Don’t blame China for global economic jitters; China contributed >25% global growth


‘There has never been a real recovery in North America and western Europe since 2008.’ Photograph: Kai Pfaffenbach/Reuters

The US stock market has just had the worst start to a year in its history. At the same time, European and Japanese stock markets have lost around 10% and 15% of their values respectively; the Chinese stock market has resumed its headlong dash downward; and the oil price has fallen to the lowest level in 12 years, reflecting (and anticipating) worldwide economic slowdown.

According to the dominant economic narrative of recent times, 2016 was the year when the world economy would recover fully from the 2008 crash. The US would lead this recovery by generating growth and jobs via fiscal conservatism and pro-business policies. Reflecting the economy’s robust growth, the US stock market reached new heights in 2015, although disrupted by the mess in the Chinese stock market over the summer. By last October, US unemployment had fallen from the post-crisis peak of 10% to 5%, bringing it back close to the pre-crisis low. In a show of confidence, last month the US Federal Reserve finally raised its interest rate for the first time in nine years.

Not far behind the US, the story goes, have been Britain and Ireland. Hit harder than the US by the financial crisis, they have, however, recovered handsomely because they kept their nerve and stuck to the right, if unpopular, policies. Spending cuts, focused on wasteful welfare spending, accelerated job creation by making it more difficult for people to live off the taxpayer. They sensibly didn’t give in to the banker-bashers and chose not to over-regulate the financial sector.

Even the continental European economies have been finally picking up, it was said, having accepted the need for fiscal discipline, labour market reform and cutting business regulations. The world – at least the rich world – was finally set for a full recovery. So what has gone wrong?

Those who put forward the narrative are now trying to blame China in advance for the coming economic woes. George Osborne has been at the forefront, warning this month of a “dangerous cocktail of new threats” in which the devaluation of the Chinese currency and the fall in oil prices (both in large part due to China’s economic slowdown) figured most prominently. If our recovery was to be blown off course, he implied, it would be because China had mismanaged its economy.

China is, of course, an important factor in the global economy. Only 2.5% of the world economy in 1978, on the eve of its economic reform, it now accounts for around 13%. However, its importance should not be exaggerated. As of 2014, the US (22.5%) the eurozone (17%) and Japan (7%) together accounted for nearly half of the world economy. The rich world vastly overshadows China. Unless you are a developing economy whose export basket is mainly made up of primary commodities destined for China, you cannot blame your economic ills on its slowdown.

The truth is that there has never been a real recovery from the 2008 crisis in North America and western Europe. According to the IMF, at the end of 2015, inflation-adjusted income per head (in national currency) was lower than the pre-crisis peak in 11 out of 20 of those countries. In five (Austria, Iceland, Ireland, Switzerland and the UK), it was only just higher – by between 0.05% (Austria) and 0.3% (Ireland). Only in four countries – Germany, Canada, the US and Sweden – was per-capita income materially higher than the pre-crisis peak.

Even in Germany, the best performing of those four countries, per capita income growth rate was just 0.8% a year between its last peak (2008) and 2015. The US growth rate, at 0.4% per year, was half that. Compare that with the 1% annual growth rate that Japan notched up during its so-called “lost two decades” between 1990 and 2010.

To make things worse, much of the recovery has been driven by asset market bubbles, blown up by the injection of cash into the financial market through quantitative easing. These asset bubbles have been most dramatic in the US and UK. They were already at an unprecedented level in 2013 and 2014, but scaled new heights in 2015. The US stock market reached the highest ever level in May 2015 and, after the dip over the summer, more or less came back to that level in December. Having come down by nearly a quarter from its April 2015 peak, Britain’s stock market is currently not quite so inflated, but the UK has another bubble to reckon with, in the housing market, where prices are 7% higher than the pre-crisis peak of 2007.

Thus seen, the main causes of the current economic turmoil lie firmly in the rich nations – especially in the finance-driven US and UK. Having refused to fundamentally restructure their economies after 2008, the only way they could generate any sort of recovery was with another set of asset bubbles. Their governments and financial sectors talked up anaemic recovery as an impressive comeback, propagating the myth that huge bubbles are a measure of economic health.

Whether or not the recent market turmoil leads to a protracted slide or a violent crash, it is proof that we have wasted the past seven years propping up a bankrupt economic model. Before things get any worse, we need to replace it with one in which the financial sector is made less complex and more patient, investment in the real economy is encouraged by fiscal and technological incentives, and measures are brought in to reduce inequality so that demand can be maintained without creating more debts.

None of these will be easy to implement, but we know what the alternative is – a permanent state of low growth, instability, and depressed living standards for the vast majority.

By Ha-Joon Chang, Guardian Economics News

China Should Take Advantage of Industry 4.0 to Shift Economy: Bill Gates

Philanthropist and co-founder of Microsoft, Bill Gates attends a panel “Preparing for the Next Pandemic” at the World Economic Forum in Davos, Switzerland, on January 22, 2016. [Photo: Imagine China]

Microsoft founder Bill Gates has urged China to take advantage of the Fourth Industrial Revolution so as to face the challenge of transforming its economy.

He made the remarks on the sidelines of the ongoing World Economic Forum Annual Meeting in Davos.

“Well China’s obviously got a lot of people, a lot of smart people. It’s moved to not only have more people college educated, but lots of engineers, to raise the quality of those engineering skills. It’s created a recognition that if people invent something that they can be rewarded for that, which is leading to all new sorts of companies. Not just the IT space, although that’s the most visible, but also more and more in biology, robotics, those things, so China’s going to carry its weight. ”

Gates also expressed his optimism about China’s economic future.

“There are a lot of great talents in China. You know, building up the educational system, you know, I think China has got a very bright future. I have a lot of confidence in China partly because they take long-term view; they look at what other countries are doing. You know China is going to contribute more and more to the world’s innovation.”

Figures from China’s National Bureau of Statistics showed that the country’s Gross Domestic Product in 2015 registered an annual growth rate of 6.9 percent, the lowest level since 1990.

Though slowing, China still contributed to more than 25 percent to global economic growth.

The Fourth Industrial Revolution, also termed as Industry 4.0, is marked by convergence of smart technology including artificial intelligence with the industrial sector.- (CRI Online)

China to Contribute More to World’s Innovation: Bill Gates

With a strong ambition to promote science and research, China is going to contribute more and more to the world’s innovation, Microsoft’s founder Bill Gates has said.

In an interview on the sidelines of the World Economic Forum (WEF) Annual Meeting 2016, Gates said China would probably become a huge participant in the Fourth Industrial Revolution, which is already under way and bringing a fast and disruptive change for most industries.

Talking about the new revolution, Gates believed the digital revolution, something he spent most of his life working on, was a huge factor.

The Fourth Industrial Revolution refers to the ongoing transformation of our society and economy, driven by advances in artificial intelligence, robotics, autonomous vehicles, 3D printing, nanotechnology and other areas of science.

A key enabler of much of these new technologies is the Internet where Microsoft and Gates has been a leading contributor to the progress.

“An industrial revolution is coming to increase productivity very dramatically,” Gates said, “It creates opportunities, and it creates challenges.”

New technology changes would free some labor, so that people can do more in culture sector, according to Gates.

He said China had built some advantages in science and technology through its educational system, and the country had a strong will to promote its contribution in different sciences sectors.

“China obviously has a lot of people and a lot of smart people,” Gates said, “Not only a lot of people college-educated, but also a lot of engineers with the quality of engineering skills. ”

“With the recognition that people have done something that they can be rewarded for that, many experts have been leaded to have new companies, in IT sector, biology, robots and other those things.”

“China is going to carry its weight,” he said.

In recent years, the former internet elite has been dedicating to driving innovation in global health and development. As the Co-chair of the Bill & Melinda Gates Foundation, Gates decided to join force with China’s Tsinghua University to establish the Global Health Drug Discovery Institute(GHDDI) in Beijing during his Davos visit.

“China has made incredible progress in reducing poverty and shares the foundation’s commitment to harnessing advances in science and technology to address the critical health challenges affecting the world’s poorest people,” Gates said.

“We are excited about GHDDI’s potential to drive innovation in global health research and development, and look forward to partnering with Tsinghua University on our continued work to address the world’s most pressing global health challenges.”

In an article released during WEF, Gates pledged his foundation would invest more in innovation in the coming years. He told Xinhua that the investment that went to China’s innovation was expected to increase gradually.

Asked whether he worried about China’s economic slowdown, which may hinder innovation progress, Gates said he was quite optimistic about China’s economic outlook.

“I have a lot of confidence in China, partly because they take a long-term view, and partly because they look what other countries are doing,” he said.

Faced with a challenge of turning the economy into new directions, Gates said China had great talent to achieve its goal.

“Most countries would envy a 6.9 percent growth, I think China has a bright future,”he said, adding “China is going to be contributing more and more to the world’s innovation.” – Xinhua Web Editor: Zhang Peng

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AIIB attracts nations from East, West, its fate connects to Chinese economy


AIIB

AIIB’s fate connects to Chinese economy

The Asian Infrastructure Investment Bank (AIIB) officially opened for business on Saturday. In the past two years or so, the bank has been a subject of heated discussion as a symbol of change in the world order. However, its significance hinges on a number of factors in future, rather than the founding itself.

There are many advantages in terms of the bank’s operation and management. Infrastructure construction in Asia, which the AIIB is centered on, is virgin territory that has huge potential to be tapped. There is ample scope for the bank to find its role.

With 57 countries as founding members, the starting point of the bank is high. Besides, China as the initiator has abundant capabilities of infrastructure construction, and its experience is applicable to developing countries.

Nonetheless, disadvantages also exist, among which the biggest is the adverse attitude of the US over the bank. It will be more costly for the AIIB to overcome problems than for the World Bank and the Asian Development Bank at critical moments. Therefore, the AIIB must be operated with superb management, leaving no room for any opponents.

The further development of the Chinese economy will provide indispensible strategic support for the AIIB to increase its heft.

The reason why the AIIB could be founded, despite obstructions from the US and Japan, is that the growth of the Chinese economy has shored up the confidence of the participants.

Since its founding, the AIIB has been connecting its destiny to the Chinese economy. The confidence the world has in the Chinese economy will be projected onto the AIIB.

The AIIB touches a nerve of major global powers of the US and Japan. Its inclusive nature enables its smooth start. China has its own interests, but it cannot put its interests above those of the other countries. We should avoid a zero-sum situation, but integrate Chinese interests with others’, and make achieving a win-win result a goal rather than a slogan.

With the changing times, China can’t expand its power through coercion. It must integrate into the world system and develop in a way that is acceptable to the majority of the world’s states.

The AIIB represents China’s taking of global responsibilities as a big power. The US, as the world No.1, can capriciously vandalize the rules it makes at some critical moments. But China cannot do so. It has to be well-disciplined in serving the world so as to be recognized and accepted as a rising power in the world. – Global Times

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Chinese economy expands 6.9% in 2015, slowest growth in 25 years


Video: http://t.cn/R4QD2R0China’s economy posted a 6.9 percent GDP growth in 2015, which is within people’s expectations. Faced with suspicions, the National Bureau of Statistics (NBS) emphasized that the figure – 6.9 percent – is real.

On the one hand, with an increasing number of “struggling” companies, the economic downturn has become a heated subject of public opinion. On the other hand, other fields, for instance, tourism, railways and online shopping, are seeing robust growth. So, taken together with the affirmation by the NBS, we can have confidence in the accuracy of the figure.

It is safe to say that people still have much confidence in the economy. Despite an economic downturn, people’s willingness to spend is witnessing an upward trend. Consumption is contributing more to GDP growth. Compared with some pessimistic comments, an increase in consumption can better reflect public confidence. In addition, citizens’ plans for their families and their futures are positive as a whole. Admittedly, the loss of confidence in the stock market has exerted negative effects. Society has varying degrees of confidence in the economy.

The 6.9-percent increase in GDP will not strike a blow to the confidence of Chinese society. Even if the figure were slightly lower, there is still a lot to sustain people’s confidence. In fact, different from Western society, politics carries some weight in how confident Chinese people feel.

There are a number of factors contributing to the public’s confidence in the economy. First of all, people believe in the government. As long as the government’s determination and confidence to develop the economy can be seen, the public will be reassured. The government has made many commitments regarding economic development and people’s living standards. It is becoming increasingly honest about the difficulties as well. The government’s backbone is not weakening. Yet, there is increasing dissatisfaction with the laziness of some officials. This new phenomenon is worth paying attention to.

The Chinese people are confident about the country’s market potentials. They know that the country lags behind in many aspects and that great efforts are needed. People tend to believe that it will be an arduous task to narrow the gap of people’s livelihood between China and developed countries. Despite the long road ahead, few people believe the process will break down.

Since the Communist Party of China launched the anti-graft drive and pushed forward reforms, many people expected the country to make greater achievements. But China is in a full-fledged transitional period. Its 1.4 billion population is to China’s advantage.

Complaints can be heard in China, and many concerns are well grounded. Some people try to seek a sense of security by applying for a foreign green card and transferring their assets overseas. But China’s status as the world’s biggest emerging market and potential for opportunities is as significant as ever.

China has plenty of tasks. Many cities still lag behind in basic infrastructure. Many roads need to be rebuilt. The key for change is economic growth. In addition, medical care cannot meet public demand. Many parents have sent their children abroad due to the low quality of education. The Chinese people’s concept of consumption is changing fundamentally and people long for improved living standards. These will all serve as a robust foundation for sustainable economic growth.

There should not be any fear that the 6.9 percent growth will upset Chinese society. The Chinese people will remain confident. The government needs to achieve concrete results and need not rush to adjust its policies. Many problems will be solved as long as China is on the right path. – Global Times

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Asian Infrastructure Investment Bank, opens to lay down milestone for global economic governance tone for global economic governance


  Xi pushes for ‘perfection of the system
http://players.brightcove.net/4405352761001/default_default/index.html?videoId=4707720864001

BEIJING: China has pledged US$50mil (RM221.25mil) to the Asian Infrastructure Investment Bank (AIIB) to support infrastructure projects in less developed countries.

Launching the China-led bank here yesterday, Chinese President Xi Jinping said this proved China’s willingness to shoulder more international responsibility and “push for the perfection of the international system”.

“This is a historic moment,” he added.

With an authorised capital of US$100bil, AIIB was proposed as a global multilateral financial institution by Xi in 2013 to finance infrastructure development in Asia, including energy/power, transportation/telecommunications, rural infrastructure/agriculture development, and water supply/sanitation.

Representatives from 57 founding members, including Malaysia, attended the ceremony at the Diaoyutai State Guesthouse.

Malaysia, which holds 0.11% share and 0.36% of voting share in AIIB, was represented by Treasury deputy secretary-general Datuk Mohd Isa Hussain.

The three largest shareholders of AIIB are China, India and Russia, with a 30.34%, 8.52% and 6.66% stake respectively.

Each allocation is based on the size of the member country’s economy.

The bank, based here, is largely seen as a rival to the US-led World Bank and Interna­tional Monetary Fund.

The United States and Japan have shunned the AIIB while US allies – including Britain, France and Germany – have signed up as founding members.

AIIB president Jin Liqun promised to run AIIB as an organisation that is “lean, clean and green”.

“The bank will make a positive and significant difference in Asian development,” he said.

Speaking on behalf of the non-regional founding members, Luxembourg Finance Minister Pierre Gramegna said the fact that the idea to form AIIB came from the east was a testament to the rebalancing of the world’s economy.

“Without basic infrastructure, markets cannot function well and growth is limited. AIIB will be a boost to the Asian economy, and become a platform for cooperation that will foster economic integration and inter-regional connectivity,” he said.

By Tho Xin Yi The Star/Asia News Network

AIIB opens to lay down milestone for global economic governance

BEIJING, Jan. 16, 2016 (Xinhua) — Chinese PresidentXi Jinpingaddresses the opening ceremony of the Asian Infrastructure Investment Bank (AIIB) in Beijing, capital of China, Jan. 16, 2016. (Xinhua/Li Xueren)

BEIJING, Jan. 16 (Xinhua) — The Asian Infrastructure Investment Bank (AIIB), a China-initiated multilateral bank, started operational on Saturday, marking a milestone in the reform of global economic governance system.

Representatives of the 57 founding countries gathered in Beijing for the AIIB opening ceremony in Diaoyutai State Guesthouse. Chinese President Xi Jinping made a speech.

With joint efforts of all the members, the AIIB will become “a professional, efficient and clean development bank for the 21st century” and “a new platform to help foster a community of shared future for mankind, to make new contribution to prosperity of Asia and beyond and lend new strength to improvement of global economic governance,” Xi said.

During the ceremony, Chinese Finance Minister Lou Jiwei was announced to be elected as the first chairman of the AIIB board of governors. Jin Liqun was elected the first AIIB president.

In addition to subscribing capital according to plan, China vowed to contribute 50 million U.S. dollars to the project preparation special fund to be established soon, to support the preparation for infrastructure development projects in less developed member states.

The AIIB will promote infrastructure related investment and financing for the benefit of all sides, Xi said, keeping Asia’s enormous infrastructure development demand in mind.

Calling the initiative to establish the AIIB “a constructive move,” Xi said it will enable China “to undertake more international obligations, promote improvement of the current international economic system and provide more international public goods.”

Statistics from the Asian Development Bank (ADB) show that between 2010 and 2020, around eight trillion U.S. dollars in investment will be needed in the Asia-Pacific region to improve infrastructure.

Xi expected the China-initiated institution and other existing multilateral development banks to complement each other for mutual strength and cooperate on joint financing, knowledge sharing and capacity building.

In his address at the founding conference of the AIIB council on Saturday afternoon, Chinese Premier Li Keqiang said the operation of the new multinational development bank is “of positive and constructive significance for the global economic governance reform.”

Hailing Asia “an engine” for the global economic growth, Li said the sustainable development of the Asian economy and regional economic integration rely on the infrastructure construction and connectivity, which would help facilitate the flow of trade, investment, personnel and information.

The aim of China initiating the AIIB is to widen financing channels, expand general needs and improve supply so as to bring along the common development in the region and promote world economic recovery with its own achievements, he said.

The premier called on the AIIB to integrate the China-proposed Belt and Road initiative with each country’s development strategies, promote international cooperation on production capacity and innovate more modes to realize a diverse and inclusive cooperation.

Global leaders extended congratulations to the opening of the multilateral development bank.

“The ADB will cooperate closely with AIIB in supporting the development of the Asia Pacific region,” said ADB President Takehiko Nakao in a congratulatory message to the opening of the AIIB.

“We will cooperate closely to provide support and constructive suggestions for the AIIB development,” said Yoo Il-ho, deputy prime minister of the Republic of Korea at the opening ceremony.

China’s Vice Finance Minister Shi Yaobin said in an interview with Xinhua that China does not intend to apply for financial support from AIIB in the initial stage.

“Though as the biggest shareholder of AIIB and the biggest developing country in the world, China is fully qualified to gain loans from the AIIB, but we made the decision mainly because that many other countries in the region are in more urgent need for infrastructure development,” said Shi.

Shi said China holds 30.34 percent of the whole capital stock, with the first batch of capital stock worth 1.19 billion U.S. dollars already in place.

The AIIB was proposed by President Xi Jinping in October 2013. Two years later, the bank was formally established as the Articles of Agreement took effect on Dec. 25 last year.

As its name suggests, the AIIB will finance construction of infrastructures — airports, mobile phone towers, railways and roads — in Asia.

Amid the evolving trend of the global economic landscape, Xi expected the AIIB will help make the global economic governance system more just, equitable and effective. – Xinhuanet

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 BEIJING, Jan. 16 (Xinhua) — The newly-inaugurated Asian Infrastructure Investment Bank (AIIB) will bring vitality to regional growth and opportunities for global development, especially for developing economies, overseas experts and scholars have observed.Chinese President Xi Jinping on Saturday attended the opening ceremony for the international development bank in Beijing.Full Story

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Internet set to cut cord with US government, ICANN urges Internet control


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The US government, announcing its intention to end its role in March 2014, said it would seek to maintain a “multi-stakeholder” model for Internet governance

A plan to end a key US government oversight role on the Internet is on track for completion this year, the head of the online address gatekeeper said, in a symbolic move towards asserting the independence of the web.

While the transition will not change how the Internet works, it would help reassure users, businesses and governments about its integrity, according to Fadi Chehade, chief executive of the Internet Corporation for Assigned Names and Numbers (ICANN).

Chehade told AFP the transition plan being prepared since early 2014 will be delivered to the US government in February, and that it could take place on September 30—a year later than originally planned.

If the US government approves the plan, “then the contract between ICANN and the US government which is set to naturally expire on September 30 will just expire,” Chehade said in an interview Wednesday in Washington.

Chehade said the private non-profit ICANN is effectively a “traffic cop” that ensures the Internet address system functions, and that the US government’s role has been merely to ensure that it follows correct procedures.

“In all the years we’ve done that (the US government) has never said we did not follow the process,” he said.

“People have aggrandized the role of the US government in what we do. But the change is actually minimal. It’s important symbolically because the US was really a steward for the Internet, but for day-to-day accountability, it is minimal.”

Who runs the Internet?

The US government, announcing its intention to end its role in March 2014, said it would seek to maintain a “multi-stakeholder” model for Internet governance—which allows virtually all users from business to academia to government to participate—instead of a “multilateral” system controlled by governments.

Chehade said that without US oversight, ICANN would be managing the technical functions of the Internet under the supervision of a 16-member board which is designed to maintain diverse representation.

“We have a very solid process that ensures this is not a capturable board,” which can be hijacked by governments or other institutions, he said.

He added that the transition plan seeks “to strengthen the assurances that ICANN will remain multi-stakeholder,” by giving Internet users more authority to appeal to overturn decisions or even to remove board members.

Chehade noted that even though the ICANN process can be “unwieldy,” most decisions are made by consensus, with very few disputed votes in the organization.

He added that he expects a fresh round of hearings in Congress, following complaints by some US lawmakers that Washington is “giving away” the Internet and suggestions that it could be controlled by other governments.

“I think the concerns Congress has raised are very justified and genuine and therefore being prepared to address them is crucial,” he said.

But Chehade noted that ICANN has effectively been handling its functions for a long time.

“The independence of ICANN has been proven to be working for many years,” he said.

“It’s been working and we are now simply admitting that. We are ending the symbolic role of the US government which should have been let go in 2000.”

ICANN chief urges wide Internet control

Internet Corporation for Assigned Names and Numbers (ICANN) President and CEO Fadi Chehadé called for the “preservation of a decentralised, transnational and not too fragmented governance” of the Internet on Tuesday

The head of the private agency that acts as gatekeeper for the Internet called Tuesday for international discussions to ensure control of the web remains decentralised.

Fadi Chehade, president and CEO of the Internet Corporation for Assigned Names and Numbers (ICANN), called for the “preservation of a decentralised, transnational and not too fragmented governance” of the Internet.

He told a Geneva conference that the Internet should remain “polycentric” but that the private and public sectors should work together.

“Only initiatives involving the private sector and governments can successfully and effectively address crucial issues like cybercrime, taxation of e-commerce, and child protection,” Chehade said.

ICANN, which is in charge of assigning domain names, is likely to break free of US oversight late next year.

Washington said in March it might not renew its contract with the Los Angeles-based agency, provided a new oversight system is in place that ensures the Internet addressing structure is reliable.

“ICANN is not and shall not be an island disconnected from other stakeholders,” Chehade said.

The agency plans to submit a proposal on oversight to the US Department of Commerce next year.

In an interview published Tuesday in Swiss daily Le Temps, Chehade said the role of the United States—one of ICANN’s 147 member countries—would remain important.

“If our DNA remains American, our openness to the world is a reality.”

US Commerce Secretary Penny Pritzker pledged at a meeting of Internet leaders in October that the United States would “protect and preserve a free, vibrant and open Internet”.

Pritzker said that while the United States might not renew its contract with ICANN, it still had a responsibility to encourage a decentralised Internet.

“The United States will not allow the global Internet to be co-opted by any person, entity, or nation seeking to substitute their parochial world view for the collective wisdom of this community,” she said. – AFP

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Make public TPPA cost, says Jomo


http://www.thestar.com.my/business/business-news/2016/01/12/jomo-make-public-tppa-cost/

KUALA LUMPUR: A former senior United Nations official and economist Jomo Kwame Sundaram said that while there are benefits to signing the Trans Pacific Partnership Agreement (TPPA), the cost of such an agreement must also be made known to the public.

He said at the 2016 TPPA Forum organised by the Malaysian Economic Association that gains from signing the TPPA in terms of economic growth were only “very modest” because Malaysia was already an open economy.

“These were also based on very questionable assumptions. Having more trade does not mean more economic growth. You have to note that having more trade may mean you export more but the country will also import more. So the (net) trade gains are very modest and the economic growth (accrued) is very very low,” Jomo said.

“However, there are huge risks involved because this is not just a trade agreement but more of a partnership agreement and most of the other requirements of the TPPA will introduce many constraints on the ability of Malaysia and others to catch up and accelerate growth and to develop the economy,” he said.

He said while there were various models to stimulate the outcome of the TPPA on the country, there was no disagreement among the different models that the increased trade benefit in terms of economic growth were only very modest.

“There will be increased trade but the benefits in terms of economic growth will only be realised only after 10 years and some countries may not even benefit in terms of growth,” Jomo said.

Jomo also said that there will be some impact on local companies that will face challenges because there will be fewer constraints on international companies.

However, the chief negotiator from the Ministry of International Trade and Industry Datuk J Jayasiri said that there will be gains for small and medium enterprises (SMEs) if they have enough capacity.

“SME Corp is helping in the upgrade of local SME’s capabilities while Matrade is promoting SMEs extensively to capitalise on the opportunities overseas,” Jayasiri said.

Jomo said that there should be an objective discussion on the matter noting that the gains were being described in such as way that the benefits were being presented without talking about the cost.

“We need to go into any deal with our eyes wide open and to be fully aware of the risks and cost as well as the potential benefits and the likelihood of achieving those benefits. So we have a slightly one-sided picture of what we do get from the TPPA,” he said.

“For people to say that we can pull out of this TPPA after six months of being in it is very deceptive. That is not the way the world works and is a very naive assumption. Say if somebody here doesn’t swim we cannot throw him into the deep end of the pool and say he will learn how to swim,” he added.

On another matter, Jayasiri said that Malaysia will be able to maintain export duties that will be imposed from the TPPA.

“For us in the Ministry, we feel that any market opening measures mean that exporters will have opportunities to go into new markets. If markets are closed it will be difficult for exporters to go into those countries,” Jayasiri said.

“Say if we are out of the TPPA, and our competitors are in the TPPA then it means our exporters will be at a disadvantage so it means we have to be in the TPPA to enjoy the preferential treatment through this,” he added.

By Daniel Tan The Star/Asia News Network

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Connected by mountains and waters


 

Relations between Asean and China are already strong, but expect them to draw even closer as they mark the 25th anniversary of dialogue relations.

THERE is a narrative in China that illustrates the interdependence of trade between Asean countries and China.

The little story, told in a programme produced by the state television broadcaster, goes like this: 36g of palm oil from Indonesia are needed to deep-fry three packets of instant noodles that would be consumed by Chinese customers.

The bio waste generated from producing the palm oil, meanwhile, can power 200 five-watt energy-saving light bulbs in Singapore for an hour.

To China, Asean is its “close neighbour connected by mountains and waters”. Collectively, the 10 nations in Asean are China’s third largest trading partner, while China is Asean’s largest trading partner.

In 2014, the two-way trade reached US$480bil (RM2 trillion) and investment was valued at US$130bil (RM558bil), with both sides aspiring to elevate the figures to US$1 trillion (RM4.3 trillion) and US$150bil (RM644bil) respectively by 2020.

To help realise this goal, China and Asean sealed a deal during the Asean summit in Kuala Lumpur to upgrade their Free Trade Area in November.

The geographical proximity makes Asean countries the first participants of China’s 21st century Maritime Silk Road (MSR), an initiative to foster connectivity and collaboration with countries along the route.

One of the flagship aspects of Belt and Road is railway connectivity. Last year, China embarked on rail projects with three Asean countries as part of Beijing’s ambition to connect China and Asean in order to facilitate the movements of goods and people.

In October, China won the bidding for the first high-speed rail (HSR) project in South-East Asia – the Jakarta-Bandung HSR in Indonesia.

A ground-breaking ceremony for the joint Lao-Chinese railway was held in December, followed by another ceremony to launch the Thai-Chinese railway project for two medium-speed lines.

Cooperation between ports is another key area of the MSR.

Malaysia, which is China’s largest trading partner in Asean, forged a port alliance with China during Chinese Premier Li Keqiang’s official visit to Malaysia in November.

China-Asean Business Council executive president Xu Ningning said Port Klang, which is the world’s 13th busiest port, can become an important locale for Chinese to “go out”, referring to China’s policy that encourages its enterprises to invest overseas.

“Malaysian investment in China is still higher than Chinese investment in Malaysia at the moment. I’d suggest Malaysia step up its promotional activities on investment opportunities to attract Chinese enterprises to Malaysia,” he commented on the sidelines of a China-Asean forum on the MSR in Beijing recently.

Former minister counsellor (economic affairs) in the Malaysian Embassy in China Datuk Ong Chong Yi pointed out that the two-way trade between Malaysia and China, which has reached US$ 102bil in 2014, accounted for one-fifth of the China-Asean trade.

Ong, who had just assumed the role as the CEO of China-Malaysia Qinzhou Industrial Park (Guangxi) Development Co Ltd, said once the Trans-Pacific Partnership deal and other multilateral or bilateral trade agreements are put in place, Malaysia would be an ideal destination to help China to enter other markets.

To provide capital support and drive infrastructure projects, China has set up the US$40bil (RM171.6bil) Silk Road Fund and a US$10bil (RM42.9bil) China-Asean Investment Cooperation Fund (CAF).

CAF CEO Li Wen said the fund, which focuses on investment opportunities in infrastructure, energy and natural resources in Asean, has invested in 10 projects in eight countries since its establishment five years ago.

Silk Road Fund Co Ltd managing director Luo Yang said the fund is interested in collaborating with Asean countries under the framework of connectivity.

A discussion of China-Asean relations will surely involve the South China Sea territorial row, which sees China and four Asean neighbours – Malaysia, Brunei, Vietnam and the Philippines – laying overlapping claims on the busy passageway.

While China has carried out extensive construction on the Spratly Islands (which it calls Nansha), it said it preferred direct consultation with other claimants to tackle the problem, and rejected the Philippines’ move to file claims with the International Tribunal for the Law of the Sea over the dispute.

“The dispute is only temporary. As long as China and countries along the MSR have enough goodwill, political wisdom and sincerity, it will be solved through friendly negotiation,” Bai Tian, the deputy director of Chinese Foreign Ministry’s Asian Affairs Department, said.

He added: “South China Sea will be a sea of peaceful cooperation and prosperity.”

It is important to note that despite the territorial disagreement, all parties are still engaging each other actively in economic cooperation. For example, Malaysia, Vietnam, Brunei and the Philippines have all joined the China-led Asian Infrastructure Investment Bank (AIIB) as founding members.

The Beijing-based multilateral lender aims to help Asia build roads, power grids and other essential infrastructure. It will hold the first meetings of its board and executive council on Jan. 16-18, 2016. The AIIB counts 57 founding members.

This year, China and Asean will mark the 25th anniversary of the establishment of dialogue relations.

A series of commemorative activities, including a summit, is expected to be held to mark the milestone and draw the region and China closer to each other.

By Tho Xin Yi Check-in China

 



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