by the dissimilitude of the merchandise specific shares. Calderón, Chong, and Stein (2002) remind that some key criteria in the OCA literature are that countries should join a currency union if they have closer international trade links and more symmetric business cycles. According to Lee, Park, and Shin (2003), two of the most important determinants of business cycle synchronizations are intra-region trade share and trade structure similarity. In the present study, the sign of the dissimilitude of merchandise specific shares is negative (-) in both cases and according to the model, conception shall be positive (+), additionally, it is not significant in the case of ASEAN+3. The negative sign for this term was also reported by Ramírez (2011) when applied this model to study the integration process of Latin America. The reason may be that countries with more asymmetric structures of production have smaller business cycle correlation as concluded by Calderón et al. (2002). The calculated OCA indexes are comparable but smaller in comparison to the reported for European Community (EC). The standard error of both models is less than half of the one obtained for the EC, then the “convergence” parameter is stricter. According to the calculated OCA indexes, during this period: in ASEAN, 2% of the bilateral pairs are converged economies (Malaysia-Thailand opposed to the results by Bayoumi and Eichengreen 1968-1998), 58% are converging and 40% are not ready; in ASEAN+3, converged pairs are 1% (Malaysia-Singapore), converging are 49%, and not ready are 50%. In the ASEAN group, the economies are more or less moving symmetrically considering the participation frequency in the converged and converging pairs that are led by Singapore, Brunei, and Thailand followed by Cambodia and Malaysia. Vietnam and Indonesia are in the middle. Laos and Myanmar are among the not converged with Philippines (the more far). In ASEAN+3 group, Cambodia leads integrating the converged and converging pairs followed by Singapore and Malaysia, then Laos, afterwards Thailand than Brunei. In the middle is Indonesia and Korea. Meanwhile, more frequently integrating the not converged pairs is Philippines, Myanmar, Vietnam and the more far economies are China followed by Japan. Singapore is definitely one of the economies that is moving close with the others in both groups as already predicted with the same or different methodologies. It is also remarkable that the tendency to symmetrical currency movement observed from Brunei and Thailand among the ASEAN members and from Cambodia among ASEAN+3 members. And the countries that are converging are also mentioned in several papers, particularly in the ones that recommended a gradual process. In the group of 10, Philippines is clearly identified as not ready yet for OCA like other authors already have reported. In the group of 13 also but sharing the stage with Myanmar and Vietnam and not as far as China and Japan. In fact, according to the present analysis, the yen bloc in ASEAN+3 is the least possible peg, opposite to the results reported by Kwan (1998) quoted by Lee and Azali (2007).

 

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Considering just the “α” values and directly evaluating them against the US dollar up to 2.5 times, the standard error of the models, 70% of the ASEAN currencies and 67% of the ASEAN+3 ones are moving symmetrically with it. This was also reported by Obiyathulla Ismath Bacha (2008) cited by Thiumsak (2014). But it is a fact that depending on the method applied and the grouping of countries and the period of study, the results may vary.

Conclusions Many authors study the feasibility of OCA, but the conclusions of this paper do not pretend to suggest any political decisions regarding a single currency, just to establish some facts about economic integration by using the empirical model proposed by Bayoumi and Eichengreen. According to the results, from 2003 to 2012, nearly half of the ASEAN and ASEAN+3 members have moved symmetrically when analyzing their OCA indexes as function of the four proposed economic variables whose significant effect changes according to the characteristics of each group. Among 10 or 13 members of these two groups, the output disturbances and the trade linkages are important to understand the symmetry of their currency movements as the theory predicts. Nevertheless, also observed by some researchers, the synchronic advantage that may be reflected in the shares of merchandise exports is not favoring the closeness of their currencies and for the ASEAN+3 has not even a significant effect. Finally, the size of the economies is not a significant matter when talking among the ASEAN members, but becomes important in ASEAN+3 and according to the theory in such conditions, smaller countries may benefit more. It is clear that according to the OCA criteria applied and the model used as well as the period of study, the conclusions may vary, and therefore extrapolations are risky. Further studies must be done, especially if ASEAN may become a region with free movement of goods, services, investment, skilled labor, and free flow of capital.

References Achsani, N. A., & Partisiwi, T. (2010). Teasing the feasibility of ASEAN+3 single currency comparing optimum currency are and clustering approach. International Research Journal of Finance and Economics. Retrieved from http://achsani.blog.mb. ipb.ac.id/files/2010/08/irjfe_37_08.pdf Alesina, A., & Barro, R. (2002). Currency unions. Quarterly Journal of Economics, 117(2), 409-436. Alvarado, S. (2014). Inference of the ASEAN integration towards AEC 2015. Proceedings from the 3rd International Conference on Business and Communication. Entrepreneurship Beyond Boundaries: Towards ASEAN Economic Community 2015. April 23-24, Malaysia. Retrieved from http://icbc.atmajaya.ac.id/wp-content/uploads/2014/Proceedings_of_the_3rd_ICBC 2014.pdf Association of the Southeast Asian Nations (ASEAN). (2009). Road map for ASEAN community 2009-2015 (p. 112). Proceedings from ASEAN Summit. March 1, Cha-am, Thailand. Association of the Southeast Asian Nations (ASEAN). (2013). The ASEAN community 2015. The ASEAN Secretariat, Public Outreach and Civil Society Division, Jakarta, Indonesia. Bayoumi, T., & Eichengreen, B. (1997). Ever closer to heaven? An optimum-currency-area index for European countries. European Economic Review, 41, 761-770. Retrieved from http://www.ecares.org/ecare/personal/sapir/evercloser.pdf Bayoumi, T., & Mauro, P. (1999). The suitability of ASEAN for a regional currency arrangement. International Monetary Fund Working Paper 1999, WP/99/162. Retrieved from http://www.imf.org/external/pubs/ft/wp/1999/wp99162.pdf Calderón, C., Chong, A., & Stein, E. (2002). Trade intensity and business cycle synchronization: Are developing countries any different? Chilean Central Bank, Working Papers, 195. 12/2002. Retrieved from http://www.bcentral.cl/ eng/studies/working-papers/195.htm

 

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Edwards, S. (2011). Exchange rates in emerging countries: Eleven empirical regularities from Latin America and East Asia. National Bureau of Economic Research Working Paper 17074. 5/2011. Retrieved from http://www.nber.org/papers/w17074 Eichengreen, B. (2006). The parallel currency approach to Asian monetary integration (p. 13). Retrieved from https://www. aeaweb.org/assa/2006/0107_1015_1303.pdf Gordon De Brower. (2001). Debating financial markets and policies in East Asia. In Gordon De Brower (Ed.), Financial markets and policies in East Asia. New York, USA: Routledge. Hamilton-Hart, N. (2006). The Chiang Mai Initiative and the prospects for closer monetary integration in East Asia. In B. Fort and D. Webber (Eds.), Regional integration in East Asia and Europe. Convergence or Divergence? (pp. 109-128). Oxon, Great Britain: Routledge. Han, K., & Lee, Y. (2010). East Asian monetary integration and the composite index of OCA criteria. Korean and the World Economy, 11(2), 297-339. Retrieved from http://www.akes.or.kr/akes/downfile/4_2.pdf Kawasaki, K. (2012). Are the ASEAN plus three countries coming closer to an OCA. Retrieved from http://www.rieti.go.jp/en/publications/summary/12050008.html Lee, G., & Azali, M. (2007). A currency union in East Asia (p. 10). Department of Economics, Faculty of Economics and Management, Universiti Putra Malaysia. Retrieved from http://econ3.upm.edu.my/kelasmaya/ sumberkursus/A01765/ECN4149/Optimum_Currency_Area_upm.doc Lee, G., & Azali, M. (2012). Is East Asia an optimum currency area? Economic Modelling, 29(2), 87-95 Retrieved from http://ssrn.com/abstract=2139231 Lee, J., Park, Y., & Shin, K. (2003). A currency union in East Asia. ISER Discussion Paper, 571. Retrieved from http://ssrn.com/abstract=396260 Moe Chint, M., Rizov, M., & Willenbockel, D. (2008). Exchange rate volatility and exports: New empirical evidence from the emerging East Asian economies. Middlesex University Business School, Institute of Development Studies ant University of Sussex. March 2008. Retrieved from http://mpra.ub.uni-muenchen.de/9014/1/MPRA_paper_9014.pdf Mundell, A. R. (1961). A theory of optimum currency areas. American Economic Review, 51(4), 657-665. Retrieved from https://www.aeaweb.org/aer/top20/51.4.657-665.pdf OEC (Observatory of Economic Complexity). (2014). Retrieved from http://atlas.media.mit.edu/ Ogawa, E., & Kawasaki, K. (2007). East Asian currency cooperation (p. 16). Japan. Retrieved from http://aric.adb.org/pdf/ seminarseries/SS10paper_East_Asian_Currency.pdf Pike, F. (2011). Empires at war: A short history of modern Asia since World War II (p. 225). London: I.B. Tauris & Co. Ltd. Ramírez, X. (2011). The Latin America integration processes: Comparative analysis from the optimal currency areas theory. Doctoral thesis. Department of Economy and Finances. Retrieved from http://www.tdx.cat/bitstream/handle/ 10803/9315/Tesis_XRR_%2810-12-13%29.pdf?sequence=2 Saltos, H. A. (1986). Statistical inference (p. 116). Ambato, Ecuador: PIO XII Ed. Saltos, H. A. (1993). Experimental design (p. 171). Ambato, Ecuador: PIO XII Ed. Shimizu, K. (2013). Regional cooperation for financial and exchange rates stability in East Asia. German Institute for International and Security Affairs. Working paper. Retrieved from http://www.swp-berlin.org/fileadmin/ contents/products/arbeitspapiere/WP_FG7_2013_01_Dezember_Kenichi_Shimizu.pdf Telisa Aulia. (2008). Feasibility of forming currency union in ASEAN-5 countries (p. 28). Research Laboratory of Economics, Department of Economics, Faculty of Economics, University of Indonesia, Indonesia. Retrieved from http://staff.ui.ac.id/system/files/users/telisa.aulia/publication/currencyuniontelisa.pdf Thiumsak, T. (2014). The feasibility of optimal currency area for ASEAN after adopting the ASEAN Economic Community Blueprint in 2008. Does it facilitate the region to move closer to a single currency area? MSc thesis in finance. School of Economics and Management, Lund University. Retrieved from http://lup.lub.lu.se/luur/download?func =downloadFile&recordOId=4457848&fileOId=4457859 Volz, U. (2010). The standard approach: The theory of optimum currency areas. Prospects for monetary cooperation and integration in East Asia (pp. 49-102). USA: Masachusetts Institute of Technology. Wiranata, D. B., & Putranto, A. D. (2010). Implementation of optimum currency area criteria and its volatility: Case study ASEAN 5+3. Bulletin of Monetary, Economics and Banking. Retrieved from http://www.academia.edu/ 647811/IMPLEMENTATION_OF_OPTIMUM_CURRENCY_AREA_CRITERIA_AND_ITS_VOLATILITY_CASE_STU DY_ASEAN-5_3

 

Journal of US-China Public Administration, December 2014, Vol. 11, No. 12, 1005-1014 doi: 10.17265/1548-6591/2014.12.006

D

DAVID

PUBLISHING

The Formation of the Custodian and Settlement Infrastructure of the Russian Financial Market Karine Adamova Financial University, Moscow, Russia The functioning of institutions of the financial markets and their interaction with a view to implementation of the main objectives of the market is provided by one of the constituent elements of the market, namely, the infrastructure of the securities market. The Russian securities market is going through a crucial point and provides a central post-trading infrastructure. In this paper, the author defines the notion of custodian and settlement infrastructure of the financial market, analyzes the modern state of this sub-sector of the financial market, and formulates problems of development of the custodian and settlement institutions of the Russian financial market, in particular in connection with the entry into force of the federal law “On the Central Depositary”. The author defines the place and role of the Central Depositary and its impact on the level of development of the market in general and the formation of the machine in Russia, at the same time, it shows the world experience in building custodian and settlement systems and the integration of the Russian custodian and settlement infrastructure and global stock architecture. Keywords: custodian, securities market, the Central Depositary, registrars, the National Settlement Depositary, PARTAD (Professional Association of Registrars, Transfer Agents, and Depositaries)

The modern financial market is a complex and multi-faceted system, which sometimes develops rapidly, as at the expense of internal resources as of and for the account of the generated external conditions and incentives. The Russian financial market is an extremely growing and developing market. This paper is devoted to research of custodian and registrar infrastructure as the backbone of financial architecture in developed and developing markets. So we will understand the main definitions, underline the current status, the main problems, the place, and role of the Central Depositary, research the integration processes and the main stream of integration of the Russian custodian and settlement infrastructure and global stock architecture.

The Concept (the Definition) of the Custodian and Settlement Infrastructure of the Financial Market The backbone of any economic system is its infrastructure, which allows you smoothly operate and develop. Thus, the operation of the financial market connected with the conduct by its participants of the various kinds of professional activity in the market, in particular, the activities of asset management, brokerage activities, and depositary activity. The functioning of institutions of the financial markets and their interaction Corresponding author: Karine Adamova, Ph.D., docent, Department of the Financial Markets and Financial Engineering, Financial University, Moscow, Russia; research fields: depositary-settlement infrastructure of the securities market, the global stock architecture, and globalization of financial markets. E-mail: [email protected]; [email protected].

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with a view to implementation of the main targets of the market is provided by one of the constituent elements of the market, namely, the infrastructure of the securities market. At that, the infrastructure of the securities market can be defined as a number of specialized organizations, supporting the activity of the professional participants in the financial markets, and providing the latest necessary services. The infrastructure of the securities market includes the system of market regulation, Depositary and Registrar and settlement and clearing systems, exchange and OTC (Over-The-Counter) Market trading systems, information and personnel systems and agencies. In a wider sense, here also you can enable auditing infrastructure, information infrastructure (rating and information agencies), and developers of specialized information products. The Depositary-Registrar system is a financial “sub”, which keeps records of the rights on securities as a kind of property and the rights of creditors to debtors, secured by the securities market in all their complexity. The Depositary-Registrar system in the securities market is the totality of the institutions: organizations pursuing depositary activities and organizations carrying out the activity on management of registry of holders of securities (1, The Regulations, 1997). The main task of the Depositary-Registrar system of the securities market is to act as a “witness”, confirming the presence and nature of the legal relations, which are the subjects of civil turnover in the securities market (we are talking about the relations, connected with the rights confirmed by securities, and the rights to securities as kind of property). This task is expressed in the following two main (“characteristic”) functions of the Depositary-Registrar system of the securities market: (1) Confirmation of the rights of creditors, expressed in the securities; (2) Confirmation of the property rights (and any other proprietary rights) of the securities as a kind of property. From this point of view, any person who performs these functions, carries out depositary activities and the referred to as the “Depositary”. Are only registrars and depositaries involved in the Depositary-Registrar system of the securities market? And is it properly to separate the clearing infrastructure from the Depositary-Registrar system of the securities market? This is a discussion question. Settlements on each deal concluded in the financial market consist of two parts: the settlement of securities and settlement of funds. In the author’s opinion, it is impossible to separate accounting and clearing infrastructure, as well as it is impossible to divide into two components of settlements for transactions in the financial market. In this connection, it is expedient to speak about such a sub-sector of the financial market, as the “custodian and settlement infrastructure” of the financial market, which in fact, is not only a set of accounting institutions (depositaries and registrars), but also the totality of clearing organizations.

Current Status of the Custodian and Settlement Infrastructure of the Russian Financial Market Modern custodian and settlement infrastructure of the Russian market is at a historic turn. Legally recorded the highest number of efforts to transform the current unsustainable segment of the financial market

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infrastructure in centralized system corresponds to all world standards of developed markets. Next is the market itself that will stimulate the development of technologies. From 2010 to 2011, there have been adopted landmark laws: Firstly, there is the federal law from 07.12.2011 No. 414-FZ “On the Central Depositary” (hereinafter, the Law on the Central Depositary); Secondly, there is the federal law from 07.02.2011 No. 7-FZ “On Clearing Operations”; Thirdly, it is the federal law from 21.11.2011 No. 325-FZ “On Organized Trading”. The initial reaction to the Law on the Central Depositary was ambiguous. Many experts are talking about a split of the market. This is especially felt in the ranks of the professional participants-members of PARTAD (Professional Association of Registrars, Transfer Agents, and Depositaries). The law introduced a monopoly on the maintenance of exchange settlements and interaction with the registrars as a nominal holder. And indignation of many registrars and depositaries, losing thus identified or for many substantial part of the business, are connected with the restriction of competition in the provision of their professional services. FAS (Federal Anti-monopolystic Service) is not denied, but the state agency would prefer to take a wait and see attitude and monitor the results of the implementation of this law. With all of this, you cannot deny the significant plus of the law—it simplifies the entry of foreign investors to the Russian stock market and improves the exchange infrastructure. Adoption of the Law on the Central Depositary has entailed a further detailed work of the Ministry of Finance on the procedure of conferring the status of the Central Depositary. In June 2012, the mentioned document entered into force (2, Order, 2012). At the moment of receiving the status of a Central Depositary, the applicant not later than December 1 should present the working plan for next year and bring its activities in compliance with the Law on the Central Depositary. The conditions of suspension and cancellation of the status of the Central Depositary are expected to be introduced at the legislative level. The following document in the rule-making process followed the adoption of the Law on the Central Depositary, and became the Order of the Federal Service for Financial Markets (FSFM) of Russia from 15.03.2012 No. 12-13/pz-n “On approval of the additional requirements to the order of formation of the committee of users of services of the Central Depositary and Requirements. The regulations on the committee of the users of the services of the Central Depositary” (3, Order of the FSFM, 2012). The committee users of the services of the Central Depositary are the institution through which clients-depositors of the Central Depositary will be able to influence the adoption of such documents, as the terms and conditions of depository activity, tariffs for the services, etc. For the elapsed time from the moment of occurrence of the first depositary in the Russian market, prior to the adoption of the Law on the Central Depositary in the Russian market, formed the only institution that without adoption of the law was seen by the participants of the market as a Central Depositary. The institute became Closed Joint-Stock (CJSC) “The National Settlement Depositary”, the depositary, which grew out of depositary unit Moscow Interbank Currency Exchange (MICEX), originally created for the service of the accounts of the professional participants—members of the stock exchange MICEX, which kept records of government securities.

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CJSC “The National Settlement Depositary” in August 2012 filed papers in federal financial markets service in the status of the Central Depositary [4, National Settlement Depositary (NSD), 2012]. The market expects the development of the situation.

Problems of Development of the Custodian and Settlement Institutions of the Financial Market If the author now tries to identify and formulate the basic problems of development of the custodian and settlement institutions, then clearly we refer exclusively to those of them, which are connected with the entry into force of the new legislation in the period from 2010 to the end of 2012. The first and probably, the main problem associated with the activities of registrars. Again, the same question of the conflict of interests of the two kinds of institutions—depositaries and registrars—which is not just that, but largely bare in connection with the introduction of the Central Depositary, for which introduced monopoly on the opening of accounts of the nominal holder in the registers on a large number of securities. In connection with reduction of the range of clients, as well as in connection with the introduction of certain procedures of interaction between the Registrar and the Central Depositary, registrars have to expand the spectrum of provided services, to revise the conception of running your own business and its positioning in the market, actually reasserting oneself its place in the Depositary-Registrar system of the financial market. By the government of the concept of an international financial centre in Russia, it implies the creation of a centralized Depositary-Registrar system. And any centralized system—not necessarily financial—has some of the kernel. And that is the core of the system of accounting and settlements which will become the Central Depositary. What will allow registrars to remain in the market? Such an infrastructure unit, as the registrar, the need of the market, otherwise the chain of interaction “the issuer-the registrar-a Central Depositary-custodian-broker-investor” may be broken, as a consequence, lead to violations, failures, and even in the blocking of the work of the whole infrastructure. In spite of the fact that in the law, there are certain norms, which may be freely interpreted by the market participants, as priority issues that require attention from the current perspective can be identified such as: (1) Unification of operational standards for all market participants; (2) Formation of clear instructions regarding the technical implementation of operations; (3) Approval of control procedures; (4) Provision of operational interaction in carrying out of corporate actions. Not sufficiently clear point is issuer’s access to information from the registry. Why the issuer, responsible for its shareholders, dealing with corporate issues, does not have the right to receive the information about all its shareholders at any time? If these problems will not be solved, the Central Depositary will become the second service organization for the issuer. Question: Whether is it necessary to the market? This will lead to the concentration of all operations on a single party and the concentration of all risks. As part of the development of electronic document circulation between the registrar and the issuer has been prepared, and discusses by the professionals of the market of the bill on amendments to the law “On joint stock companies” (5, Federal Law, 2012), which provides the opportunity to conduct a series of procedures,

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connected with the preparation and holding of the general meeting of shareholders, in electronic form. Still one of the current problems is the problem of correlation of the standards of depositary activity of the national Central Depositary of the Russian market to the international depositary systems. One of the last and the main issues is the question of competition, which also makes to boil market participants. The Federal Antimonopoly Service of Russia has expressed their comments during the discussion of the draft of the Law on the Central Depositary. However, they remained without attention and FAS took a wait-and-see policy. After the adoption of the law, the FAS will oversee its implementation. In case there are risks associated with the restriction of competition, then the FAS will make a decision about further actions. It should be noted that for the past period of development of the Russian financial market from the beginning of the 90s of the last century to the current historical moment of creation of Institute of the Central Depositary, we have made a huge breakthrough that developed economies have done for centuries. In comparison with the problems behind the decision of the current issues, it looks a lot easier.

Place and Role of the Central Depository and Its Impact on the Level of Development of the Market in General and the Formation of the International Financial Center in Russia Perfect model of infrastructure, which is good for all participants of the market, there is no and it is a fact. Each market develops systems that have been formed in accordance with country-specific historical factors, etc. And any of them have own “pros” and “cons”. But the process of integration of the capital market dictates its own conditions. For efficient cooperation in the international financial market, it requires a certain set of correspondences to local markets. The development of these correspondences, as well as the definition of approaches and recommendations for market participants engaged in various international organizations, associations, and unions. Among them, there are Group of 30, European Central Securities Depositories Association (ECSDA), International Organization of Securities Commissions (IOSCO), International Social Securities Association (ISSA), The Giovannini Group, Bank for International Settlements (BIS), Committee for Payments and Settlement System (CPSS), European Central Bank (ECB), etc. If you try to define the place and role of the Central Depositary in the infrastructure of the financial market, according to the recommendations of the international professional associations and groups of specialists [in particular, a Group of 30 (6, Group of 30, 2012)], we are talking about a financial institution with a certain functionality. The main kinds of activities of the Central Depositary from the point of view of the world experience can be classified as follows: (1) Storage of documentary securities as in their own storage facilities and in other Central Depositaries, custodian banks, and the transfer agents; (2) The maintenance and management of a computerized system for accounting of securities and cash; (3) Keeping the cash accounts of customers and implementation of multi-currency transfers in the relevant national currency; (4) Delivery or transfer of securities against simultaneous payment in accordance with the instructions of the client; (5) Collection and distribution of dividends, interest income and the amounts of redemption of securities on behalf of its customers on their accounts;

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(6) Performance of functions of a nominee for clients on registered securities, adopted for the accounting of the Central Depositary; (7) Maintain relations/relations with the Central Depositary of securities in other markets to conduct international operations participants. The centralized system is needed, but the mechanisms of its formation can be absolutely different. The law marked a new stage of development of the custodian and settlement infrastructure of the securities market—stage of simplifying the calculations, increasing of efficiency of accounting, and reducing the risks and costs of all its participants. It defined the legal status of the Central Depositary, requirements, and its activities, functions, and the basis of the interaction with other participants of the securities market. The basic articles of the new regulation: 1. The emergence of the Central Depositary in the securities market. The legislator has given the Central Depositary of a number of exclusive features designed to ensure the stability and openness of the Russian stock market, such as: (1) Perform the functions of the Settlement Depositary; (2) Exercise the functions of the nominal holder in the registers of holders of securities of issuers who are obligated in accordance with Art. 30 of the federal law “In securities market” to disclose information in the form of material facts; (3) Carrying out the functions of the nominal holder in the register of owners of investment units or mortgage certificates, if the rules of trust management provide the possibility of their public circulation; (4) Opening of the deposit accounts of the foreign nominal holder for foreign organizations, which are international centralized systems of accounting of rights on securities and (or) settlements on securities or the Central Depositary, carrying out securities settlements by results of trades in foreign exchange, other regulated markets or clearing; (5) Storage of bonds of the bearer bonds with mandatory centralized custody to be admitted to public circulation. 2. Changes in the order of implementation of activities of professional participants of the securities market. 3. Ensuring the confidentiality of information. 4. Disclosure of information on the final beneficiaries of ADR/GDR issued on shares of Russian issuers. Thus, Moscow seven-league strides to become an international financial centre.

Integration Processes and Tendencies of Development of the Custodian and Settlement Institutions The basic integration processes that have taken place in recent years in the Russian market concerned the basic operators of the trading and custodian and settlement infrastructure currently being completed. These two processes took place publicly and each specialist of the market knows about them. The first process is the integration of stock exchanges of Russian Trading System (RTS) and MICEX. The second process is the integration of post-trading systems of the two above mentioned groups. The end of 2012 will mark the completion of these integration processes. The second process involves the integration of the three major professional participants of the market

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CJSC “NSD” (hereinafter—the NSD), CJSC “DCC (Depositary-Clearing Company)” (hereinafter—the DCC), and the Non-banking Credit Organization (NCO), “RTS Settlement Chamber” (CJSC) (hereinafter—SP RTS). The process of integration takes place in accordance with the strategic initiatives of groups of MICEX and RTS on the creation of the united stock exchange. The aim of integration is the increase of efficiency and competitiveness of the Russian post-trading infrastructure, creation on the basis of the merged companies of the Central Depositary of Russia, and the leading settlement depositary institute in the Russian stock market. The combined company—NSD, in the course of the integration of NSD, it first will be the second settlement depositary markets of the ex-RTS, then the only settlement depositary and settlement bank of the united stock exchange, and after that will fully serve its own customers and clients of DCC at the same time. Corporate governance of the combined company will be carried out on the basis of the principles set forth in the stockholders’ agreement in respect of the NSD, concluded by June 30, 2011 (7, NSD, 2011). The principles of integration: (1) Ensuring business continuity; (2) Maximum full consideration of the interests of clients of the integrated companies; (3) Joint work of the companies; (4) Transparency of the process of integration; (5) Collegiality of decision-making. Integration stages: It is supposed at first, there will be operational integration, which can be divided into four main stages: (1) Launching the mechanism of integration; (2) Translation of settlement business DCC in NSD; (3) The beginning of the operation in the mode of the combined company; (4) Development of the united company in accordance with the approved strategy. At the end of the year, it is planned to finally solve the question of the legal status of DCC. The main advantages of integration for the participants of the market: (1) The creation of a single product line; (2) Increase of efficiency of activity and the reduction of costs of market participants. Terms of the integration of NSD and DCC: The integration process involves a number of key milestones and dates: (1) II quarter of 2012—the beginning of performance of functions of a settlement depositary on the part of NSD on the market standard, the preservation of the depositary functions of a settlement depositary on the market standard (T + 4) in parallel DCC with the NSD, as well as the function of an authorized depositary for trading on the main market of MICEX (T + 0); (2) September 3, 2012—termination by the DCC fee schedule the execution of functions of a settlement depositary for the standard market, the preservation of the depositary functions of the authorized depositary for trade in the markets of standard and core, as well as stops acceptance of securities as collateral assets transactions. NSD becomes the only settlement depositary of the joint exchange for these markets; (3) October 1, 2012—the beginning of the provision of NSD services for settlements on the conditions of DVP (please add the full name) in a currency (the launch of services similar to that available in DCC). Parallel maintenance of the two payment schemes DVP-NSD and DVP-DCC bridge;

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(4) December 1, 2012—termination by the DCC rendering services of DVP-DCC bridge. With the account of requirements of the Law on the Central Depositary to the candidate for the status of the Central Depositary, at the present time, the only bidder is an NSD, it meets all requirements to the candidate for the status of the Central Depositary. The third integration process about which the market spoke in the autumn—creation of a mega-regulator—unification of the Federal Service for Financial Markets and the Bank of Russia.

The Place and Role of the Custodian and Settlement Institutions in the Global Stock Architecture What is the global stock architecture? The global stock architecture is a huge reservoir of the global financial market, on which depends the viability and the continuous development of the market, financial institutions, financial instruments, and which consists of two main elements: the network of stock exchanges (trading systems) and the international custodian and settlement system (post-trading systems). At the present time in the world economy formed the structure of the capital markets, within which there are two types of trading systems: global and regional. Each type has its own market niche and economic specialization. What is the role of the custodian and settlement institutions in the global stock architecture? The quality of the custodian and settlement system in any developed or developing market determines the amount of the transaction costs and competitiveness of trading systems. The functions of the accounting and settlement systems in the global stock architecture: (1) Confirmation of rights of investors on financial assets; (2) Accounting of financial assets; (3) Settlements on transactions with financial assets; (4) Clearing of financial liabilities arising from transactions with financial assets; (5) Netting of financial obligations; (6) Payments related to market transactions with financial assets.

Modern Models of the Custodian and Settlement Systems Analyzing the developed financial markets and systems of these markets, we can distinguish several types of organization and construction of the custodian and settlement systems. European German model completes the vertical integration of trading and post-trading operations in the context of commercial companies. Such a structure is characteristic for the markets of Italy, Germany, and Spain. Exchange controls all stages of the business process (clearing, settlement, and custody), owning the controlling package of shares in commercial organizations. In the year 2000, the German Stock Exchange acquires International Depositary Cedel and combines it with the German Central Depositary (in which it already owned a controlling package of shares) in the international Central Depositary Clearstream. She also owns the clearing organization Eurex Clearing. The German Stock Exchange is a company with a broad shareholder base. In Italy and Spain, the national stock exchange is managed by a syndicate of national banks. European English model is horizontal integration of commercial companies. The most striking example is the clearing organization CREST, which is the Central Depository for the British and Irish markets and is controlled by the participants-users. In 2001-2002, Euroclear Bank teamed up with Sicovam (France), Negicef

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(the Netherlands), CREST (UK), and CIK (Belgium). Formed the holding company of a Euroclear ED in the national and international CSD is composed as subsidiaries. In 2003, the English LCH has teamed up with the French Clearnet and the Dutch clearing organization into a single company LCH.Clearnet. Now Euroclear Group includes a number of companies, providing settlement and custody services in the United Kingdom, France, the Netherlands, Belgium, and other countries. The merger of LCH and Clearnet is seen as an important step toward the creation of a pan-European clearing organization. In the past, the big work was conducted on the formation of the unified system platform. Also, the consolidation of the settlement systems of Belgium, France, the Netherlands, the UK, and Ireland was maintained. This successfully completed project will serve as a stimulus for the merging of the Central securities depositories on a wide scale, which would significantly reduce the costs of international transactions. The developed standards could become the basis for a large European project. Works on the creation of a common platform of the Central Depositary for the exchange of all countries of the Euroclear operator were completed in 2011 (8, Euroclear, 2012). The American model is a vertical integration of post-trading services in the framework of the non-profit organization. It is characteristic for the USA, where Brussels (the Depository trust and clearing Corporation, formed in 1999) at the same time controls the Central Clearing Counterparty (NSCC) and the Central Depositary (CSD) for all trading systems (shares) of the country. These three legal persons have the same group of managers and a single board of directors, as well as the united corporate services (legal, financial, and audit). The existence of one of the clearing organization was challenged in court on the basis of the antitrust laws of the United States. However, the court decided that the competition is of a secondary importance in comparison with the efficiency and stability of settlement and clearing infrastructure. Today, the structure of the stock markets in the United States is characterized by competition exchanges and trading platforms in a Central Clearing Counterparty and the national Central Depositary. To what model does the Russian financial market come? The conditions of the world financial center of the Russian market and its accounting and settlement infrastructure, in the author’s opinion, will be able to demonstrate the most efficient in the conditions of formation of horizontally integrated system. The current stage of development of our infrastructure is based on integration processes and the centralization of the accounting system, the most consistent with this model.

The Integration of the Russian Custodian and Settlement Infrastructure and Global Stock Architecture The Russian stock market is largely integrated into the global financial system. According to experts, a few years ago up to 80% of all deals on the shares of Russian companies was performed on foreign exchanges in London, Frankfurt, and New York. Recently, thanks to the vigorous efforts of the FSFM of this figure fell to less than 50%. The share of “foreign” money in the Russian stock market remains in the range of 70%-75%. As in Russia is absent the Central Depositary, and existing settlement depositary does not have direct links with the Central Depositaries of developed countries, the de facto integration of the Russian stock market in this system so far has been through and under the control of the transnational banks and global custodians. As the reform of settlement and clearing systems, as well as the creation of a Central Depositary, they will increase the competitiveness of the Russian financial market. With the advent and development of Institute of the Central Depositary and the formation of relations with the Central Depositaries of other countries will have an

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additional channel for implementation of cross-border transactions and integration into the world system of the Russian market, undoubtedly, that will have a positive impact on the development of all sectors of the Russian economy. It is with this purpose of Part 4 of Article 25 of the Law on the Central Depositary condition stipulated on the opening of the July 1, 2012 accounts of the foreign nominal holder of foreign organizations included in the list approved by the FSFM and the relevant following requirements: (1) Is an international, centralized system of accounting of rights on securities and (or) settlements on securities; (2) Are in accordance with the personal law of the Central Depositary of securities and (or) perform calculations in securities on the results of trading on foreign stock exchanges or other regulated markets or carry out clearing of the results of such trades. The discussion of the issue of access to the Russian market of Western institutions began in the second quarter of the current year. The largest representatives of these systems are Euroclear Bank SA/NV (Belgium) and Clearstream International SA (Luxembourg). In August, the Federal Service for Financial Markets of July 27, 2012, No. 12-65/PZ-n “On approval of the list of foreign organizations, which the Central Depositary shall open a depo account of a foreign nominee”, was registered by the Ministry of Justice of the Russian Federation. This order lists 67 foreign organizations.

Conclusions So, now the Russian market is living with the Central Depository CJSC “NSD” for two years already. And a new era, not be afraid of this word, the development of the Russian market will show us the readiness to the formation of an international financial centre on the basis of laid the foundations of the custodian and settlement institutions.

References Federal Law. (1995). On joint stock companies (with changes dated on December 29, 2012). Rossiyskaya Gazeta, 5976. News press-relies. (2012, August). Retrieved from https://www.nsd.ru Order of the FSFM of Russia. (2012). On approval of the additional requirements to the order of formation of the committee of users of services of the central depositary and requirements. The regulations on the committee of the users of the services of the Central Depositary. Rossiyskaya Gazeta, 13. Order of the Ministry of Finance of Russia. (2012). On approval of the procedure for assigning the status of the central depositary (registered in Ministry of Justice of Russia on May 23, 2012, No. 24289). Rossiyskaya Gazeta, 124. See Point 2.1. (1997). The regulations on depositary activities in the Russian Federation. Approved by the decree of the Federal Commission for the securities market. October 16. The Regulations on Depositary Activities in the Russian Federation. (1997). Approved by the Decree of the Federal Commission for the Securities Market dated October 16, 1997, No. 36. Retrieved from http://www.consultant.ru/

Journal of US-China Public Administration, December 2014, Vol. 11, No. 12, 1015-1021 doi: 10.17265/1548-6591/2014.12.007

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Client Orientation as a Form of Spiritual Needs of Personnel in Labor Irina Kotlyarevskaya, Evgeniya Yazovskikh Ural Federal University, Ekaterinburg, Russia The paper considers some grounds of the inside organization marketing concept as a management system that is aimed at meeting the needs of the company’s personnel in labor. These needs are based on three levels [physiological (highest), social (middle), and spiritual (lowest)] and each level has its own revolutionizing forms of the development of needs in labor (abstract, wants, and demand). Having analyzed a great deal of research materials concerning employees’ motivation at Russian enterprises, a native higher educational establishment Ural Federal University named after the first President of Russia B. N. Yeltsin was one of them, it can be concluded that this research does not reflect an estimation degree of meeting employees’ needs in labor. Moreover, there is no motivation of client orientation in them that is considered as a form of spiritual needs of employees in labor. The essence of this form is determined by some objective and subjective factors. Keywords: needs in labor, employees’ motivation, client orientation marketing, consumer’s behavior

Specialists’ attention to the phenomenon of client orientation has increased due to including another element in marketing mix personnel. Marketing is said to become a zone of responsibility of all the company’s personnel rather than narrow specialists. Research on this topic is constantly conducted and is published in both the internet and journals. However, marketers’ opinions on the essence of the phenomenon of client orientation are different. The definition of client orientation varies. On the one hand, it means relations, process, and instrument, but on the other hand, it implies result, index, and business strategy. These differences in notions do not develop a marketing theory, namely a paradigm of relations, they just impede effective application of client orientation in practice. The main goal of this paper is to interpret client orientation in the system of inside organization marketing aimed at meeting personnel’s needs in labor, which are developed in different forms including the form of client orientation. The structure of this research is the following: Firstly, it is methodology of research of inside organization

Corresponding author: Irina Kotlyarevskaya, Ph.D. in economic sciences, professor, Head of Marketing Department, Ural Federal University named after the first President of Russia B. N. Yeltsin; research fields: marketing, strategic marketing, methodology of managing marketing in Russia, network of business, modern problems of management and marketing, marketing analysis, marketing in innovations, and client orientation. E-mail: [email protected]. Evgeniya Yazovskikh, Ph.D. candidate in economic sciences, associate professor, Marketing Department, Ural Federal University named after the first President of Russia B. N. Yeltsin; research fields: theory of organization, organizational behavior, management, marketing (client orientation), entrepreneurship, competition, and state regulation of business. E-mail: [email protected].   

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marketing aimed at meeting personnel’s needs in labor at three levels of its development and client orientation as a form of spiritual needs of personnel in labor; secondly, it is the analysis of secondary data concerning motivation of employees at Russian enterprises that include the formation of their client orientation.

Methodology The survey of client orientation represented in scientific literature (Rozhkov, Rebiazina, & Smirniva, 2014) shows that marketers try to study this phenomenon in the frames of competence doctrine. It is considered that the best way of its studying is logics of needs doctrine. The methodology of research is based on worked out theoretical approach to define the essence of inside organization marketing (as well as external marketing) that represents managing activity aimed at satisfying personnel with labor (Kotlyarevskaya, Yazovskikh, & Arnautova, 2014). There are evident coincidences of stages of the development of needs in labor with the known classification implying evolutionary transition from physiological level (necessity to work), to social level (interest in labor) and finally to spiritual level (enjoyment in labor). Many-sidedness of needs in labor, hence, stimuli of their development, is determined not only by the hierarchy of their stages and the state of correspondence of abilities but also by the forms of their subjectivity that needs in labor acquire while being gradually matured on every stage of the hierarchy: starting with the abstract form, then comes from the form of desires, and finally is the form of demand. The levels and forms of the development of personnel in labor are shown in the matrix (see Figure 1) that is an open system of forms of these needs. Methodology of inside organization marketing implies moving the accent in managing the personnel from forming their skills in labor to meeting their needs in it, i.e., requirements and expectations of the employee from the character and contents of his labor activity. Defining the development level of personnel’s needs in labor and the forms corresponding to it through their satisfaction, it is possible to form personnel’s working abilities. According to this approach, if the employee does not need to develop any ability, this ability will not be productive. The same thing can be said about client orientation. Not every employee can possess it. For this function he must have, at first, needs in client orientation whose satisfaction is the process of forming his ability to interact with him. Otherwise, client orientation will just be a formal characteristic of employee’s working behavior. Following only the codes of client orientation worked out at the enterprise, the employee will not be able to become really client orientated. While communicating with the customer, he will only make a contact, smile politely but unnaturally, offer the assortment he has without trying to understand his client, visualize the attributes of his products or service, and understand what problems the customer would like to solve buying these products. In methodology of the relationship paradigm of inside organization marketing, client orientation of the company’s personnel is such an interaction with the client that results in profound understanding his interests, return reactions for setting mutual values making and meeting the needs completely. In this case, not only meeting the client’s needs in profits he gets from this interaction is meant, but also meeting the company’s needs in increasing its profits is implied. Such an interpretation of the essence of client orientation enables to consider it as an attributive characteristic of the personnel as the inner necessity of their interaction with the consumer, as needs of making  

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the consumer loyal, trustful, and devoted to the company in order to satisfy his needs in such a reactive cooperation. Loyalty and client orientation are often considered as a pair phenomenon in some articles. Such an approach is supposed to be fair, but it needs explanation for the personnel as the inner consumer. In communication with external consumer, client orientation and loyalty are interconnected as “stimulus-reaction” and imply two or more subjects of these relations. For the inner client, this connection appears, firstly, as indirect; secondly, as multi-subjective; and thirdly, reactive and reciprocal but not in any case. In this case, client orientation and loyalty change their consistency. To form client orientation of the employee, his loyalty to the company is necessary. But loyalty not always implies client orientation. The employee can be loyal to the company but not client orientated to the external client. Loyalty becomes an imperative to client orientation in the situation when needs of the employee to labor develop to spiritual. At the first two levels of these needs, loyalty provides its development but expresses benevolent and mutually beneficial attitude of the employee to the company, to be short. Relative independence of loyalty and client orientation of the inner employee are explained by the multi-subjective character of their possessor. However, one should admit that loyalty of the external client, as reaction to client orientation of the employee, may not appear either. While developing loyalty as benevolent and mutually beneficial attitude of the employee to the company is connected with the level development and formation development of his needs in labor but coincidence of loyalty and client orientation occurs at the highest spiritual level of these needs. According to this logics, client orientation will be a key competence of the company, providing it with competitive advantage, making marketers and client orientated employees work out, and introduce methods of the consumers’ behavior not only in the consumption sphere but also in the sphere of labor of the potential customer where his needs appear more and more often today, requirements to the choice and service of the consumer rationalizing his spare time. The main tendencies of the development of market needs, studied by the authors, have become the following: firstly, their complicity due to which one need makes appear another one thus becoming a complicated consumer’s problem; secondly, their status increases in social hierarchy of needs and hedonism (even in food products) and individualization (Kotlyarevskaya & Yazovskikh, 2013). In these conditions, only those employees can master methods of client orientation that have the highest level of the development in labor—spiritual where intellectual communication, creation, and self-realization admitted by others can be realized. Such employees try to initiate the relations rather than make a mere contact with their clients. A client for them is a person with all his requirements, hopes, expectations (that is valuable for the employee) and the relations with the client are the relations of partnership and collaboration. The marketing concept 3.0 worked out (Kotler, Kartajaya, & Setiawan, 2011) as marketing of human’s soul, raising him to the level of human’s aspirations, values, and spirit, is supported by the authors. This concept develops humanistic abilities of marketing that not only face a person to the production process but also convert this production from the production of the product to the production of a person as the main value of social life. The possessor of such abilities is a client orientated employee having spiritual needs to set up mutually beneficial relationships with the consumer that represent “both cultural and spiritual process” (Kotler et al., 2011).  

  Forms of the development of needs in labor Wants

Intellectual and consumer, Spiritual (highest)

intellectual and communicative, needs in creation and

Social (middle)

Physiological (lowest)

Aiming at professional knowledge and its improvement, interpersonal spiritual communication, attention and respect of other members of the group, creativity and

self-realization

self-expression

Needs in social functioning; status and role needs

Professional communication, good relations with colleagues and administration; needs in labor of definite quality and prestige

Institutional and consumer:

Demand

Arrangements of labor and a working place,

means of meeting physiological, convenient working conditions, supporting basic, vital needs

healthy life style Figure 1. Matrix of levels and forms of the development of needs in labor.

 

Decrease in priority of salary payment

Abstract

Increase salary payment

Levels of the development of needs in labor

+ additional (creative) leave

+ pre-school institutions for children, bonuses + prophylactic medical examination, own sport and health establishments

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To prove the approaches described above, numerous research of employees’ motivation at Russian enterprises with the accent on the analysis of such research in native higher educational establishments such as Ural Federal University named after the first President of Russia B. N. Yeltsin was studied (Vinogradova, 2011; Garina, Grishchuk, Kluchnikova, & Hagay, 2012; Doronina, 2009a; Doronina, 2009b; Dubitsky, 2004; Korzenko & Nuzhaeva, 2012; Kosyakin, 2006; E. V. Minko & A. E. Minko, 2014; Rebrov, 2011; Slinkova, 2009; Sushkina & Ignatov, 2006). The sphere of higher education was chosen by the authors, firstly because it concentrates personnel with a high level of the development of needs in labor; secondly, it supplies skilled personnel for a social and economic development of the country beginning, the process of forming the needs in labor and its supreme form—client orientation. The analysis of this research shows that specialists studying employees’ motives in labor emphasize those ones that are shown in the matrix: (1) To have good working conditions; (2) To get good salary; (3) To do interesting work; (4) To be appreciated at their true value by employers; (5) To have good relations with colleagues; (6) To have a possibility for a career promotion. However, the aim of this research, first of all, is searching for ways of adaptation of employee’s working orientation to employer’s production needs. It often happens that the analysis of personnel’s motives is substituted by research of employee’s satisfaction with employer’s activity and working conditions that he provides. Thus, in research, the priority belongs to hygienic factors (F. Herzberg) to motivating ones. Studying hygienic factors (that is implied in the title) dominates in annual research of personnel’s satisfaction with their labor at Ural Federal University named after the first President of Russia B. N. Yeltsin. It means that estimating such satisfaction cannot reflect completely estimating employee’s satisfaction of needs in labor, because the studied factors do not coincide with motivation and cannot increase it. Moreover, they can result in its decreasing if the employee is not met by them. To meet his needs in labor, the employee has definite requirements to hygienic and motivating factors that is why he can underestimate conditions and the contests of his labor not only because they are slightly represented by the employer but because he has no interest in them, i.e., they do not correspond to his requirements. In all fairness, it is worth noticing that nowadays, HR (human resources) specialists considering it as a key factor of the company’s competitiveness making some changes in their concepts where the basis is an increasing role of the employee’s personality, knowledge of his motivating skills, skills in forming and directing them according to the tasks the company faces. Such an approach implies that the main element inside the organization is an employee and outside the organization is a consumer of products; employee’s consciousness must be directed to the consumer rather than the head of the company, to initiative rather than to unthinking performance (Konovalova & Mitrofanova, 2014). However, such concepts exist only on the stage of being worked out. That is why such motivating regulators as responsibility, creativity, and admitting achievements are still considered very seldom. There is not any hint at motivation as a factor of development of personnel’s client orientation. A system of education, especially higher vocational education, must play an increasing role in making the  

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basis of client orientation for future specialists and induce students to it while their mastering their profession. However, in that research of employees’ labor motivation at universities that was analyzed, the motives connected with client orientation were not found. In this case, it is not a surprise that there are no them in research devoted to professional motivation of students (Bobkov, 2014; Gegel & Frolova, 2012; Eliseeva, 2005; Evanenkov & Kuszhanova, 2013; Kovziridze, 2011; Malinauskas, 2005). There is nobody to follow! But there are some objective factors influencing client orientation of the employee. To the authors’ minds, they were correctly defined (Popov & Tretyak, 2014). Those authors studied the phenomenon of low client orientation in BRICS (Brazil, Russia, India, China and South Africa) countries: Firstly, these are fast growing consumer markets that do not stimulate companies to form long-term relations with clients; secondly, poor competition for the consumer and market turbulence; and thirdly, dissatisfaction of the consumer with the quality of goods and services he gets. The outward signs of orientation to the client when the form of client orientation does not coincide with their contents, they are called by right as imitative or declared client orientation (Popov & Tretyak, 2014).

Conclusions The results of theoretical research showed that the concept of inside organization marketing is aimed at meeting the employee’s needs in labor and is different from the system of managing human resources aimed at forming labor abilities, implies another way of solving the problem of orientation of company’s employees to the market, to the client. The requirements of the employer to working abilities of the employee including his abilities to deal with the market, can have some sense if these requirements correspond to different levels and forms of employee’s needs in labor. It can be represented at three levels of its development where each level has its own forms of its expression. One of such forms of the spiritual (supreme) level of needs in labor is client orientation of the employee to such an interaction with clients that allows the employee to understand profoundly their interests, provoking a reaction in reply for mutual setting values and for complete meeting the needs. Such an interpretation of client orientation witnesses that not all personnel, even that is loyal to the company, can be client oriented. Imperativeness of this attitude of employees to the client appears only at the spiritual level of the development of their needs in labor. The results of the conducted empirical research of the secondary information concerning motivation of employees at Russian enterprises showed that national employers study personnel’s needs and ambitions poorly thus putting off, together with objective factors, solution of the problem of their market competences. The influence of political factors in form of economic sanctions on objective and subjective conditions of client orientation at Russian enterprises is the problem of the next research.

References Bobkov, O. P. (2014). A psychic and pedagogical model of forming educational and professional motivation of student at the economic university. Concept, 4, 14-32. Doronina, N. V. (2009a). About motivating aspects of labor quality of lecturers at higher schools. Economic Sciences, 4, 381-385. Doronina, N. V. (2009b). Estimating influence of motivation of lecturers at higher schools on quality of education. Problems of Modern Economics, 3, 456-459. Dubitsky, V. V. (2004). About motivation of activity (work) of lecturers at higher school. Sociological Research, 1, 119-124. Eliseeva, E. N. (2005). Problems of labor activity of students. Bulletin of Chelyabinsk State University, 7, 123-126. Evanenkov, S. P., & Kuszhanova, A. Zh. (2013). Motivation and conditions of students’ professional choice in Saint-Petersburg. Management Consultations, 6, 80-92.

 

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