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Friday, 17 August 2018

Governance woes behind US trade war

Illustration: Peter C. Espina/GT

For now, there is still no end in sight to the brewing trade war between the world's two economic heavy hitters. Ignoring voices of objection at home, the Donald Trump administration announced that the second tranche of tariffs on $16 billion in Chinese goods will take effect later this month. Though Trump has yet to fulfill his campaign promise to levy a 45-percent tax on Chinese goods, his logic on trade policy refuses to change.

The reason why the US has provoked and intensified the trade war lies in the incapacity of the global system. Specifically, division of labor in the globalized era has led to the exodus of the US manufacturing industry out of the country. Meanwhile, the US claims that China's "predatory" economy has developed itself into the biggest beneficiary in the system.

That's why the Trump administration insists on attacking China's "stealing" practice in the name of "safeguarding US national interests," regardless of the cost of torpedoing the existing international order.

The robust stock market and economic growth of the US as well as the decline in unemployment have further boosted Trump's confidence in escalating the trade war. His trade policy has gained more acceptance among Americans. However, the logic behind his trade war can hardly hold water.

The era of globalization has been an inevitable development of human society. As people in the global village are more interconnected, trans-regional flow of finance, technology, information, service and talent has re-optimized global production resources, inspiring the development of countries and regions.

The unprecedented development of productivity and international division of labor has prompted developed countries which boast capital and technology advantages to transfer their low-end industries to other countries where labor and land costs are relatively low. Then a great many multinationals have mushroomed, which has objectively precipitated the growth of developing countries.

Economic liberalism has become a paragon of democracy with which developed nations dwell upon with relish. It's also an important pillar for the postwar international order. When developed countries sat on the top of the industrial chain to reap benefits, they never complained about the unfairness of the system but instead became its most powerful defender.

Ironically, the US - the founder of the global system - has now become its most proactive opponent. The Trump administration attacks the "unfair" global system and views China as being complicit in bringing about the fall of the US manufacturing industry and loss of jobs. Such rhetoric has led people to believe that the stature of the US has fallen to a third world country's.

Globalization is not without problem. Apple is a paradigm of a globalized industrial chain, but it's not a nice story. Developing countries at the low end of the industrial chain can only get disproportionally meager profits while lucrative gains flow to developed nations. In this way, the US deficit is far less than the book figures.

More severely, low-end manufacturing has worsened the environment, putting the health of the public in jeopardy. But the US-led developed world just passed the buck.

Emerging economies like China are resigned to be just a factory of developed countries, so they work hard to develop hi-tech and produce high-value-added products to create a level-playing field with developed countries. This is the law of market economy, which, however, has become a threat to its national security and an enemy of its economy in the view of the US.

The strange logic can hardly justify itself.

Denying others a share of the spoils is not the essence of the era of globalization. If developed countries think there's something wrong with the global system, they can appeal to international organizations to carry out reform, instead of resorting to short-sighted practices like threatening with tariffs.

Trump's trade war actually stems from domestic conundrums notably industrial hollowing-out and loss of everyday jobs. The problems are not a result of globalization but of domestic mismanagement. It seems that forcing jobs back home will create jobs, but it can't last long because it will fail to stimulate the fundamental driving force of industrial development. If Trump can make more efforts at boosting the real economy instead of waging a trade war, he may get closer to "Make America Great Again."

Credit: By Zhang Tengjun Source:Global Times Published: 2018/8/15 The author is an assistant research fellow at the China Institute of International Studies. opinion@globaltimes.com.cn

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Thursday, 16 August 2018

Dr Mahathir's visit to China tomorrow to witness signing of 3 MoUs


Malaysia welcomes China's participation in transport projects: People stand beside the high-speed trains built by China Railway Rolling Stock Corporation (CRRC) in State of Perak, Malaysia, July 9, 2015



PM’s special visit to China


PRIME Minister Tun Dr Mahathir Mohamad is scheduled to be in Chi­na from August 17 to 21, during which he is expected to meet President Xi Jinping and Premier Li Keqiang.

The visit is special because Dr Mahathir is returning to China once again as prime minister after a 17-year gap. His last official visit to China as prime minister was in October 2001 to attend the Apec CEO summit.

Dr Mahathir is a regular visitor to China. In the 22 years of his first stint as prime minister (1981-2003), he visited China seven times. He visited nine more times after he retired, making it a total of 16.

This coming visit has an added significance because he is leading a different government and there are several touchy issues standing in the way of good relations between the two countries.

In his previous official visits, he was leading the Barisan Nasional government. In this visit, he is leading Pakatan Harapan which ousted Barisan in the May 9 general election.

Chinese leaders are familiar with Barisan. Back in 1974, it was the leader of this newly-formed coalition Tun Abdul Razak Hussein who made the ground-breaking visit to China. That visit resulted in Malaysia becoming one of the earliest countries in South-East Asia to recognise China.

Bear in mind that although Indonesia recognised China in 1950, their relationship soured and was suspended between 1967 and 1990. Singapore, a predominantly Chi­nese nation, recognised China only in 1990, and Brunei did so in 1991.

It was not an easy decision for Malaysia because it already had diplomatic relations with Taiwan since its independence in 1957.

The recognition of Taiwan was reflective of Malaysia’s pro-Western stance and staunchly anti-communist policy. The armed communist insurgency starting in 1948 did not help to endear Malaysia to China.

With the disbanding of the Malayan Communist Party (MCP) following the 1989 peace accord, which involved the MCP and the governments of Malaysia and Thailand, the Malaysian Chinese Association (MCA) became the last remaining vestige of the Chinese revolution in Malaysia.

It was no coincidence that while the MCP was fashioned after the Chinese Communist Party (CCP), MCA was the mirror image of the Chinese Nationalist Party, Kuomintang.

Abdul Razak’s own party, the United Malay National Organisa­tion (Umno), was staunchly anti-communist. Still, Abdul Razak pulled it off and received overwhelming endorsement from voters at the 1974 general election in which the enlarged Bari­san coalition was contesting for the first time.

So, given this very long history of mutually beneficial relationship and Dr Mahathir’s own affinity with China, his visit is not only special but also offers the two countries the opportunity to clarify and sort out issues that could stand in the way of good relations.

Dr Mahathir had wanted to visit earlier but time was not favourable. Proving his seriousness about wanting to put the relationship between the new Malaysian government and China on a good footing, he sent Tun Daim Zainuddin as his emissary.

Like Dr Mahathir, Daim is a familiar face in Beijing. Back in the 1980s during his first stint as Finance Minister, Daim took an active part in supporting China’s new role in international financial organisations like the Asian Deve­lop­ment Bank, World Bank and the International Monetary Fund.

During his visit to Beijing on July 18, Daim handed over Dr Mahathir’s letter to Premier Li and had discussions with Foreign Minister Wang Yi.

It is clear that neither China nor Malaysia would want the 44-year relationship to be jeopardised by issues that cropped up during the time of former Prime Minister Datuk Seri Najib Tun Razak.

Among these are the Chinese loans for the construction of the East Coast Railway Line (ECRL) and the little known Suria Strategic Energy Resources Sdn Bhd (SSER) pipeline project.

It is highly possible that China, in extending these loans and entering into construction agreements for the projects, was acting in good faith in line with its One Belt One Road (OBOR) policy but along the way, this was perverted by irresponsible elements in Malaysia and China.

Neither China nor Malaysia should suffer the embarrassment and financial losses caused by these people and their associates. The relationship between the two countries is too precious to be allowed to be soured by their irresponsible and criminal actions.

Dr Mahathir said in a recent interview with the Hong Kong-based South China Morning Post that his less-than-favourable view of some Chinese-backed deals, deemed overpriced and lopsided against Malaysian interests, did not mean he was hostile towards Beijing.

More recently, he said Malaysia would seek to do away with these projects if they continue to be unfavourable to the country and a burden to the people.

The Pakatan administration and the people of Malaysia must not be made to shoulder the burden of irresponsible acts of Najib and
As Dr Mahathir has pointed out, ­Malaysia and China developed “a very good relationship” during his first tenure as prime minister and there is no reason why this would not continue during his comeback era.

A. KADIR JASIN

akadirjasin.blogspot.com/akadirjasin.com

Dr Mahathir to witness signing of 3 MoUs during China visit


KUALA LUMPUR (Aug 16): Prime Minister Tun Dr Mahathir Mohamad will make an official visit to China from tomorrow until Tuesday (Aug 17-21, 2018) at China's Premier of the State Council Li Keqiang's invitation.

Malaysia's Foreign Affairs Ministry said in a statement today Dr Mahathir and Li will witness the signing of three memoranda of understanding (MoUs) to mark the strengthening of the Kuala Lumpur-Beijing strategic partnership. The MoUs are in the areas of agriculture and agricommodity, the statement said.

According to the statement, Dr Mahathir will be accompanied by his spouse Tun Dr Siti Hasmah Mohd Ali. The delegation includes Foreign Affairs Minister Datuk Saifuddin Abdullah, Primary Industries Minister Teresa Kok Suh Sim, International Trade and Industry Minister Ignatius Darell Leiking, Agriculture and Agro-based Industry Minister Datuk Salahuddin Ayub, Minister in the Prime Minister's Department (Law) Datuk Liew Vui Keong, Entrepreneurship Development Minister Mohd Redzuan Md Yusof and Perak Chief Minister Ahmad Faizal Azumu, according to the statement.

"This is the maiden visit by YAB Prime Minister to the PRC (People's Republic of China) after assuming office in May 2018. YAB Prime Minister visited the PRC seven times during his term as the 4th Prime Minister of Malaysia from 1981 to 2003.

"During the visit, YAB Prime Minister will be visiting Hangzhou and Beijing. In Hangzhou, YAB Prime Minister is scheduled to meet provincial leaders, undertake a visit to Alibaba Group Corporate Headquarters and Zhejiang Geely Holding Group. In Beijing, YAB Prime Minister will be meeting Premier Li Keqiang and President Xi Jinping respectively to discuss bilateral issues as well as regional and international issues of mutual interest," the statement said.

Chong Jin Hun / theedgemarkets.com


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Back to the future for Malaysia

Monday, 13 August 2018

Malaysia needs more childcare & daycare centres

https://www.thestar.com.my/news/nation/2018/08/13/malaysia-needs-more-childcare-centres-dpm-we-are-also-in-dire-need-of-qualified-workers-to-ensure-sa/
https://youtu.be/N6GSfiHN6mw

PUTRAJAYA: There is a dire need for more qualified childcare workers and registered childcare centres in the country, says Datuk Seri Dr Wan Azizah Wan Ismail.

The Deputy Prime Minister said that these shortages could adversely affect the safety and quality of care for Malaysian children.

“Data from the Welfare Department showed that up to June this year, the number of childcare workers looking after children four years and below is 16,873.

“Out of this, only 3,173 of them have the minimum qualification of a childcare course,” said Dr Wan Azizah, who is also Women, Family and Community Development Minister.


She was speaking at the launch of the National Childcare Centre Day 2018 themed “Equality” at the IOI City Mall here yesterday.

Dr Wan Azizah added that the rest of childcare workers in the country, all 13,700 or 80.19% of them, did not have the minimum qualification for the job.

She said the lack of qualified childcare workers contributed to the lack of registered childcare centres in the country.

“Calculations based on a census done by Malaysian Statistics Department showed that we need to have 38,333 registered childcare centres.

“However, the actual number at present is only 4,302,” she said.

Dr Wan Azizah said her ministry took a serious view on the safety of children at childcare centres and at the homes of childcare providers. “We are looking at the need to improve on the Child Care Centre Act and regulations on childcare centres to fit the current needs and situation,” she said.

She added that her ministry was also studying how to utilise information and communication technology to be included in the childcare system in the country. The Star

GST vs SST. Which is better?


MALAYSIA’s decision to revert to the Sales and Service Tax (SST) from the Goods and Services Tax (GST) will result in a higher disposable income due to relatively lower prices it will incur in most goods and services.

Consumers will have a choice in their consumption – by paying service taxes based on their affordability and ability.

The coverage of GST was comprehensive and it covered too wide a sector. While it was able collect a sustainable sum of RM44bil for the country, it was not people-friendly.

The narrowing scope of the SST will at most, collect approximately RM23bil for the country but it will indeed relieve the people – so SST is needed by the people.

Methodology of SST

The Sales Tax Bill and the Service Tax Bill have just been passed at the Dewan Rakyat and are expected to get approval from the Dewan Negara when it convenes on August 20.

This leaves little room for businesses and entrepreneurs to get ready for the new tax regime in less than a month’s time.

Therefore, it is of utmost importance to understand the concept and mechanism of SST as stated in both the Bills.

SST comprises two legislations. The sales tax is imposed on the manufacturing sector as governed by the Sales Tax Act 2018 while service tax is imposed on selected service sectors, with one of the most notable ones being the food and beverage (F&B) service providers.

The Service Tax Act 2018 would govern the selected service providers and the details would be gazetted in the subsidiary legislation, PU(A) Service Tax Regulations 2018.

Finance Minister Lim Guan Eng has announced that the threshold for F&B providers is set at annual turnover of RM1mil.

This would mean that those who operate with less than RM1mil turnover would not charge service tax at 6%.

This translates into hawker food, cafes, take aways or food trucks being able to provide F&B at lower prices as compared to the GST regime of 6%. Consumers are deemed to be given an option to pay service tax or not, depending on their consumptions at places such as fast food outlets, restaurants or food courts.

Generally, living costs will be relatively lower in the SST era as the B40 group of consumers would certainly be relieved in their daily eating affair.

The existing GST regime sets up the threshold at RM500,000 per year, meaning that almost all restaurants, including simple mixed rice outlets, would have a GST of 6% imposed. The service tax regime would not impose service tax of 6% on service charge rendered in any restaurant or café operator.

Service charge in its true essence, represents tips or gratuity to the waiters working in the restaurant and it is entirely at the discretion of the F&B operators.

These operators may choose to charge from 5% to 15% or even free of charge. In summary, in the event service charge is imposed, it would not be subject to service tax.

SST is people friendly as the daily consumption of food and beverages would be much lower in price as compared to the GST regime. The imposition of service charge is not governed by any law and it is entirely at the discretion of the F&B operators.

In order to avoid disputes, it is advised that notice be placed outside the premises if the F&B operator is imposing a service charge ans the rate determined by them.

SST is one stage

Sales Tax is only imposed one time on the manufacturing company when a sale is made to a trading company. The subsequent sales of the goods by the trading company would have no sales tax imposed.

Business entrepreneurs must be mindful and careful in the cost management as Sales Tax – although imposed at 10% – would eventually result in a much lower pricing of goods as compared to the GST regime.

GST is operating on a value added concept with input tax available as deduction. The supply chain moving from manufacturers to distributors, dealers and to consumers would result in higher pricing as GST is imposed on final stage, comprising of value add and profit margin.

SST is a business cost

Under the GST regime, input tax is available as a credit or deduction against output tax based on tax invoice received from GST registrant suppliers.

This would mean that GST is never a business cost as deduction is available against output tax even though there is no sales generated. Sales Tax on the other hand, would be paid by the trading company purchasing goods from the manufacturing company.

It is a business cost and deduction is only available when there is a sale. This would mean that business cost would be higher as Sales Tax is part of the inventory cost and to be deducted as cost of sales when goods are sold or exported. In simple terms, no sales, no deductions.

Businessmen are urged to carefully analyse the cost and not overprice the goods for the benefits of the people and the sustainability of their businesses. The reduction of GST from 6% to nil would immediately translate a price reduction of 6%, which is a must for a businesses to adhere to.

Failure to adhere to the pricing would expose the operators to the fines and penalties on anti-profiteering governed by Price Control and Anti-Profiteering Act 2011.

As the breakdown shows, SST is well suited in the Malaysian environment, to both the business communities and the people.

Source: Dr Choong Kwai FattDubbed the Malaysian tax guru, Dr Choong Kwai Fatt is a tax specialist and advocate.

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    Go-ahead likely for Penang LRT


    GEORGE TOWN: The approvals from the federal authorities for the RM8.4bil Bayan Lepas light rail transit (LRT) and the massive Penang South Reclamation (PSR) scheme on the southern coast of the island are expected to be obtained before the end of the year.

    Sources told The Star that the approvals would be from the Department of Environment, the federal regulator overseeing Environmental Impact Assessment (EIA), and the Transport Ministry.

    The sources said if everything goes on as scheduled, the reclamation project for the three man-made islands would start early next year.

    “The LRT project might begin in January 2020,” they said.

    The LRT, together with a monorail, cable cars and water taxis, is part of the state government’s RM46bil Penang Transport Master Plan (PTMP).

    It will begin from Komtar in the northeast corner of the island and pass through Jelutong, Gelugor, Bayan Lepas and Penang International Airport before ending at the proposed PSR development comprising three man-made islands totalling 1,800ha near Teluk Kumbar.

    It is expected to provide a fast route to the airport and will traverse densely populated residential, commercial and industrial areas.

    There are 27 LRT stations along the alignment, with the maintenance depot located on the first island that is to be reclaimed on the island’s south coast.

    The alignment also factors in interchanges with future LRT, Sky Cab and monorail lines that are being planned, including one that will cross the channel to connect Gelugor on the island with the Penang Sentral transport hub in mainland Butterworth. The success of the PTMP depends on funding from property development on the PSR scheme.

    The Pan Island Link (PIL) 1 is another component which came to light recently as its Detailed EIA was on display at 10 locations in Putrajaya, Kuala Lumpur and Penang until yesterday.

    The proposed 19.5km highway links Gurney Drive to the Penang International Airport.

    SRS Consortium Sdn Bhd, the Project Delivery Partner (PDP), will call for the tender of the LRT and PSR via a Request for Proposal (RFP) exercise early next year, the sources said.

    SRS’s role is to supervise the projects until their completion and scale down the cost.

    It is learnt that there are currently six or seven companies interested in carrying out the LRT project and the reclamation work for the islands.

    “SRS will scale down the cost of the urban rail transport link connecting Komtar and Bayan Lepas, and also consider alternative proposals such as a monorail,” said sources.

    It is learnt that Scomi Engineering has recently proposed a monorail project costing about RM6bil, to the state government.

    A China company has also proposed to build a LRT link costing less than RM6bil.

    On the three man-made islands, it is said that more than RM4bil would be spent on the reclamation.

    “The cost is estimated to be over RM4bil because there will be a need to construct a dam and three power plants for the islands.

    “One of the islands will be used for indus­trial activities. There will be industrial lots developed for sale to overseas and local investors to generate funds for the urban rail transport link.

    “The other two islands will be used for building commercial and residential properties,” sources explained, adding that about RM17bil, which includes the cost for the LRT and PIL 1, has been approved.

    On the viability of trams as an alternative to LRT, the sources said the move would require relocating underground sewage infrastructure, power and telecommunications cables.

    “They have to be relocated because laying the rails for trams involves a lot of costly road digging. The LRT is constructed on an elevated platform and does not involve digging into the ground.

    “Furthermore, the roads in Penang are narrow, so using trams with other vehicles on the same road could cause accidents,” a source added.

    SRS Consortium, a 60:20:20 joint venture involving Gamuda Bhd, Loh Phoy Yen Holdings Sdn Bhd and Ideal Property Development Sdn Bhd, was appointed by the Penang government as the PDP for the implementation of the PTMP.

    Meanwhile, Chief Minister Chow Kon Yeow said he has written a letter to Prime Minister Tun Dr Mahathir Mohamad on June 29 to seek funds for the LRT project.

    “We have yet to receive a reply.

    “If the South island reclamation projects are not carried out, the state has no choice but to seek federal funds for the LRT,” he said during his speech at the state assembly yesterday.

    Chow had earlier said the major components of PTMP would be fully funded by revenues generated from the sale of reclaimed land of the PSR project.

    He said the fully funded nature of the components – the LRT and the PIL 1 – was unlike any other mega infrastructure projects currently being critically reviewed by the Council of Eminent Persons.

    The SRS Consortium was concluded to have the best overall proposal among six local and international bidders, which were evaluated based on qualities such as transport master plan proposal, delivery track record, financial standing and funding/business models.

    By David Tan The Star