THE THIRD EYE: 9/1/13

Wednesday, September 4, 2013

Eyeing the UMNO polls

RESPECT: There are no clear battle lines as contests are expected to be on friendly terms

THE race for Umno party posts has begun, albeit with less politicking or warring. Compared with other Barisan Nasional component parties, Umno by and large has implemented a democratic reform to its party polls. Almost everyone can contest for any post; just fill in a form and you are good to go.

Former Umno Puteri head Datuk Seri Azalina Othman Said started the ball rolling after throwing down the gauntlet against Datuk Seri Shahrizat Abdul Jalil for her Wanita Umno head post.

Many were surprised by this move and believed that Azalina has finally risen to the occasion to redeem herself after years of hiatus in the party leadership.

Shahrizat, in response, flashed her trademark smile and accepted the challenge. But, she will not go down without a fight. Insiders say that she is looking for a running mate to bolster her campaign.

Word has it that Azalina had met former Johor Wanita Umno head Datuk Halimah Sadique and proposed that they team up for the wing's top posts.

However, Halimah had suggested Azalina run for a deputy's post, on the notion that she was more senior than the former tourism minister. Much to Azalina's disappointment, the deal was called off.

But the negotiation ended in an amicable manner. Azalina did not bear a grudge and Halimah respected her decision. It is an admirable trait, considering that the two women leaders are politically prominent.

Azalina's move to contest as Wanita Umno head has in some way provided an impetus for outgoing Puteri members -- who would be automatically absorbed as Wanita members upon reaching a certain age limit -- to stride into an unchartered territory of a senior wing.

Puteri head Datuk Rosnah Abdul Rashid Shirlin is now gunning to be an executive councillor in Wanita. It is not known whether she would be bringing her followers to the fold but that is only to be expected, if she wants to strengthen her position in Wanita.

In vacating her post, at least two Puteri leaders -- Mas Ermiyati Samsudin and Jamilah Hanim Othman -- have announced their decision to contest as Puteri head.

Differing in style and grassroots support, Mas Ermiyati and Jamilah are seen as the two most suitable candidates to lead Puteri. However, until today, they have yet to draw the battle lines and preferred that the contest should be done on friendly terms.

Jamilah had said that she would rather not have a running mate at the risk of turning the wing fractious. Things are going well for Puteri and it seems that it has politically matured over the years.

In Umno Youth, there has not yet been a clamour over contest for the chief post, as most have agreed there should be no challengers to Khairy Jamaluddin. However, it is a different story for the Umno Youth vice-chief post.

Datuk Razali Ibrahim is still mulling over post he would be contesting, but pundits agreed that he is likely to forgo his post in favour for a seat in the party's supreme council.

Circumstances are pointing to similar lead as well, when a number of Umno Youth leaders such as Umno youth executive councillor Lokman Noor Adam, Perak youth chief Khairul Azwan Haron and Tenom youth chief Jamawi Jaafar announced their candidacy for the number two post.

All this is being done in the spirit of democracy and the grassroots are supportive of the decisions made by the contenders.

Observers note that the new system to elect party leaders has certainly opened up the flood gates for aspirants, and thus far has promoted healthy political ideals.

As the contest draws nearer, it will be interesting to see if the battles for leadership posts will be more or less intense as in previous party polls.

Eyeing Tan Sri Dr Zeti Aktar Aziz views on Providing for the 'bankless' poor

PROGRESSIVE: World's 2.5 billion people are reaping fruits of financial inclusion

MAKING the financial system accessible to the world's poorest people can unlock their economic potential, improve their lives and benefit the wider economy. So, it is no surprise that financial inclusion of the poor has become an important component of public policymaking. Central banks and regulators worldwide are taking the lead in making financial inclusion a priority, in addition to their traditional mandates of maintaining monetary and financial stability.

Financial inclusion is about providing an opportunity for the world's 2.5 billion unbanked and financially underserved to participate in the formal financial system, thereby helping to lift them out of poverty and enter the economic mainstream.

Greater financial inclusiveness promises a more cohesive society and more balanced growth and development.

Moreover, financial systems themselves stand to benefit from becoming more comprehensive and progressive. The additional consumers participating in the formal financial system will strengthen national economies and, in turn, enrich the global economy.

Indeed, as developing countries move towards middle-income status, financial inclusion is a key component of continued progress.

In countries with high levels of financial exclusion, consumers are left to rely on unregulated informal services. These inferior substitutes often imply exorbitant costs for borrowers, and financing that is usually too short term for productive investment activity.

Moreover, the lack of consumer protection and regulatory and supervisory frameworks exposes informal activities to vulnerabilities that can harm borrowers and jeopardise financial stability.

Increasing the availability of formal financial services to those who have long been denied them requires establishing a balanced regulatory framework.

Oppressive, blanket regulation, which may be necessary in complex and unpredictable financial markets, may not be relevant in a rural community or, worse, it may stifle efforts to promote financial inclusion.

Indeed, proportionality is an important aspect of regulation, enabling prudential measures that, rather than exceed or underestimate, are commensurate with the risks that need to be addressed. Little wonder, then, that high levels of exclusion in developing and emerging countries have prompted policymakers to embrace proportionate regulation, thereby gaining the flexibility to encourage innovation in the provision of financial services while preserving financial stability.

Bangladesh, for example, has adapted its financial regulations for microfinance institutions. This has helped to catalyse the growth of sustainable microfinancing to local women-owned enterprises. Kenya's "test and learn" approach to regulation has unleashed the potential of mobile-phone-based financial-service delivery through M-PESA, which offers consumers a safe and convenient alternative to cash.

There are many other examples of successful implementation of proportionate regulation that have resulted in greater financial inclusion without compromising financial stability. In Malaysia, agent-banking regulation (which safeguards consumers' interests while supporting financial institutions' business models) has led to the expansion of branchless banking to reach previously unserved rural areas.

Similarly, Mexico’s “tiered” approach to financial access — according to which requirements for opening bank accounts are proportionate to risk, with low-value accounts subject to higher transaction restrictions — has expanded access to basic accounts, while mitigating the risk of money laundering.

And, Pakistan and Indonesia, by basing capital requirements for microfinance institutions on the size of the population that they expect to serve, are enabling these institutions to serve distinct market niches sustainably.
Policymakers in many countries have recently been considering the role of financial standard-setting bodies (SSBs) in advancing financial inclusion. In particular, they are focusing on the specific challenges that arise when applying supervisory standards in a developing country that is pursuing financial stability and inclusion.

Although global standards supposedly reflect the principles of proportionality, they provide insufficient guidance for the national regulators, banking institutions and financial-sector assessors, who are trying to apply them effectively in diverse environments. This lack of contextual clarity has led to excessively conservative interpretations of the regulations, and thus to the creation of unintended barriers to financial inclusion. Addressing this will require input from policymakers with practical experience applying international standards, particularly in emerging economies.

At the same time, in order to ensure continued progress towards financial inclusion, representatives from developing and emerging economies must play a greater role in shaping future standards. The Alliance for Financial Inclusion, a network of central bankers and financial policymakers from more than 80 developing countries, is already contributing to more effective and proportionate global regulation by facilitating increased engagement with SSBs. This month, Malaysia’s central bank will advance the process by hosting AFI’s Global Policy Forum.

Such collaborative efforts among developing countries ultimately foster closer cooperation between them and their developed counterparts. This will lead to better outcomes for the global financial system, the global real economy, and, more important, the people who have been excluded from both for far too long. Project Syndicate

Eyeing the RON 95 and Diesel TWENTY CENTS price hike by Roy Goh

FUEL HIKE: People must look at the long-term benefits in subsidy cuts

MALAYSIANS lined up to save money on Monday night and burnt some as they waited.

The prices of RON95 and diesel were raised by 20 sen to RM2.10 and RM2 yesterday.

This triggered nationwide panic-buying and Kota Kinabalu was no exception with vehicles queuing from late noon.

To make things worse, pump attendants and station supervisors bore the brunt of the people's frustrations at the slightest delay or mistake.

In other states, there were also reports of motorists crashing into pumps, vandalism and other form of abuses -- because of the 20 sen hike. It was good to note those who fuelled before the midnight deadline earned a reprieve worth RM6 to RM20 until their tank empties.

The smallest of cars could hold up to 30 litres and multiply that by 20 sen, its owner saved RM6. For owners of bigger vehicles that could hold up to 100 litres, they saved up to RM20.

A hike in the price of an essential item, such as fuel, is always worth a debate among economists right to the man on the streets.

There are points to be raised both from the decision-makers and end-users. But for the trouble they go through waiting for up to an hour, the rage burning as they scrolled their smartphones on social media, the honking and the beverages they bought, it's priceless, at least to those who queued.

Their grouses varied from the announcement being too sudden, it was wrong, 1Malaysia People's Aid (BR1M) to be blamed and some emphatic tunggulah kamu (just you wait) to the government.

A friend, who smokes a cigarette brand that retails at RM10.50 a packet, said he queued to fill up to make sure he saved as much as he could.

Asked if he would change to a cheaper brand of cigarette so that he could save, his answer was no.

Three key facts that were not stated by those who vented their feelings:

THE contraction could save the government RM1.1 billion for the remainder of the year and RM3.3 billion annually;

THE prices of RON95 and diesel at the stations were still subsidised at 60 sen and 80 sen per litre; and,

COMPARED with prices in the region, where in most countries, it is higher.

The hike would likely hit the lower-income group, according to Federation of Malaysian Consumers Association president Datuk N. Marimuthu.

"The 20 sen increment is high as RON95 petrol and diesel are widely used by the low- and middle-income families.

"Even though it gives the government much-needed elbow room to plan and allocate a bigger budget for other developments, they should also think about the people."

The keyword when Prime Minister Datuk Seri Najib Razak made the announcement was rationalisation.

The move was part of the government's subsidy rationalisation initiative to ensure a more efficient and just distribution of benefits derived from its subsidy effort, he said.

"Currently, our subsidy system benefits everyone, including the higher-income group and foreigners. Thus, we need to move to a more targeted subsidy system that caters to the vulnerable groups.

"The subsidy rationalisation will be carried out in many stages. To reduce the burden of the low-income and vulnerable group following the fuel subsidy rationalisation, BR1M will be increased in the 2014 Budget," he said.

The government, in its 2013 Budget, allocated RM24.8 billion for fuel subsidy and the price move would help save RM1.1 billion in the remaining part of the year. Whatever is saved would be ploughed back to benefit the people, especially the lower-income group.

All this, however, calls for prudent spending among the public and efficiency from the civil service, especially in the transport industry. It also points to the stricter enforcement of laws against profiteers, who will jump on the issue as an excuse to hike prices of goods and services.

Monday, September 2, 2013

Eyeing Tan Sri Dr Sulaiman Mahbod's writing on Trade Liberalisation

INTERNATIONAL COMPETITION: The world is already a global village with economic boundaries crumbling

WITH globalisation and internationalisation, countries are no longer spared of pressures from many quarters to open up their economies and be increasingly exposed to demands for surrendering their sovereignty to manage their economic affairs.

The last round of trade negotiations, otherwise called the Uruguay Round, led to the demise of the General Agreement on Tariffs and Trade (GATT), which dealt with trade in goods, and in its place the World Trade Organisation (WTO) established and brought trade in services into its fold. Efforts were also in place bringing in intellectual property (TRIP) and investments (TRIM) under the WTO fold.

Subsequent post Uruguay Round efforts to further improve multilateral processes, beginning in Seattle, and later in Doha, stalled. In place of multilateralism, bilateral pressures picked up speed and free trade initiatives came onto the scene subjecting small economies to the full onslaught of economic power of the large economies.

Now another form of regional partnership called the Trans-Pacific Partnership (TPP) Agreement has emerged, to bring several economies in the region into another regional arrangement with its own ways of addressing disputes between contracting parties, even proposing the need to adjudicate disputes on investment incentives.

Thus the statement that countries are no longer at war in a military sense but are having skirmishes in the trade arena, is true. The concern by the American leaders of China's exchange rate policy is but one of these.

Nearer to home is our commitment towards Asean economic integration, the Asean Economic Community (AEC), which is slated to come into force by 2015. The varying economic stages within Asean should not delay the formation of AEC and our efforts need to be focused on this more urgent matter. Certainly what happened in the Eurozone, the Euro in particular, should give us more insights into the challenges and trappings of regional integration.

The AEC should be the corridor where our diplomats and trade negotiators should be busier, rather than responding to pressure from the majors whose real problem is to effectively manage their own economies.

We must ensure AEC materialises to showcase to the world that our brand of economic grouping is working and impactful. Asean has come a long way and it is high time we consolidated it even further. AEC is quite a natural progression after our CEPT, AFTA, AFAS, and after the opening up of neighbouring countries, such as Myanmar and the coming of the latter, into another potential centre for investments into the region.

Malaysia would stand to gain from AEC given its stage of economic growth and development and the public policies that are supportive of the private sector as the engine of economic growth.

As any trade negotiation would develop, and TPP included, the issue of more liberalisation is uppermost and the issue of how to address disputes under the new proposed grouping will always be an important agenda for negotiation.

Our negotiators must be prepared with country positions after doing the calculations of cost and benefit of joining the partnership. Have we done so? Hopefully we have.

Our culture for in depth economic and policy analysis has somewhat taken a back seat preferring only the importance of the bottom line. The private sector with all the subsidies it has enjoyed often does not find it quite necessary to invest in policy related researches and R&D. This is where we differ from the developed west where policy related researches and R&D are largely funded by the industry for the benefit of the whole economy.

In managing all these pressures and expectations, our economic players and policy makers will have to be prepared for liberalisation. We have to build our state of readiness for a more liberal economic environment. It is almost a fact of economic life that the world is already a "global village" with economic boundaries crumbling.

Thus the mindset, of thinking global and acting local, must be in all of us. To be so contented with the domestic market and with the strong support of the public sector available here, should be a mindset of the past.

To be sure, others are watching us to contribute to the global process of liberalisation. The simple reason is that we have benefited from their capital investment flows and markets for our products.

Thus Malaysian industries and traders should always be prepared for competition from external players and operators, and to work with their Asean counterparts to become global players to face international competition. The need to consolidate and to grow into regional and global player is a must now.

The TPP is a wake-up call to our industries to stay efficient and competitive as well as highly productive. If nations with limited resources can find niches in this competitive world, Malaysia too, can.

With efficient utilisation of our natural and human resources by our industries as well as operating in a non-subsidised environment, using the boundary pricing policy as much as possible, may be the formula for long term survival of our industries. Additionally, we must be prepared for our protection walls to be increasingly brought down in due course.

Eyeing Unusual features in leaked TPP proposals writes Khor Eng Hee

TRANS-PACIFIC PARTNERSHIP TALKS: There should be a balance of rights and obligations, writes Khor Eng Hee

SECRECY surrounds current negotiations taking place on the Trans-Pacific Partnership (TPP), a plurilateral trade negotiation carried out so far by 11 countries to establish a regional free-trade area. Japan was admitted as the 12th participating member on July 23.

Certain parts or chapters of the draft text of the TPP, however, have been leaked on the Internet. Consequently, much interest has now been aroused among people worldwide about the main players, their motives and of the issues involved.

Trade liberalisation, as the Uruguay Round (UR) has shown, does not necessarily bring benefits to participants equally.

Major adjustments are often required in the economy and these can be costly. A country's business and industrial enterprises must be prepared and capable to compete in world trade, and to face such competition at home to profit from such liberalisation.

When elements of geopolitics are added to trade liberalisation, the outcome does not impact just on trade.

Some of the obligations can be liabilities. They can constrain development efforts because of the restraint in legal commitments undertaken either unwittingly or under pressure.

This article discusses the TPP in a general manner. It takes up one or two of the salient features of the proposed agreement as these have been leaked out. Readers will need to understand that it is written under such qualification.

The terms and conditions including the sectors involved in the proposed agreement are still kept away from the public. These, in addition, are evolving as negotiations progress.

However, from what has been leaked out, there seems to be some features in the draft TPP text not seen in the 50 years of the General Agreement on Tariffs and Trade's (GATT) history and in the World Trade Organisation's (WTO) institutional and legal framework.

Some of the commitments proposed seem to go beyond those accepted in the WTO or other regional free-trade areas in sectors like environment, labour standards, intellectual property rights protection, investment, competition, etc. Many of these proposals would have serious implications.

Observers note that of the 29 chapters of the TPP, only two deal with trade. There is nothing strange about such an approach as major participating countries do attempt to use trade negotiations to pursue their other economic or political strategic concerns and aims in international relations.

Developing countries also enter into trade negotiations with some plan and ambition. However, their efforts do not have the strategic interests or impact compared with those of major advanced nations.

Theirs is simply social and economic growth and development. They do not yet possess the strength and influence to aim for a more ambitious power play.

One other unusual feature is the proposal that private economic enterprises and their individuals in sectors covered by the agreement would be empowered to sue the government of another party for what they claim to be breach of commitments, and because of this, for loss, direct or indirect.

Some observers are of the view that what is proposed puts the government answerable to the enterprises of another party rather than the other way around when they establish themselves in another country. This would put lesser countries at the mercy of multinational corporations, some of whose annual budget is even bigger than their government's.

The host government would open itself to all sorts of litigation, not just government-to-government as in the GATT in the past, now in the WTO or in most other existing free trade areas.

Such commitments will apply to all members of the agreement once they are adopted and come into effect. While developed members have the human and financial resources to deal with such a problem or are au fait with such a practice in their culture, are developing members on par with their developed counterparts?

Such a principle or legal rule if applied to services trade such as financial and banking services as an example, would tie down governments from regulatory corrective actions in the event of financial volatility and other crisis that the world today is prone to. Hedge funds, for example, would have a heyday.

Threat of punitive action would be sufficient to pressure particularly weaker member countries. This would act as a strong constraint on any affirmative policy measures towards national economic development and growth.

For one thing, capital control would be out of the toolkit of central banks to prevent a sudden surge of outflows of capital under these proposed terms and conditions.

The number of free trade agreements so far concluded and studied by some scholars and think tanks show that the use of different rules of origin is discouraging some foreign businesses from making use of some of these free trade areas as it adds up transaction costs.

One common question in the corridors of the GATT that I used to hear in my days in Geneva was: "At the end of the day, is there a balance of rights and obligations?"

One answer is that it may be too late if one waits for the end of the day to ask such a question. What is the use of such rights if developing countries, because of weakness, cannot make use of them.