World Suffers From US Economic Disaster

After a round of intense political power struggle, the United States finally reached a conclusion in the tussle over the debt ceiling. The US President Barack Obama is deemed the biggest loser. At the same time, the US stock market crashed and caused fear and anxiety across the world. Global stock markets dropped, too.
Within a day, the world lost 13.4 trillion Malaysian ringgit ($4.44 trillion) because of the United States. China Press published these 14 digits in a row in the front page to highlight the enormous amount of money the world had lost within such a short time. This 14-digit loss may remain in our minds since a long time.
US Credit Rating
After the enormous loss suffered by the world, the US-based public finance ratings group, Standard & Poor's (S&P) announced the decision to downgrade the US credit rating, from the best rating AAA to AA+. The downgrade is actually a very serious hit to the credibility of the United States. Yet, the world has to lose their money together with the United States. This once again reflects an unignorable fact, that is, the United States is still the most influential country in the world. There is no other country that can replace the United States, both in a positive and in a negative way.
In the previous round of the financial crisis, the world had to share out the burden of the monetary problems of the United States. At that time, people who got agitated sang the same tune with the anti-US groups and advocated the idea of replacing the United States. They assumed that some other countries could replace the United States and become the hegemonic leader in the world.
The financial crisis was caused by the United States. Yet, the world had to share out the losses with the United States. This has told us that the United States is the real most influential country in this world.
Difficult To Change Reality
Now, because of the downgrade of the US credit rating, the whole world is also falling. None of the countries in this world can escape from this disaster caused by the United States. You may loathe the United States, you may curse the country, but you cannot change the reality that all are subject to the influence of the United States.
We can only see the "wonder" of the United States from the third perspective in this round of global disaster. On the surface, the United States stumbled badly, but in the reality, it is the world that is hurt.
The US credit rating has been downgraded and the value of the US dollar has depreciated. For China and Japan, which have massive reserves of the US Treasury Bills, the value of their reserves drop a great deal. This will help the United States to sell its products to other countries.
This is not only an economic disaster, this is also a common issue of the international community.

Malaysia's External Trade Balance

According to the import and export statistics of the Ministry of International Trade and Industry, in April this year, Malaysia's exports grew by 11.1 percent to 57.8 billion Malaysian ringgit ($19.6 billion) whereas the imports grew by 9.4 percent to 46.8 billion ringgit ($15.9 billion). The imports and exports were similar in May -- the exports grew by 5.4 percent to 55.1 billion ringgit ($18.7 billion) while the imports increased by 5.6 percent to 46.6 billion ringgit ($15.8 billion). In May, Malaysia's trade with China and Japan rose by 10 percent and 16 percent respectively. These figures reflect the changes in Malaysia's external trade relations and release some noteworthy alerts.
This obvious change in trade could be deemed as a result of the change from the previous ‘one triangular trade relationship’ to the current ‘two triangular trade relationships,’ in which China, Japan, and Thailand play the key roles. In the past, the government emphasized on the development of processing and export industries. Primarily, it involved importing machines and raw materials from other countries and utilizing the relatively skilled yet cheap labor force to process and manufacture products to be exported to countries like China, Singapore, Japan, the United States, and Thailand. Therefore, Malaysia's trade relations with these countries had turned from trade deficit in earlier years to trade surplus and the trade surplus had increased year by year. At the same time, our trade deficit against certain countries had also increased year after year.
World Investment Report
In recent years, driven by the free trade agreements and strong pressure from relevant countries to open up our market, Malaysia's trade surplus has seen some decrease. Yet, the triangular trade relationship remains. The new triangular trade relationship is the result of Malaysia's external investment in other countries, coupled with the increase of exports of machine equipments and components in the recent five years. According to the world investment report 2011 released recently by the United Nations Trade and Development Agency, the foreign direct investment to Malaysia soared 536 percent to 27.3 billion ringgit ($9.3 billion) in 2010, constituting the highest record in the history. Meanwhile, Malaysia has relied on Japan for the supply of key raw materials needed for the exports of machine equipments and components. Thus, Malaysia's trade deficit against Japan has been increasing year by year. Consequently, the issue of trade deficit against Japan has not shown any sign of improvement or solution; instead, it has deteriorated year after year.
On the surface, the changes of export markets and the expansion of exports caused by the overseas investment have maintained the growth of Malaysia's exports (the first five months of this year saw an increase of 8 percent despite the worsening external environment). This has enabled Malaysia to maintain a reasonable economic growth and led to the major changes in Malaysia's trade balance with its major trade partners. This is a normal structural adjustment. However, if we study more in-depth, we will realize that there are indeed some worrying issues in the current process of Malaysia's trade and economic development.
Export-Oriented Economy
The first issue is about the capability to maintain our overseas investment. Some officials have been talking about ‘all-round development’ lately and advocating investment in places like China, West Asia, and Middle East. However, a country's capability of overseas investment is subject to its international balance of payments. A county will only be capable to invest overseas if it enjoys massive international trade surplus for consecutive years. When its international balance of payments turns from surplus to deficit, the country's capability of overseas investment will decline substantially, or even b e eliminated altogether. Prior to the Asian financial crisis, Malaysia had enjoyed increasing surplus in the international balance of payments almost every year and the overseas investment had naturally flourished.
During the crisis and even the early stage of the recovery, the surplus in Malaysia's international balance of payments dropped drastically and even came to the verge of deficit. As a result, Malaysia's capability to invest overseas is no longer as strong as that in the years before the crisis. Therefore, a very important issue now is about how to maintain the development of our export-oriented economy.
Overseas Investment
The second issue is concerning the subsequent growth of the export of components derived from overseas investment. The export of components derived from overseas investment has constituted the major part of the growth of Malaysia's exports in recent few years. However, China has become the main destination of Malaysia's overseas investment. We must not overlook the capability of China-made components replacing imported components in the country itself. This is especially so considering the fact that Malaysia's investment in China has shifted from coastal areas to inland areas.
To save the cost of transportation, of course it is more convenient to use locally-produced components. Thus, it will be not surprising if Malaysian enterprises in China choose China-made components over those imported from Malaysia. This will lead to a shrink in the export of components derived from Malaysia's overseas investment. Should this happen, after some time, the growth of Malaysia's export will be retarded and another huge change may be seen in the value of Malaysia's trade balance against other countries.
Increasing Trade Deficit
The third issue is the issue of the development of key raw materials. Malaysia's industries have indeed seen substantial development in the past. However, the experience of the two triangular trade relations tell us that Malaysia has relied on China and Japan for key raw materials, both in processing-type export and investment-type export. Thus, the growth of exports to countries other than China will always come together with the increase of trade deficit against China and Japan. The fundamental issue here is that Malaysia is not able to develop key raw material industry on our own yet. The government and the industrial sector have to get Malaysia out of this nightmare by planning and developing relevant key raw material industries so that Malaysia's economy could grow normally.
The changes in Malaysia's external trade balance indeed show us negative signs in the long-term development of industries in this country.

US-China Currency War

The US dollar has dominated the world since the mid 20th century, but that something has recently changed in the so-called global currency war. The United States pressures China to float its yuan and Japan is working hard to keep the yen at bay not to harm its exports." For its part, the Chinese giant is making the mission more difficult by buying Japanese bonds at this critical stage and Brazil is also trying to stop the rising value of its currency. The other problem is that the euro is suffering severe blows because of Greece's indebtedness crisis, which raises fears that the currency may collapse.

The US banks have officially been accused of having contributed to Greece's financial crisis by hiding important data on the country's budget deficit, wondering if this means anything other than a global currency war that expands with each passing day. General Dominique Strauss-Khan, IMF (International Monetary Fund) director, has ruled out the outbreak of such a war and warned against interference in the financial market for purposes of revenge.

Song Hongbing, an American researcher of Chinese origin issued a book titled the Currency War in 2008 saying that the US Administration will be challenging China's miraculous economy by devaluating the dollar and raising oil and gold prices. As a result of the global economic crisis, firms have been shut down, the world trade has been crippled, investment projects have been paralyzed, and unemployment rates have increased all over the world. Nevertheless, China has found a way out of the crisis by achieving the highest growth rate in the world, thanks to its huge gold reserve and its huge investments in US and other international bonds. In one year, China succeeded in replacing Japan as the second largest economy in the world, Germany as a major exporting country, and the United States as the largest consumer market in the world. Moreover, the weak yuan has increased Chinese exports as the other major economies moan under the burden of the economic crisis. The US market has been overwhelmed by Chinese goods; currency is a more fatal weapon in economic wars than weapons of mass destruction.

Germany and Japan are joining the US in pressuring Beijing to let the yuan appreciate to prevent an international currency war from spiraling out of control. Still, China remains firm that a gradual rate change is all it will allow.

Causes of Concern
The US dollar has fallen by about 25 percent against the Brazilian real since the beginning of 2009, making the real one of the strongest performing currencies in the world. This is supposed to sharply contrast against a series of recent interventions by central banks in Japan, South Korea and Taiwan in an effort to make their currencies cheaper. China, an export powerhouse, has continued to suppress the value of the renminbi.

At the end of July 2008, before the global crisis erupted, the Brazilian real traded at 1.56 to the US dollar. In late September 2010 it traded at 1.71, that is, 10 percent lower. What then about the 25 percent, which had made the real one of the strongest performing currencies in the world? That was because during the crisis, the real was the worst performer against the US dollar: from 1.56 in July 2008 to 2.62 in early December 2008, a massive drop of 68 percent. In contrast, the euro fell 24 percent; the Indian rupee by 22 percent, the Korean won 55 percent and the Chinese renminbi by 0 percent. The Japanese yen appreciated during the crisis by as must as 23 percent at one point. In fact, all Asian currencies, having first lost much less (or actually gained) ground vis-à-vis the US dollar, have also recovered more ground — whether it be the yen, renminbi, rupee, Malaysian ringgit or Taiwan dollar. Only the Korean won is in a position comparable to the real.

US Frustration
Just 13 years ago, the IMF , supported by the developed West, sought to amend its articles to define currency convertibility away from current account convertibility toward “capital account liberalization,”, the term “liberalization” replacing “convertibility” at the last moment being a nod to the then ongoing Asian currency crisis. And today, we get advice from many in the West on how capital flows are a concern and controls may be a good idea. Of course, having so greatly profited from capital, developing a disdain now is not unexpected. It is an inevitable and defining characteristic of old elites.

The US frustration and anger over what it sees as Chinese “intransigence” seems understandable. On all occasions since November 2009 — when on a visit to Beijing President Barack Obama went to great lengths to placate his hosts in the hope that they would respond positively to his urgent request for a revaluation of the yuan, as the Chinese currency is named, but drew a blank — China has resolutely said no to the US demands for a revaluation of the yuan. Just a few days before the passage of the anti-China Bill Chinese Prime Minister Wen Jiabao, at a meeting with Obama on the fringes of the UN General Assembly flatly refused to budge from the Chinese position. To the passage of US law Beijing’s reaction was that it would retaliate and others would join the trade wars.

At the IMF ministerial meeting Governor of the Chinese People’s Bank, Zhou Xiaochuan, stated that the value of the Chinese currency had nothing to with the high rate of unemployment in the US and Europe. He advised the US to “practice self-criticism” about its economic policies. He wasn’t alone in pointing out that the US and its allies were concentrating on China but were reluctant to blame each other for “misalignments” in their currencies. This was a pointed reference the US Treasury Secretary Timothy Geithner’s refusal to comment on Japan’s decision to lower the value of the yen. Brazil has also done roughly the same thing.

Impact of Global Financial Crisis
Battered by the financial crisis and prompted by self interests, the United States and some European countries have been doing the opposite of what is right and trying to dump their problems on the laps of other countries. They have been pursuing trade protectionism and putting pressure on China to revaluate its currency. The result of their actions will be to hinder global economic recovery and growth.

The important point is how the current global economic crisis has affected the dollar? The crisis facing the US dollars is more serious than it was during the seventies of the past century. The problem are the indebtedness levels, which reached 375 percent in 2008, the highest since the Second World War, compared to indebtedness which reached 1 percent during the seventies of the past century.

According to economists, the crisis is extremely serious this time. The United States will have to export its dollar to the world in accordance with international agreements. As far as US currency reserves are concerned, the United States should achieve a trade balance by exporting its currency and getting goods, even if this may result in a trade deficit.

China's Role in International Economy
China's economy has a global influence. Today more than half of the commodities (both finished products and materials) consumed in the world today are made in China. If the renminbi appreciates too rapidly, the prices of Chinese products sold overseas will necessarily go up, which will certainly have a major impact on the bottom line of overseas operators and countless businesses involved will see a drop in profits or even go bankrupt. The damage that may be caused by an overly rapid appreciation of the renminbi cannot be underestimated.

The international community often wonders what prevents China from playing a greater role in the international economy. The reason they find that China pursues a cautious policy in making its decisions, especially since the United States is now pressuring it to raise the value of the yuan. Moreover, the United States has huge investments in China, which depends on the US market and technology, although it wants to have its own strong, stable currency.If the dollar continues to lose its purchasing power, the United States will lose its political influence and military power. The United States to draw up a responsible plan to reduce spending and indebtedness and increase tax in order to remain confidence in the dollar.

Malaysia-China Bilateral Trade

The Malaysia-China Chamber of Commerce (MCCC) has drawn up a plan to establish MACC branches in all states in Malaysia. The intention is to allow MCCC to achieve comprehensive development and to maximize the potential of MCCC branches at state level to reap business advantage while serving the interest of the Malaysian Government.

Malaysia-China Chamber of Commerce President Datuk Yang Tian Pei (Datuk Yong Ah Pwi) said that with the increase of two branches, namely, Sabah and Terengganu MCCC branches that have already received approval from the Registrar of Societies to begin operation, the total number of MCCC branches in Malaysia has been increased from four to six. Datuk Yang said that he was happy that MCCC has continued to grow along a positive path.

MCCC Formed by 1,200 Enterprises
MCCC President Datuk Yang Tian Pei also disclosed that while the formation of another MCCC branch in the state of Sarawak in East Malaysia is being worked out, at this moment, other states were also getting ready to form their respective MCCC branches. He said such initiative should pave the way to help the MCCC building branches in all the states in the country. He said that at this moment, the four well-established the MACC branches were the ones in Malacca, Perak, Johor and Penang.

Datuk Yang Tian Pei has taken over the presidential leadership of MCCC since 2004. He will soon complete his two terms or a total of six years as the President of the Malaysia-China Chamber of Commerce. In conjunction with the 20th anniversary celebration of MCCC to be held on 22 May, Datuk Yang Tian Pei has accepted an exclusive interview with Nanyang Siang Pau. In this interview, Datuk Yang shared with us his days with the MCCC in the past 12 years and his expectation of MCCC in the coming years.

Datuk Yang said that the present MCCC membership consists of 1,200 enterprises which include many small and medium size enterprises coming from different ethnic groups in Malaysia. The MCCC membership also includes many large corporations and multinational companies.

Non-Chinese Enterprise Membership on Rise

In this interview with the Nanyang Siang Pau, Datuk Yang Tian Pei said that the MCCC membership coming from the non-Chinese enterprises were on the rise. It was especially so at the newly established MCCC branch in the state of Terengganu. To him it was a good and positive development.

He said that with such a development, MCCC would also follow the trend to transform while expanding its function. This was because in the days to come, MCCC might be required to handle more and more bilingual and even trilingual business affairs as well as business operations. He added that in the coming days, MCCC would also need a stronger and bigger Secretariat that could provide multilingual services to the vast and varied MCCC membership.

According to Datuk Yang Tian Pei, there were already many younger members willing to join the MCCC Board in recent years. He said it was the design of the MCCC leadership to gradually moving toward bilingual operational structure. He said it was a good phenomenon when all board members could master Chinese and English bi-lingual skills in addition to mastering the Malay language as a third language.

MCCC To Assist Non-Chinese Enterprises To Do Business in China
MCCC President Yang also said that his organization also assisted enterprises from other ethnic groups besides ethnic Chinese based enterprises to explore the market in China. He said that to the non-Chinese enterprisers and businessmen from Malaysia, doing business in China would not face language barrier because nowadays, many Chinese businessmen in China could communicate in English.

Datuk Yang Tian Pei said that in addition to helping the Malaysian enterprises from all ethnic groups to do business in China, MCCC also made arrangement for Chinese enterprises to invest in Malaysia. He said what MCCC could help was to make arrangement for the enterprises in China to make direct contact with relevant authorities in the Malaysian Government so that they could enjoy the one stop service provided by the MCCC

According to Yang, with the help of the MCCC, the Chinese enterprises were able to find the right channel and government department to approach for assistance. In this regard, the Malaysian Investment Promotion Board and other related government bodies had also become more energetic in dealing with these enterprises coming from China. After these relevant government bodies reduced the red tapes on business application procedure, the complaints coming from the enterprises and businesses from China toward the relevant Malaysian Government bodies hardly happened.

4 June 1989 Tiananmen Incident Turned Out To Be Turning Point for China-Malaysian Trade Relationship
Datuk Yang recalled that before the 4 June 1989 Tiananmen incident that happened in Beijing, Malaysia and China did not have any direct business dealing. He said that prior to 4 June 1989, Malaysia's business dealing with China had to go through Hong Kong or Singapore. He said that, although Malaysia had established diplomatic ties with China in1974, for a long period of time the bilateral exchange between Malaysia and China remained at teething period with no breakthrough until after the Tiananmen student revolt incident broke out on 4 June 1989. He said the period after 4 June 1989 was the real turning point of Malaysia's trade advancement with China.

Datuk Yang recalled that soon after the Tiananmen incident that happened on 4 June 1989, Rafiidah Aziz, then international trade and industry minister led a Malaysian trade mission to pay an official visit to China. It could be said that the Malaysian trade mission to China was the first foreign government trade mission the Beijing Government received after the Tiananmen incident. As such, the Malaysian trade mission to China was given high-level of attention and high-level of hospitality. Datuk Yang was with that trade delegation. He could still relate the details of the success of that trade mission to China.

Yang disclosed that as a matter of fact between June and July of 1989, he had already led a trade team to attend the trade fair held in Dalian in northern China. Two month later, Rafidah Azis then led the official trade mission representing the Malaysian Government to make trade contacts with Chinese business community.

He added that it was during that time that the Malaysia-China relationship became closer. It was from that period onward that the trade volume between the two countries had gradually increased. Such development has made Malaysia the largest ASEAN trading partner with China. The trade foundation between Malaysia and China was solidly established since then.

Datuk Yang Tian Pei recalled that in June 1990, Chen Kai Xi, the Group Managing Director of Hai-o (Seagull) corporation, led a group of Malaysian companies to explore business opportunities in China. This group of the Malaysian businessmen initiated and established the Malaysia-China Chamber of Commerce that has been in operation until today and for the past 20 years.

According to Datuk Yang, the original name of MCCC was known as the Malaysia-China Import and Export Association. Later on, since the members of this Association also involved in business investment activities, the Association was renamed the present Malaysia-China Chamber of Commerce.

New "Zero Tariffs" Rule Creates Tremendous Pressure to Malaysian Enterprises
Although the trade relationship between Malaysia and China is growing very well as days to by, the bilateral trade between the two countries is not without concern to the Malaysian businesses and enterprises. The special concern about doing business with China at this moment is the "zero tariffs" rule (as result of ASEAN-China Free Trade Area Agreement) imposed on Malaysian businesses at the beginning this year.

To Malaysian businesses doing business with China, this is a critical challenge. Many Malaysian businesses are overwhelmed by such 'zero tariffs' pressure because goods imported or exported to China are now subjected to this free trade agreement. In response, Datuk Yang Tian Pei said that in Malaysia, there were just too many business opportunities available. He advised Malaysian business community not take a pessimistic outlook at such new trade rule. He said that Malaysian businesses must move with time and if necessary to carry out business transformation. Yang's philosophy was that if we could not change the macro environment, we should change the micro environment and to change ourselves to fit into the bigger environment.

He said that Malaysia was a country without major natural disaster and that basically all ethnic groups could get along harmoniously. He said that with good living environment, low domestic prices and rich natural resources, Malaysian businesses could in fact export large quality of goods to China. He said that for example, in recent years, Malaysian businesses were able to export chocolate, white coffee, bird's nest and other local products to the huge and massive market in China. Such success cases of business venture to China should inspire the later comers in wanting to do business with China.

He opined that at present time, the world prices for primary community such as rubber and palm oil were pretty high. That was the main factor for China to buy in large quality of rubber and palm oil from Malaysia.

Malaysia-China Trade Volume Drastically Increased
Datuk Yang Tian Pei said that during the past six years he served as the MCCC President, what pleased him most was the care, help and support the MCCC members had given him and MCCC. Moreover he said the MCCC Board members were able to work in solidarity with him for the good of MCCC. He said that both MCCC members and Board of Directors were all keen to assist in MCCC affairs. As such although his work as MCCC President was forever busy, he was very happy and felt rewarded in serving MCCC as its president for two terms or a total of six years since 2004. Yang said that he joined the MCCC Board in 1990.

On current Malaysia-China trade, Yang Tian Pei said that the development of trade and economic ties between Malaysia and China were moving ahead very fast. The overall relationship between Malaysia and China has also become more intimate than in the past. He said that as the business interaction between the Malaysian and Chinese corporations had become extremely large lately, the work load of MCCC had also become particularly heavy and huge.

Throughout this special interview with the Datuk Yang Tian Pei, although Yang has talked about his involvement with the MCCC at ease, nevertheless, through his conversation, the Nanyang Siang Pau reporter observed that due to his involvement with MCCC and his own business that requires him to spend most of the time in China, the time he has left for his family is limited. He also did not have very much time to accompany his family members to visit other countries.

In closing, Datuk Yang said that the bilateral trade volume between Malaysia and China had indeed gone through substantial growth in recent years. He said that for example, in 2008 the total Malaysia-China trade volume was $53.5 billion dollars (approximately170 billion ringgit [M$]). In 2009, because of global financial crisis, the total trade volume between the two countries was $ 51.9 billion (approximately M$ 164.9 billion). However during the first quarter of 2010, the total trade volume between Malaysia and China has already reached $16.1 billion (approximately M$ 51.2 billion). It was much higher as compared with the same quarter in 2009. Yang said he expected the annual trade volume between Malaysia and China to exceed $60 billion (approximately M$ 190.7 billion) in 2010.

Datuk Yang also predicted that the tourists coming from China in 2010 could exceed 1.2 million. He also forecasted that within the next five years, tourists coming from China could reach the target of 2 million and that within the next 10 years Malaysia could expect to receive 5 million tourists coming from China.

New Economic Model Brings Good News to Malaysians

The Invest Malaysia 2010 Conference Prime Minister-cum-Finance Minister Datuk Seri Najib Razak announced the New Economic Model (NEM) on 30 March to lead Malaysia into an open, free and open economic path. The goal is to enhance national competitiveness and per capital national income. This new NEM is encouraging and exciting for the ultimate goal of the NEM is to improve the national per capita income, regardless of race, in the next 10 years to double from the current $7,000 to $15,000.

In term of Malaysian currency, the current national average annual income of $23,800 ringgit, or $1,983 ringgit per month per citizen, is not very much.

Reducing Reliance on Foreign Workers
We trust the real meaning to improve the national income should be for all Malaysians to upgrade their knowledge, working skills, trade competitiveness and value in the workplace. With the implementation of this NEM, Malaysians and civil workforce can no longer sit around and wait for the government or business to automatically increase the salary. This is not the meaning of NEM. Instead, citizens and workers need to improve productivity in order to achieve the goal to increase revenue. The government can only play the role in the promotion and planning but the ultimate effort to increase income has to come from the citizens.

Once we understand the clear concept of NEM, we hope all citizens can cooperate with the government policy and use own action to demonstrate that all can make efforts to upgrade their knowledge and market value. This is because the NEM will eventually need full cooperation from the people to carry out the implementation.

On policy control, the Government must gradually reduce the reliance on cheap foreign labor, and make effort to bring back the 350,000 Malaysian professionals now working in other countries.

Return of Overseas Malaysian Professionals
Undeniably, brain drain of Malaysian talents to other countries is a serious condition. This is the stumbling block for Malaysia to move toward the high-knowledge-based economy.

Therefore, the government must overcome this problem. The government must create a platform for fair and good employment environment in order to retain Malaysian professionals in Malaysia.

Implementation Process
This NEM is fundamentally a good policy. However, we believe that in order to ensure the smooth implementation of this NEM effectively, the government must remove the obstacles that can pop up during the implementation process.

These include the extremist views recently published in the local media and certain extremist group such as the Malay Right Group PERKASA in making demand for the government to retain all Malay rights. It is only then that the NEM can reach the desired goals.

Malaysia Becomes Hong Kong's 11th Largest Trading Partner

Hong Kong Financial Secretary John Tsang Chun-wah has recently disclosed that Malaysia and Hong Kong's trade volume has maintained a steady growth of 7.5 percent in the past five years. He said that 2009, Malaysia was Hong Kong's 11th largest trading partner. The total bilateral trade volume between Malaysia and Hong Kong in 2009 was more than 93 billion Hong Kong dollars (M$40 billion ringgit).

Tsang also said that 15 percent or 62 billion Hong Kong dollars (M$27 billion ringgit) of the Malaysia-China trade volume was done through Hong Kong.

Springboard for Foreign Companies
Tsang said: "We should continue to work on the free trade agreement, namely, the Closer Economic Partnership Agreement (CEPA) to break through trade barriers in inter-regional trade, service and investment trade barriers."

Hong Kong Financial Secretary Tsang pointed out that financial service was one of the most important areas in the bilateral relations between Malaysia and Hong Kong. He said Hong Kong played the role as a springboard for foreign companies, including Malaysian companies to do business in China.

Bilateral Cooperation
Hong Kong enjoys a high degree of cooperative relationship in the financial field with Malaysia. More recently Hong Kong and Malaysia have both opened their respective financial liberalization door for both sides to create more opportunities for cooperation.

Tsang Chun-wah also said that one of Hong Kong's further cooperation with Malaysia was in Islamic finance. He said Malaysia has a lot of experience in this field. He said that in the field of Islamic finance, Hong Kong hoped to develop more opportunities for bilateral cooperation with Malaysia, including the development of Islamic bond market.

Obama Fulfills Historic Dream With Passing of Health Care Reform Bill

The US Congress finally passed the Health Care Reform Bill that will cost the government close to $1 trillion. This is a major US medical reform bill passed in the past 100 years of US history. The passing of the bill fulfilled President Obama's election promise to the people. In 2009, when US President Barack Obama took office, he pledged to the people that he "must tame this health care insurance monster."

Historic Step
In fact, to reform national health care insurance plan has become one of the hottest topics in the US politics in recent years. However at the time when the US Congress passed this historic health care reform bill to provide medical care for all US citizens, other countries such as Germany and France have instead passed their respective "saving and unity" acts to cut social welfare expenditures in response to the plight of financial and economic downturn.

The respective cut in social welfare and unemployment allowance fund by Germany and France was as high as $20 billion respectively. It was also the second time since the Second World War that these two European nations have cut their social welfare funds to their citizens. Coincidentally, earlier this year, South Korea has also released a document entitled "Affordable health insurance white paper." This white called on the people to reduce dependence on social welfare.

Political Gimmick
The experience of the United States, Germany, France, Korea and other countries in dealing with social welfare and medical care issues is a good reminder for Malaysia's ruling and opposition parties to stop those political gimmick and competition of "cashing out social welfare checks for votes" during general election campaign . It is important for Malaysia to use its limited financial resources to give priority to look after the truly unfortunate people and disadvantaged groups in the community first so that the well being of all citizens can be safeguarded.

Along with economic development, when a country's national income increases, the government must in due course gradually offer various social welfare measures to strengthen the care for the vulnerable groups in order to achieve the social fairness and justice ideals. But social welfare plan is by no means a free lunch. Once implemented, it is difficult for a country to amend or cancel. As such the implementation of it must be cautious. As the government itself is non-productive, every single dollar the government spends will finally have to come from tax payers' pockets. For this reason alone, when a government makes plans for social welfare or health care improvement, it must carefully plan them within its financial means.

Distribution of Social Welfare Fund
Malaysia's social welfare budget is on the lower side as compared with other countries and Malaysia also has the phenomenon of operating an uneven distribution of social welfare fund. It is time for Malaysia to make adjustment to its current social welfare system. However, according to Malaysia's current reality, if the government wants to implement any social welfare measure, it cannot take a universal and parallel approach; otherwise, Malaysia might repeat some of the mistakes made by some other countries.

When a country implements social welfare and health care plan without looking into the actual financial situation of the nation, such social welfare or health care promise cannot be effectively carried out. It is only good to look at but cannot satisfy actual need. Moreover, if this country tries to force this social welfare package through under acute financial shortage, such measure might even lead to financial bankrupt, Future generation of the country will also suffer eventually.

In general, social welfare can be divided into social assistance and social insurance. Social assistance is to help the socially disadvantaged groups to maintain a minimum standard of living with human dignity. The expenditure of it is generally absorbed by the government through the existing tax revenue. On the other hand, social insurance is a collective effort taken by the government and the people collectively in coming out with a plan to reduce human emergency and risk in time of need. The principle in maintaining such a social insurance plan is based on self-supporting and contribution of fund from the government people.

In case of Malaysia, the premium and coverage of social insurance plan accorded to people are low. In time of need the insufficient insurance fund coverage will have to come out from the Government's social assistance fund. If Malaysian Government continues to come out with such new social welfare measure, it will have a lasting impact to the government's financial soundness status.

Government's Commitment
In recent years, under pressure from the Parliament, Malaysian Government has adopted a number of tax cuts, coupled with the economic downturn, the federal budget has shown significant imbalance in revenue and expenditure. With the government expenditure continues to expand, the federal financial situation is deteriorating rapidly with government debt now amounting to $336 billion ringgit. This federal debt has reached 7.4 percent of Gross Domestic Product (GDP). This is the highest percentage in the past 20 years.

Since the social welfare budget is the Government's recurrent expenditure, and therefore Malaysian Government's federal budget for next year is also not very promising. Next year, the government's commitment to expand social allowance and disability allowance to the low-income elderly will require a budget of about $1 billion ringgit to support.

Efforts to Carry Out Plan
However, the government's effort to carry out prudent spending through levying taxes on consumer goods and to reduce fuel subsidies has not produced good result.

Although there is a need for the government to impose the reasonable Goods and Services Tax, but as it stands now, it will be difficult for this Goods and Services Tax to get through the Parliament now. In the end, all kinds of policy promises that the government intends to implement will have to be reduced or even let go. Such situation will further lead to more disputes by the society.

Japan Might Withdraw Investment From Malaysia Because of Worker Shortage

Japanese Ambassador to Malaysia Masahiko Horie said that if Malaysia could not improve the situation on the shortage of foreign workers Japanese firms might be forced to withdraw their investment from Malaysia and moved to countries with cheaper and ample labors. He pointed out that the shortage of foreign workers and skilled workers in Malaysia has become Japanese firms' biggest problems. The Japanese investors in Malaysia were disturbed by the situation.

Freezing Intake of Foreign Workers
In 2009, Japan was Malaysia's leading manufacturing sector. Japan has injected a total of $ 7.41 billion ringgit in Malaysia. However, if Malaysia still cannot resolve the shortage of manpower problem, it will be difficult for me to guarantee that this investment figure can be maintained or even improved.

Horie said the shortage of workers began to surface after the Malaysian Government implemented the new foreign work policy by freezing the intake of foreign workers.

Business Transformation Suffers Setback
Ambassador Horie said that in recent years, the short supply of workers was indeed quite a big problem for Malaysia. He said the Japanese enterprises in Malaysia faced not only their respective restructuring and upgrading struggle; the Japanese firms' daily operations were also affected by the shortage of workers.

In September 2009, a Japanese firm carried out an open recruitment for 400 factory operators. After making great effort, the firm only managed to recruit 300 operators. In this regard, the productivity of the firm naturally suffered a severe blow. What is more, as far as I know, almost Japanese firms in Malaysia are also facing similar problems.

Facing Dilemma Money
The aforementioned phenomenon affects not only the Japanese companies. Other foreign-owned factories are also faced with this dilemma of they have the money but they cannot find worker situation.

Horie reminded that as far as Malaysia's domestic economic development, was concerned, having abundant manpower and human resources and having workers with ungraded skills have become an urgent issue for the Malaysia to resolve. The authority concerned should not take such a shortage of workers issue lightly.