China hits back after US imposes tariffs worth $34bn


Video:  https://www.bbc.com/news/av/embed/p06cvv5k/44697671

US tariffs on $34bn (£25.7bn) of Chinese goods have come into effect, signalling the start of a trade war between the world’s two largest economies.

The 25% levy came into effect at midnight Washington time.

China has retaliated by imposing a similar 25% tariff on 545 US products, also worth a total of $34bn.

Beijing accused the US of starting the “largest trade war in economic history”.

“After the US activated its tariff measures against China, China’s measures against the US took effect immediately,” said Lu Kang, a foreign ministry spokesman.

Two companies in Shanghai told the BBC that customs authorities were delaying clearance processes for US imports on Friday.

The American tariffs are the result of President Donald Trump’s bid to protect US jobs and stop “unfair transfers of American technology and intellectual property to China”.

The White House said it would consult on tariffs on another $16bn of products, which Mr Trump has suggested could come into effect later this month.

Video:  https://www.bbc.com/news/av/embed/p06d06gb/44707253

The imposition of the tariffs had little impact on Asian stock markets. The Shanghai Composite closed 0.5% higher, but ended the week 3.5% lower – its seventh consecutive week of losses.

Tokyo closed 1.1% higher, but Hong Kong fell 0.5% in late trading.

Hikaru Sato at Daiwa Securities said markets had already factored in the impact of the first round of tariffs.

list of products

Mr Trump has already imposed tariffs on imported washing machines and solar panels, and started charging levies on the imports of steel and aluminium from the European Union, Mexico and Canada.

He has also threatened a 10% levy on an additional $200bn of Chinese goods if Beijng “refuses to change its practices”.

The president upped the stakes on Thursday, saying the amount of goods subject to tariffs could rise to more than $500bn.

“You have another 16 [billion dollars] in two weeks, and then, as you know, we have $200bn in abeyance and then after the $200bn, we have $300bn in abeyance. OK? So we have 50 plus 200 plus almost 300,” he said.

The US tariffs imposed so far would affect the equivalent of 0.6% of global trade and account for 0.1% of global GDP, according to Morgan Stanley in a research note issued before Mr Trump’s comments on Thursday.

Analysts are also concerned about the impact on others in the supply chain and about an escalation of tensions between the US and China in general.

Timeline

 

US-China trade war

16 February, 2018
US Commerce Department recommends a 24%
tariff on all steel imports and 7.7% on aluminium. It’s seen as a policy
directed at China, which is the world’s largest maker of steel.
22 March, 2018
China says it will impose tariffs on US goods worth $3bn.
22 March, 2018
President Trump announces a plan to impose
further tariffs on Chinese imports worth $60bn but grants temporary
exemptions from aluminium and steel tariffs to the EU, South Korea and
other countries.
2 April, 2018
China imposes 25% tariffs on 128 US products including wine and pork.
3 April, 2018
The US Government proposes new additional
tariffs on Chinese imports worth $50bn. These include: televisions,
medical equipment, aircraft parts and batteries.
4 April, 2018
China proposes tariffs on US goods worth $50bn.
5 April, 2018
President Trump announces he’s considering additional tariffs on Chinese products worth $100bn.
15 June, 2018
President Donald Trump announces new
tariffs on goods worth $34bn will come into force on 6 July 2018. He
also proposes a new list of tariffs for imported goods worth $16bn.
15 June, 2018
China says it will respond to these new US
impositions with it’s own new tariffs on agricultural products and
manufactured goods.
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Najib arrested, charged and pleaded not guilty


 

Former premier Najib Abdul Razak was arrested at his residence in Jalan Duta, Kuala Lumpur, this afternoon, according to MACC chief commissioner Mohd Shukri Abdull.

The arrest was carried out in relation to the commission’s investigation into the SRC International issue.

Speculation is also rife that the former premier could be charged tomorrow.

Shukri Abdul told the media that the arrest took place at 3pm and the former premier has been taken to the commission’s headquarters in Putrajaya for further questioning.

Previously, MACC had recorded Najib’s statement twice with regard to the SRC International issue.

Last Friday, Malaysiakini had reported that there is a strong likelihood the former premier would be arrested this week.

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[More to follow]

LIVE: Najib arrives in court

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Penang undersea tunnel developer CZC ‘duped into paying RM22mil’ at gun point?


GEORGE TOWN: The developer of the Penang undersea tunnel project claims it was duped into paying two individuals RM22mil to stop graft investigations.

Consortium Zenith Construction Sdn Bhd (CZC) senior executive director Datuk Zarul Ahmad Mohd Zulkifli (pic) said they were told that action would be taken against them if they did not pay.

“They (the duo) claimed to be the powers that be. Eventually, we found out it was not true. We were conned,” he said.

He said the company had previously followed all the rules.

“But at that particular period of time, we didn’t know what was the rule of law. It’s not bribery but the act was akin to putting a gun to my head,” he said.

Zarul Ahmad said he could not disclose the details because the case was still being investigated by the Malaysian Anti-Corruption Commission (MACC).

“I believe soon they will come out with something pertaining to those issues,” he said.

Zarul Ahmad said things were different now after the outcome of GE14 on May 9.

“On May 10, I opened my window and I took a nice breath of fresh air and it was wonderful.

“Last time, I couldn’t answer certain things but now, I can because there is freedom of speech. I know I won’t get into trouble for making statements that I want to make,” he said at a hotel here yesterday.

In March, a 37-year-old Datuk Seri was picked up by MACC for allegedly receiving RM19mil from CZC to “help settle” investigations into the controversial RM6.3bil mega project comprising an undersea tunnel and three highways.

Former chief minister Lim Guan Eng said the state government was shocked at the news that CZC allegedly paid RM19mil to an unnamed businessman and RM3mil to an MP.

Zarul Ahmad said they had provided an explanation about the incident which was accepted by the Penang government two weeks ago.

CZC, the special purpose vehicle of the Penang project, had come under the spotlight after its two senior directors were picked up to assist in MACC investigations over alleged corruption claims.

MCA deputy president Datuk Seri Dr Wee Ka Siong had raised numerous concerns about the project, including why the special pur­pose vehicle did not meet the RM381mil minimum paid-up capital requirement during the tender process.

Zarul Ahmad said they were adopting the just-in-time (JiT) philosophy, meaning the paid-up capital would only be increased when necessary.

He said 90% of the financing was done through the banks and they did not want to incur interests for nothing.

“That is the only way to reduce our cost and maximise returns.

“Why should we increase our paid-up capital to RM300mil or 400mil when we are only using a certain amount,” he said.

By Tan Sin Chow and Saran Yeoh The Star
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China staunch defender of free trade under WTO, meet the ‘selfish giant’ of global trade


Photo taken on April 12, 2018 shows the World Trade Organization headquarters in Geneva, Switzerland. [Photo/Xinhua]

China staunch defender of free trade under WTO

There can be no order without rules. And trade is no exception to this. The World Trade Organization regulates the trade between nations to ensure that trade flows as smoothly, predictably and freely as possible.

China has spared no efforts in honoring the promises it made to join the WTO, and the country has not only abided by the WTO rules over the past 17 years. It has contributed a great deal to the development of the world economy and is a staunch defender of the WTO trade system.

In contrast, the Donald Trump administration’s unilateralism and trade protectionism pose an ever greater threat to free trade. Under the unjustifiable pretext of national security, it has violated the United States’ WTO obligations by imposing tariffs on steel and aluminum imports, and discriminating among its WTO trade partners.

There is no denying that China has benefited a lot as a member of the WTO, which has facilitated its opening-up and reform. Without integrating its economy with that of the world, it would have been impossible for the country to maintain its double-digit economic growth for more than a decade.

Yet the other side of the coin is that as a rule-abiding member of the WTO, China has also contributed to the world economy. Had it not been for China’s help and support, it would not have been possible for the US and other major Western countries to have emerged from the devastating effects of the 2008 financial crisis so quickly.

And without China’s opening-up, it would not have been possible for so many transnational corporations to benefit from their business in China. And of course, those businesses have provided jobs for China and enabled the country to earn more from international trade.

Free trade is undoubtedly reciprocal. China is a beneficiary of free trade within the framework of the WTO, but it also benefits others. It is a contributor to the development of the world economy and defender of the current world economic order.

Because they fail to appreciate this, some Western countries regard China as simply a free rider on globalization and refuse to recognize China’s status as a market economy as they should.

That the US refuses to settle its trade dispute with China within the framework of the WTO only points to its own lack of respect for the WTO trade rules.

China will continue to abide by WTO rules and firmly defend the current world economic order, as it believes that rules-based multilateralism is essential for the healthy development of the world economy.

By China Daily editorial

Amid trade row, US losing international legitimacy

The Trump administration should find a balance between its
new strategy, which can be partly reasonable, within the existing highly
interconnected world. The US should understand that emerging countries
cannot be treated like in the past.

 Meet the ‘selfish giant’ of global trade

Donald Trump has opened a Pandora’s box which, if not shut soon, will cause mayhem in global trade and seriously undermine the multilateral trading system

At a time when globalization needs to be safeguarded and promoted, some countries are doing exactly the opposite by violating even the normative axioms of international relations. In particular, the Donald Trump administration seems hellbent on instigating a trade war with major economies by using anti-globalization and protectionist measures, which are disrupting the international trade order.

Claiming to resolve domestic structural problems and meet global challenges with a combative approach, US President Donald Trump has become the most powerful force behind the wave of trade protectionism. The trade disputes he has stirred up pose a big challenge to globalization, which is based on the division of labor in the global value chain. Trump’s protectionist moves would disrupt the global production network, leading to a contraction, if not dismantling, of the global value chain. In fact, he has put the global free trade system and international trade order at great risk of being destroyed.

In his one and a half years in office, Trump has not only expedited investigations by the US International Trade Commission into anti-subsidy, anti-dumping allegations under Section 337 of the Tariff Act of 1930, but also used unconventional protectionist measures, such as Section 301 and 201 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962, to order investigations against imports, including those from China, and the trade practices of other economies.


‘Trump trap’ versus ‘Thucydides trap’

No wonder many overseas scholars are more worried about a “Trump trap” rather than the “Thucydides trap”, because the former will harm not only China but also the rest of the world.

Essentially, the Trump administration’s trade policies are not different in nature from those of the Barack Obama administration. But compared with Obama’s trade policies, Trump’s policies exhibit some new features.

First, for Trump, his “America First” policy is more important than international rules and the world trade order. Trump has been exhibiting a tendency to either take advantage of or discard the multilateral global trading system to fulfill US interests. The president’s 2017 Trade Policy Agenda stresses that the efficiency of the open and multilateral trading system, built by the US itself, needs to be reassessed to realize and promote US national interests.

Apart from complaining about China’s so-called restraints on foreign capital’s access to some service industries, including telecommunications, banks and healthcare, the US Trade Representative has also accused China of forcing technology transfers despite China gradually opening up these industries in accordance with the General Agreement on Trade in Services of the World Trade Organization.

Second, the US administration has raised economic security to a new level, by incorporating economic and trade policies into national security, with Trump’s first National Security Strategy emphasizing that economic security is national security. Declaring that the US would use all applicable tools to defend national security, Trump has said the US will adopt a zero-tolerance policy toward any move it considers unfair or harmful to the US economy.

Third, Trump is trying to weaken, even overthrow the multilateral trading system, a system based on rules that has played a central role in promoting cooperation and opening-up of trade and investment, apart from offering a stable and reliable system for WTO members to resolve trade disputes.

Evidently, the Trump administration is making all-out efforts to skirt and marginalize the WTO, most recently by saying appeals against WTO rulings should not take more than the mandated 90 days to deal with. What it has conveniently ignored, however, is that the delay is caused as the US, from time to time, has thwarted the Appellate Body from starting the procedure of selecting new judges, leading to a paralysis in the WTO’s dispute-settlement mechanism.

Trump mantra: Trade good, imports bad

Fourth, Trump is trying to defend fair trade, ironically, through unilateral trade sanctions. The Trump administration has ordered an estimated 94 investigations into so-called unfair trade practices involving dozens of countries in just one and a half years, a year-on-year increase of 81 percent. In fact, the fair trade principle advocated by Trump stresses a kind of equality that promotes a unilateral (as opposed to multilateral) open market and regards trade beneficial but imports harmful.

Generally speaking, the fair trade Trump demands mainly constitutes of even tariffs and competition on an equal footing. Yet the disparity in tariff rates among WTO member states is largely attributable to multilateral trade negotiations. More important, uneven tariffs have enabled smaller economies at a primary stage of development to enter the global trading system.

Since different countries are at different development stages, and have different economic scales, production factors and political sensitivity toward trade liberalization and tariff policies, it is practically impossible to fix a unified tariff rate, which Trump effectively demands.

So, what is the truth behind the uneven Sino-US trade tariff rate? This can be better explained using hard data, instead of selectively ignoring unfavorable facts like the Trump administration has been doing. China’s actual trade-weighted average tariff rate is 4.4 percent, which is almost the same as that of developed economies, including Australia that has a trade-weighted average import tariff rate of 4 percent and the European Union 3 percent.

Correspondingly, more than 3,335 of the US’ most-favored nation tariff rates are higher than 5 percent and 1,120 above 10 percent.

Also, to prevent others from catching up, the US has invoked more than 125 Section 301 investigations since 1974, causing significant damage to other economies-the EU has faced 27 investigations, Japan 16, and Canada 14.

In January 2017, the US President’s Council of Advisors on Science and Technology recommended in a report titled “Ensuring Long-Term US Leadership in Semiconductors” that the US restrain the development of China’s technology industries because China’s rise in the field of semiconductors posed a threat to the US.

China’s high-tech sector a key target

Besides, the US is attempting to thwart the Made in China 2025 plan by launching more Section 301 investigations. And the 578 high-tech products on the US’ sanctions list against Chinese imports, which account for 43.36 percent of the total number and 56.15 percent of the total amount of high-tech products, show the US is indeed trying to contain the development of China’s high-tech industry.

Trump also is seeking to restrict Chinese investment in the US’ high-tech sector, by extending the power of the Committee on Foreign Investment in the US and accelerating the legislation procedure of the Foreign Investment Risk Review Modernization Act.

Do we need more evidence to prove the US is the most potent destructive force in the global market and technology competition?

Furthermore, Trump seems to be preparing to take new measures in the escalating Sino-US trade conflict to restrict Chinese enterprises from investing or acquiring US companies in strategic industries listed in the Made in China 2025 plan, by using the International Emergency Economic Powers Act.

And as part of its new tax reform, the Trump administration plans to prevent US companies from transferring their operating activities, high-value patents, copyright and trademarks to low-tax countries. Particularly noteworthy is a provision in the Senate version of the tax reform plan, which says a tax of 13.1 percent would be levied on global intangible low-taxed income. The move is aimed at foiling the efforts of US companies such as Apple, Google and Qualcomm to transfer their technologies to or conduct innovative cooperation with companies in other countries.

Trump is trying to instigate a trade war without realizing, rather refusing to accept, that a trade war will hurt all and sundry, including the US. The challenge for and obligation of the rest of the world is to find a way, and find it fast, to safeguard the multilateral trading system and protect it from the assaults of Trump Inc.

By Zhang Monan China Daily.  The author is a researcher at the China Center for International Economic Exchanges.

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Goldman Lunch at Taste Paradise Sets Table for 1MDB Money Probe


https://www.bloomberg.com/news/videos/2018-06-28/goldman-bankers-in-focus-in-1mdb-money-probe-video

Low Taek Jho and an official from 1MDB had hired Goldman Sachs Group to underwrite the US$1.75 billion bond offering.

SINGAPORE: In a private dining room at Singapore’s Taste Paradise restaurant, over a meal of abalone and suckling pig, two Goldman Sachs Group Inc bankers were explaining a US$1.75 billion bond offering to six executives of a Swiss bank.

It was early 2012, and joining Goldman bankers Roger Ng and Tim Leissner that day were a young Malaysian financier named Low Taek Jho and an official from state investment fund 1Malaysia Development Bhd, known as 1MDB, which had hired the New York bank to underwrite the bond sale.

Now, people familiar with the matter say, investigators from Singapore to the United States are looking more closely at the roles of Mr Ng and Mr Leissner, who have both left Goldman. And they’re asking what happened in that private dining room named after the first emperor of a unified China, Qin Shi Huang.

In particular, they’re examining how US$577 million in proceeds from a bond sale that May ended up a day later in an account at BSI SA in Switzerland – the same bank whose executives were at the Taste Paradise.

Click here for the full report: Goldman Sachs lunch at Singapore’s Taste Paradise set the scene for 1MDB’s money probe

The lunch, previously unreported, brought together the key parties in what has become the biggest financial scandal in Malaysia’s history, involving the alleged misappropriation of US$4.5 billion of 1MDB funds. It was the culmination of numerous conversations as BSI bankers and compliance officials sought clarity on the deal.

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Govt Linked Companies (GLCs) – Monsters in the house?


Politicians should not be appointed to run government-linkedv companies (GLCs) to keep graft in check, said Malaysian Anti-Corruption Commission Advisory Board Chairman Tunku Abdul Aziz Tunku Ibrahim.He  said politicians holding GLC positions might face conflicts of interest, ading to abuse of power and responsibility.

ABOUT a month before Malaysia’s  parliamentary election in May,
then-opposition leader Tun Dr Mahathir Mohamad raised concerns over the
role that government-linked companies (GLCs) were playing in the
economy, being “huge and rich” enough to be considered “monsters”.

Data support his description – GLCs account for about half of the  Benchmark Kuala Lumpur Composite Index, and they  constitute seven out of the top-10 listed firms in 2018. They are present in almost every sector, sometimes in a towering way. Globally, Malaysia ranks fifth-highest in terms of GLC influence on the economy.

Calls to do something about GLCs have   increased since the election following the  release of more damning information, although most of it relates to the GLCs’ investment arm: government-linked investment companies (GLICs).

Some experts have proposed the formation of an independent body with
operational oversight for GLICs, after institutional autonomy is established and internal managerial reforms are introduced. Unlike most GLCs, GLICs are not publicly listed and face little scrutiny. The same applies to the various funds at the constituent state level, which need to be looked at too.

For GLCs, the answer is less straightforward. PM Tun Mahathir claims that GLCs have lost track of their original function. Before the Malaysian government decides on what to do, it needs to examine the role GLCs should play – as opposed to the role they currently play – and to examine their impact on the economy.

In Malaysia, GLCs were uniquely tasked to assist in the government’s affirmative action program to improve the absolute and relative position of bumiputras. The intention was to help create a new class of bumiputra entrepreneurs – first through the GLCs themselves, and then through a process of divestment.

Given the amounts of money involved and the cost of the distortions introduced, the benefits to bumiputra were unjustifiably small and unequally distributed. The approach of using GLCs as instruments of affirmative action failed because it led to a rise in state dependence, widespread complacency and even corruption, as Tun Mahathir himself recognised in his memoirs, A Doctor in the House, and again more
recently. There is also empirical evidence that GLCs have been crowding out private investment, a concern raised in the New Economic Model as early as 2011.

Additionally, the new government has correctly highlighted the need to include certain off-balance-sheet items and contingent liabilities, such as government guarantees and public-private partnership lease payments, in any complete assessment of debt outstanding. The use of offshoot companies and special purpose vehicles (SPVs) in the deliberate reconfiguration of certain obligations mean that traditional debt calculations underestimate Malaysia’s actual debt.

All these factors combine to place new impetus on reconsidering the extent of government involvement in business. Divestment will not solve  Malaysia’s debt problem, but it can help if there are good reasons to pursue it. So how should the government proceed?

It is important to recognise at the outset, that there is a legitimate role for government in business – providing public goods, addressing market failures or promoting social advancement. And like in most other countries, there are good and bad GLCs in Malaysia. If a GLC is not crowding out private enterprise, operates efficiently and performs a social function effectively, then there is no reason to consider  divestment. But a GLC that crowds out private investment in a sector with no public or social function, or one that is inefficiently run, should be a candidate for divestment. In this regard, one has to carefully study why GLCs should be present in retail, construction or property development, for instance.

In assessing performance, one needs to separate results that arise from true efficiency, versus preferential treatment that generates artificial rent for the GLC. The latter is a drain on public resources and a tax on consumers. Divestment in this case, will likely provide more than a one-off financial injection to government coffers – it will provide
ongoing benefits through fiscal savings or better allocation of public resources.

The divestment process should be carefully managed to ensure that public assets are disposed at fair market value, and does not concentrate market power or wealth in the hands of a few. This has allegedly happened with privatisation efforts in the past.

The new government has committed itself to addressing corruption and improving the management of public resources. As part of this process, one must re-examine just how much government is involved in business. This is one of the many tasks that the Council of Eminent Persons is undertaking in the first 100 days of the new government.

To be done correctly, would require a careful study of GLCs and their impacts. This could then rejuvenate the private sector while enabling  good GLCs to thrive, and fortify Malaysia’s fiscal position in the process. This is what Malaysians should expect – and indeed demand – of the “New Malaysia”.

Jayant Menon is Lead Economist in the Economic Research and Regional Cooperation Department at the Asian Development Bank. This is an abridged version of an item that first appeared on the East Asia Forum.

Jayant Menon The Sundaily

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On the rise: A man walks past the Employees Provident Fund headquarters in Kuala Lumpur. Remuneration of GLC chiefs, senior managemen

Govt-linked companies (GLCs) shake-up as they sing a different tune


EPF Building in Kuala Lumpur.- Art Chen / The Star..
On the rise: A man walks past the Employees
Provident Fund headquarters in Kuala Lumpur. Remuneration of GLC chiefs,
senior management and directors have been on the uptrend following a
transformation initiative to make them more competitive commercially. 

 

Overpaid CEOs and social duties of GLCs set for review

The new government has clearly said that there is a need to review the role of GLCs and the remuneration paid out to their top executives

A GLANCE at one of the annual reports of the country’s government-linked companies (GLCs) reveals that its chief human resource officer earned close to a million ringgit or about RM80,000 per month, last year.

Other senior personnel were also compensated with generous remuneration, with its chief executive taking home over one and the half million ringgit in financial year 2017.

More importantly, this was at a company that had courted much controversy in recent times over allegations of mismanagement and under-performance.

Such a scenario, however, is not uncommon at GLCs, where remuneration of key executives tend to run in the millions but performances sometimes leave much to be desired.

By definition, GLCs are companies where the government has a direct majority stake via their entities such as Khazanah Nasional, Employees Provident Fund, Permodalan Nasional Bhd (PNB), the Armed Forces Fund (Lembaga Tabung Angkatan Tentera) and the Pilgrims Fund (Lembaga Tabung Haji).

In recent years, remuneration of GLC chiefs, senior management and its directors have been on the uptrend following a transformation initiative to make them more competitive commercially.

The thinking behind this is that in order to attract talent – subjective as the definition of that may be – top dollar should be paid.

Some, however, argue that GLCs should in fact prioritise national service a little more.

Universiti Malaya’s Faculty of Economics and Administration professor of political economy Edmund Terence Gomez says GLCs have social obligations.

“What this essentially means is that GLCs cannot operate in a purely commercial manner as they also have to look at the social dimension,” he says. “The GLC professionals have many times articulated that they are doing national service. Going on that alone, one can argue that they shouldn’t be paid private sector salaries,” Terence adds.

And so it is now, there is a disquiet building up among GLCs following the change in government.

The new government has clearly said that there is a need to review the role of GLCs and the remuneration paid out to their top executives and senior management.

In this regard, the Pakatan Harapan government is understood to be mulling over making drastic changes in the appointment and remuneration of key directors at GLCs which include government agencies.

It was reported recently that the Council of Eminent Persons, headed by Tun Daim Zainuddin, who was Finance Minister in the 1980s, has requested details of the salaries of some of the top executives at GLCs as part of the review.

Already, there have been a couple of GLC chief executives who have left and more of this is expected to materialise over the coming weeks.

“It appears to be a purge of Tan Sri Nor Mohamed Yakcop’s boys,” quips an industry observer, referring to the veteran politician who was instrumental in the revamp and transformation of Khazanah which started in 2005 and subsequently, driving the GLC transformation initiative.

UM’s Terence says if the new government is to appoint new individuals, it must ensure that the process is transparent.

“If you are removing these people, who are you replacing them with? More importantly how are you selecting these people?

He adds there needs to be a transparent mechanism in the appointment of this new breed of professionals that will be brought in and what must also be looked into is the kind of check and balances being put in place to ensure governance.

“There should be a debate on these things,” he says.

Economist Yeah Kim Leng believes that a review is timely and appropriate as part of a deeper institutional and structural reform.

“The broad aims are firstly, to reduce excessive payoffs which don’t commensurate with performance and secondly, to address the widening wage and benefits gap between the top and bottom rungs of the organisation,” he says.

Such rationalisation will result in a more equitable salary structure as well as raise the generally depressed wages of middle management and support staff which form the largest number of most organisations, Yeah adds.

Unfair advantage

The role of a head honcho, be it at a GLC or non-GLC, is seldom a walk in the park.

CEOs make critical operational decisions that affect everything from future business directions to the health of a company’s balance sheet and employee morale.

The job generally entails long hours and tremendous pressure to meet expectations of shareholders and stakeholders.

But again, while local GLCs have been key drivers of the economy, one key feature is that they are ultimately owned by the government.

This, some argue, give GLCs unfair advantages such as access to cheap funding and political patronage over their private counterparts.

So, is running a GLC more of a stewardship role as opposed to an entrepreneurship role?

Therein lies the issue that in turn will have a bearing on the remuneration levels of GLC heads.

Minority Shareholders Watch Group (MSWG) chief executive office Devanesan Evanson puts it this way.

“Entrepreneurs have their skin in the game in that there are often the major or substantial shareholder in a company.

“It is in their direct interest to perform as this will be translated into share price appreciation which will impact the value of their shareholdings – this is motivation to grow the entrepreneurial spirit,” he says.

On the other hand, GLC heads do not have their skin in the game save for their limited shareholding through ESOS or share grant schemes.

“If a GLC loses money, the impact on them is limited. They may be prepared to take perverse risks as the eventual loser is the government-linked investment companies or GLICs (and the minority shareholders of the GLC), which eventually are the people who are the members or subscribers of the GLICs.

“In that way, we are not comparing apple to apple and yet, we need talent to run GLCs.

“So we can conclude that, we need to pay for talent at GLCs but it should not be as much compared to what one would pay the CEO of a firm which he started,” Devanesan says, noting that remuneration of some of the GLC heads have risen too fast in recent years.

Rising remuneration is a given, others say, as the government had recruited top talent from the private sector to helm these companies.

A case in point is  Axiata Group Bhd , which has done relatively well with the infusion of the “entrepreneurial spirit” under the helm of president and group CEO Tan Sri Jamaludin Ibrahim, who has helmed the Khazanah-owned telco since 2008, they point out.

Prior to that, Jamaludin was with rival Maxis Communications Bhd, a private company controlled by tycoon Ananda Krishnan.

Other GLCs which have performed consistently over recent years include banks like Malayan Banking Bhd
and CIMB Group Holdings Bhd which have expanded their operations out of Malaysia, carving a brand name for themselves regionally.

Under a 10-year transformation programme for GLCs initiated in 2005, companies were given quantitative and qualitative targets to meet as measured by key performance indicators.

Now, the 20 biggest GLCs currently make up about 40% of the local stock market’s market capitalisation.

One of the principles under the programme was also the national development agenda, which emphasised the principle of equal growth and development of the bumiputra community with the non-bumiputras.

Asian Strategy and Leadership Institute (ASLI) Centre of Public Policy Studies chairperson Tan Sri Ramon Navaratnam says the purpose of establishing GLCs to encourage bumiputras to participate in business has largely been fulfilled.

“Now that the bumiputras are on a strong footing in the corporate sector with able leaders who have wide experience, it (GLCs) could be seen as an erosion to the welfare and progress of the smaller and medium-sized industries, particularly those where other bumiputras are involved,” Ramon says.

Having said that, he says although many GLCs are doing well, they have performed well “mainly because of protective policies and monopolistic practices”.

“The time has come in this new Malaysian era for more competition and less protection.”

Benchmarking

Still, if simplistic comparisons are to be made, the CEOs of the country’s two largest GLC banks, Maybank and CIMB for instance, took home less than the CEO of the country’s third largest bank, the non-GLC Public Bank Bhd
last year.

In 2017, Public Bank’s managing director Tan Sri Tay Ah Lek took home some RM27.8mil in total remuneration while Maybank’s Datuk Abdul Farid Alias earned RM10.11mil and CIMB’s Tengku Zafrul Abdul Aziz made RM9.86mil.

Across the causeway, a survey of CEO remuneration of Singapore-listed companies by one financial portal shows that Singaporean GLC CEOs earned 31% more than their non-GLC counterparts in 2017.

Singapore’s Temasek Holdings-owned DBS Bank, which is Singapore’s largest bank, paid out S$10.3mil (RM30.36mil) to its head honcho, while in the telecommunication sector, SingTel’s remuneration to its top executive was some S$6.56mil (RM19.34mil) for the most recently concluded financial year.

By definition, Singapore GLCs are those which are 15% or more owned by the city-state’s investment arm Temasek Holdings.

UM’s Terence does not think Singapore should be a benchmark for Malaysian companies.

“Singapore is a much smaller country and the manner in which they operate in is also different … their GLCs are deeply conditioned by their holding company, which is the Minister of Finance Incorporated,” he says.

MSWG’s Devanesan notes that determining remuneration is “not exactly science” as there are many parameters to be considered.

Some of the factors to note include whether the companies are in a monopolistic or near monopolistic position and the performance of the GLC heads over the years.

“Based on these parameters, we can instinctively know if a GLC head is over-remunerated,” he says. Over in China, state-owned Industrial and Commercial Bank of China (ICBC), the country’s largest lender by assets, paid out about 63.43 yuan or about RM39mil in total remuneration before tax for the year 2017 to its top executive.

Notably, the Beijing-based ICBC’s net profit’s was at a whopping US$45.6bil (RM182bil) in 2017.

Sources: Gurmeet Kaur and Yvonne Tan The Star

GLC singers sing a different tune

Some officials singing ‘Hebat Negaraku’.

 Swan song for some after ‘Hebat Negaraku’ post-GE14 – CEO think video to showcase musical talents

 

 Several heads of government-linked companies (GLCs) have come together bin a heartwarming music video titled “Hebat Negaraku” (my country is great).

 GLC chiefs show off musical talent in ‘Hebat Negaraku’ music video …

The heads of government linked companies (GLC) who sang a song that later became the theme song for the Barisan Nasional’s election campaign have distanced themselves from the controversial music video.

Those who sang and played musical instruments in the music video titled “Hebat Negaraku” (my country is great) said they did not know the video or the song was going to be a political theme song.

There have been repercussions on the CEOs who appeared in the music video. They have come under scrutiny for making a song that was used as propaganda by Barisan in the last general election.

Three of the GLC bosses in the video have either retired or resigned since the new government took over.

Several more have been speculated to leave in the coming weeks or months but nothing is cast in stone. Sources said this is because most of the CEOs are not known to have campaigned openly for either Barisan or Pakatan Harapan.

“None of the CEOs had a clue it would become a political song. Do you really think the CEOs would have done it if they knew it would become political?” asked one of the CEOs who appeared in the video but declined to be named.

“We have said no to so many things, and we could have easily have said no to this if it was political.’’

Another CEO said he was approached and felt it was “more of a patriotic song and nothing more.”

“At that point in time, we did not think much (of the repercussions). Hebat Negaraku was announced as Barisan’s campaign theme long after the recording was made. We did not know that.’’

Another CEO added: “We thought it was a casual thing when we were approached as some of the CEOs have their own band.’’

It all started when several CEOs were called to be part of a music video and they thought it was to showcase the musical talents of 14 GLCs heads, plus staff members of the 20 key GLCs.

The song is about the greatness, advancement and inspiration of Malaysia. It was released on YouTube on March 22 but has since been taken down.

But fingers have been pointed at the GLCs bosses who made the music video because it became a political video.

Datuk Seri Shazalli Ramly has been said to be the main orchestrator for the group in terms of making the music video. He was also said to be the branding chief for Barisan’s elections campaign.

Barisan lost the elections held on May 9 to Pakatan, which has since formed a new government and is scrutinising all the performance, processes, remuneration and procurement of the government and GLCs.

Shazalli quit his job as group CEO of  Telekom Malaysia Bhd (TM) on June 6. Malaysian Resources Corp
Bhd (MRCB) group managing director Tan Sri Mohamad Salim Fateh Din has retired as group MD last week and it was something he had planned to do.  Malaysia Airports Holdings Bhd
Datuk Badlisham Ghazali did not get his contract renewed. All three were in the music video.

There is a GLC secretariat that now comes under the purview of TM, which was earlier parked under Khazanah Nasional Bhd. The secretariat organised the making of the music video, according to sources. The CEOs were called to attend a session and within a few hours it was all done with no prior rehearsals.

“When you are called, it could be difficult not to comply since it is the secretariat that called you. We have to oblige but we really did not know it was going to be a campaign slogan. This is really unfortunate that it has turned out like this.

“We were surprised when we found out it was a party slogan but it had already been done and what can we do, we are in the picture,’’ said another CEO.

Not all CEOs who were invited took part in the video. Prior engagements were the reason used for declining to appear. – By b.k. Sidhu The Star

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