Minister Fast Promotes Canada as a Strong Trading Partner at World Economic Forum

Canada’s pro-export plan, reinforced by the Canada-European Union and Canada-South Korea trade agreements, makes it a top investment destination

January 24, 2015 – Davos, Switzerland – Foreign Affairs, Trade and Development Canada

The Honourable Ed Fast, Minister of International Trade, today concluded the second stop of his trade mission to Europe, at the World Economic Forum (WEF).

Minister Fast met with Cecilia Malmström, European Union Trade Commissioner, to discuss the new opportunities created on both sides of the Atlantic by the Canada-European Union trade agreement. They reiterated their support for its quick ratification and encouraged businesses to position themselves to realize its full potential.

Minister Fast held meetings with European business leaders, including John Cridland from the Confederation of British Industry. This builds on Minister Fast’s meeting in Rome with the Italian business association, Confindustria. Both organizations have been strong supporters of the Canada-EU trade agreement.

Minister Fast hosted a round table attended by his colleagues and Canadian business leaders to discuss their plans to capitalize on the new opportunities the Canada-EU trade agreement presents.

On the margins of the WEF, Minister Fast held bilateral meetings with his counterparts to continue advancing Canada’s interests on the world stage. He met with Ambassador Michael Froman, U.S. Trade Representative, continuing to address the United States’s protectionist “Buy America” measures and urging the country to make legislative changes to comply with the WTO’s Country of Origin Labelling (COOL) ruling. Minister Fast and Ambassador Froman also reviewed the advancement of the Trans-Pacific Partnership (TTP) negotiations.

Minister Fast also met with Cesar Purusima, Secretary of Finance of the Philippines. They discussed the agenda for the upcoming Asia-Pacific Economic Cooperation summit, which the Philippines is hosting in 2015 and the shared interest of advancing opportunities for small and medium-sized businesses. They also reviewed key aspects of the Canada-Philippines trade and investment relationship and ways in which this partnership could be strengthened. Minister Fast also met with Mustapa Mohamed, Minister of International Trade and Industry of Malaysia. Malaysia is the 2015 chair of the Association of Southeast Asian Nations.

Minister Fast addressed a session, along with EU Trade Commissioner Malmström, on trade and investment in the 21st century, during which he promoted Canada as a top destination for investment and a strong partner for trade.

Minister Fast also participated in the informal WTO ministerial meeting on the margins of the WEF, where he urged all members to work diligently between now and July to define a plan that will lead to the conclusion of the Doha Round at the next WTO Ministerial Conference. He also reiterated that it is important to conclude negotiations on the WTO’s information technology, trade in services and environmental goods agreements as soon as possible, to the benefit of all.


“This past year was a truly historic one for Canada’s pro-job, pro-export plan. Canada is a proud trading nation, and the historic Canada-EU and landmark Canada-South Korea trade agreements are significant achievements. Under Canada’s Global Markets Action Plan, we will continue our vigorous trade promotion efforts to boost our exports and create new opportunities for Canadian businesses. At the World Economic Forum, as part of my trade mission to Europe, I promoted Canada as a strong trading partner to continue creating new jobs and prosperity for hard-working Canadians from coast to coast to coast.”

– Ed Fast, Minister of International Trade

Associated Links


Max Moncaster
Press Secretary
Office of the Honourable Ed Fast
Minister of International Trade

Media Relations Office
Foreign Affairs, Trade and Development Canada
[email protected]
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ISIS Targeting Educated Women

A dire new warning from the UN. “The UN on Tuesday decried numerous executions of civilians in Iraq by the Islamic State group, warning that educated women appeared to be especially at risk…Numerous other women have also reportedly been executed recently in IS-controlled areas, including Mosul, [UN] spokeswoman Ravina Shamdasani told reporters. She said “educated, professional women, particularly women who have run as candidates in elections for public office, seem to be particularly at risk.” “In just the first two weeks of this year, reports indicate that three female lawyers were executed,” Shamdasani said.” (Yahoo )

Treaty Ratification of the Day: Somalia ratified the UN Convention on the Rights of the Child. Now, the only two countries not to have ratified it are South Sudan and…The USA. (UNICEF

Stat of the Day (Not so Humanity Affirming): More than one million people may have been forced to leave their homes in northern Nigeria by the five-year-old insurgency of Islamist sect Boko Haram, a United Nations agency said. (Reuters

Get Mark’s Global Dispatches Podcast app and peruse the archives of his interviews with i-dev and IR  superstars like Jeff Sachs, Helene Gayle, Chris Blattman, Louise Arbour, George Mitchell, Nick Kristof, Carolyn Miles and many more. It’s free! —>


Armed men kidnapped a woman working for the U.N. peacekeeping mission MINUSCA in Central African Republic’s capital Bangui on Tuesday, the mission said. (Reuters

Nigeria was on Tuesday awarded $8.1 million in funding for a final push to eradicate polio, as it nears six months without a case of the disease. (AFP

Police in Democratic Republic of Congo fired shots in the air on Tuesday to halt a second day of protests against a draft measure that could delay a presidential election set for 2016 and allow President Joseph Kabila to stay in power. (Reuters

Half a billion dollars of aid pledged to end the Ebola outbreak in west Africa still hasn’t been paid, according to the UN’s response co-ordinator. (Guardian

Dodged a Bullet: The economic impact of Ebola on African economies in 2015 will be less severe than previously thought, the World Bank said in a report on Tuesday, causing just a fraction of the more than $25 billion in losses first expected. (VOA


Eighteen Nobel prize winners called on Saudi academics to condemn the flogging of Saudi blogger Raef Badawi in an open letter published by British newspaper the Independent on Tuesday. (AFP

The Islamic State group threatened in a video Tuesday to kill two Japanese hostages within 72 hours unless it receives a $200 million ransom, but Tokyo vowed it would not bow to “terrorism”. (AFP

A Bahraini defense lawyer says prominent human rights activist Nabeel Rajab has been found guilty of insulting government ministries on Twitter and sentenced to six months in jail. (AP

As the season for wheat planting in Iraq wound down early last month, farmers in areas under the control of Sunni militant group Islamic State grew worried. More than two dozen farmers say they had not planted the normal amount of seed, because they could not access their land, did not have the proper fertilizers or adequate fuel, or because they had no guarantees that Islamic State would buy their crop as Baghdad normally does. (Reuters


Rights groups welcomed the release of a prominent Rohingya Muslim doctor who was arrested while trying to calm rioters during sectarian violence in western Myanmar, but noted Tuesday scores of political prisoners remain behind bars. (AP

Sri Lanka’s new health minister said a mystery kidney disease that has ravaged farmers in part of the country for two decades will be given top priority under the newly elected government. (AP

State-controlled media say a court in northern Vietnam has sentenced eight people to death for heroin trafficking. (AP

Malaysia on Tuesday cut its economic growth forecast for this year and announced a slew of austerity measures as tumbling oil prices force the government to slash spending. (AP

More than 100 Chinese citizens trapped by fighting between government troops and insurgents in northern Myanmar, have been arrested and are being held by the Myanmar government, a Chinese embassy spokesman in Yangon said on Tuesday. (Reuters

A U.N. campaign to make North Korea accountable for human rights abuses should be scrapped, a semi-official North Korean propaganda website said on Tuesday, days after a defector admitted parts of his story about brutal prison life were untrue. (Reuters

At least three security marshals were injured in a brawl that broke out in Nepal’s parliament early on Tuesday, with opposition legislators climbing on their chairs and throwing microphones and shoes in a heated debate over the Himalayan nation’s new constitution. (Reuters

On January 17 last year, representatives from two dozen of the world’s largest fashion brands wrote to the Cambodian government demanding that it investigate the killings by security forces of at least five garment workers during violent demonstrations two weeks earlier. But one year later, it seems little progress has been made. (VOA

The Americas

Thousands of Argentines took to the streets in protest on Monday following the death of prosecutor Alberto Nisman. (BBC

The family and supporters of “one of the most abused prisoners in Guantanamoon Tuesday launched a new celebrity-backed campaign demanding his release, coinciding with the publication of his prison diary. (AFP


South Asia expert C. Christine Fair is Mark’s podcast guest this week. You’ll learn a lot about Pakistan. You’ll learn even more about effectively navigating sexual harassment as a student and foreign policy practitioner (Global Dispatches Podcast

“The Age of Miracles” ONE’s CEO Michael Eliot Sets the Scene for 2015. (Time

The global land rights organization Landesa released a new video to advocate for explicitly including  land rights for women and men in the post 2015 development targets and indicators.

Winners and losers in China’s deepening economic slowdown (AP

Can countries still trade their way out of poverty? (Guardian

Zambia: Rise of the UPND Down to Good Preparation and Luck (African Arguments

Africa in 2015: 10 Things to Consider (Africa Research Institute

Israel’s challenge to the International Criminal Court (The Washington Post

On the Zambian Presidential By-Election (An Africanist Perspective

Achille Mbembe on How the Ebola Crisis Exposes Africa’s Dependency on the West (Africa is a Country

Five years on, it’s time to go back to Haiti (Humanitarian Practice Network


The International Monetary Fund on Tuesday sharply cut its 2015-2016 world growth forecast of only six months ago, saying lower oil prices did not offset pervasive weaknesses around the globe. (AFP

Unemployment will rise by 11 million in the next five years due to slower growth and turbulence, the UN warned. More than 212 million people will be jobless by 2019 against the current level of 201 million, theInternational Labour Organization said. (AFP

Myanmar, Haiti and Mali were ranked the least open and transparent countries in a global index of government data released on Tuesday, which found that most governments do not make official data openly available to the public. (Reuters

Two giant pharmaceutical companies should lower the price of a new vaccine against pneumococcal disease that is needed by children in developing countries, but is unaffordable for some of their governments, say the volunteer doctors of Médecins sans Frontières. (Guardian

Speeches: Economic Diplomacy: How Business, Economic Ties and Trade Can Strengthen National Security

Thank you, Nelson, for that introduction. And thank you Paul for inviting me to talk about something that is very important to me: how our economic agenda is working to keep America safe and prosperous.

Before I go further, I’d like to point out that, after a year on the job, it seems to me that economics is forever doomed to be the Rodney Dangerfield of the social sciences.

It’s true. When people at dinner parties ask me what I do, the most effective way to stop the conversation dead in its tracks is for me to utter the word “economics.”

Everyone makes fun of economics; even economists.

Walter Heller, who was President Kennedy’s chief economic advisor, once said: “An economist is someone who, when he finds something that works in practice, wonders if it will work in theory.”

I find Heller’s quote not only interesting but timely. That’s because, when it comes to the geopolitical stage, economics doesn’t only work in practice. It has become the indispensable foreign policy tool of our time.

The reasons for this are clear cut. The majority of challenges we face are economic in nature and, very often, those challenges have security implications for the United States.

Moreover, we now live in a world where “market forces displace as much weight as military might,” as U.S. Trade Representative Michael Froman recently put it.

Increasingly, countries like the BRICS nations are already using their economic clout to punch above their weight. It is no longer an option to strengthen our economic power in every way we can, it’s an imperative.

It follows then, we should use all the economic resources and assets in our power to address economic challenges. Doing so allows us to address the essence of the problem, while also finding sustainable solutions that can enhance our security for the long term.

Secretary John Kerry has not only recognized the inextricable link between foreign policy and economic policy, he has made it a central operating principle.

As he puts it, “economic policy is foreign policy.”

This principle is embodied in everything we do, including economic sanctions, which are an important weapon in our national security arsenal.

EB takes the lead for the State Department in these sanctions efforts, whether we are working to steadily increase the diplomatic and financial costs of Russia’s aggressive actions toward Ukraine, or directing sanctions in more limited ways against countries such as the Central African Republic and Yemen.

We are also working closely with key partners and allies to stem the flow of revenues that support the forces of ISIL.

EB is the State Department’s leading office in many foreign policy matters, including global finance, food and agricultural policy and loan guarantees. We are the lead negotiator for internet governance and air transportation deals. We support entrepreneurs around the world. We also work closely with USTR to forge multilateral and bilateral trade and investment deals.

In all we do, we are deeply aware of the symbiotic link between the prosperity that we work to advance and the security that it brings.

We know that, when a country bustles with economic opportunity, its citizens are more likely to become productive members of their society. They are equally likely to advocate for better education and, by extension, peace and prosperity. That makes them more likely to become one of our economic, trading and security partners. Of course, that also bodes well for our national security.

We fully understand the potential consequences when these economic factors are not in place. A failed state that denies opportunity is more likely to give rise to corruption and crime cartels, extremism and social unrest, and very often, hostile activity towards the United States.

Obviously, I could spend all day talking about the different missions of my Bureau. But today, I want to focus on our trade agenda. Specifically, I want to talk about two ongoing trade deals that, if concluded, will not only usher in a new era of prosperity for Americans but go a long way toward shoring up national security.

Those are the Trans-Pacific Partnership, also known as TPP; and the Transatlantic Trade and Investment Partnership, which we refer to as T-TIP.

I choose trade for at least two reasons. First of all, the size of the prize.

I don’t think many people are aware of the size and scope of the global market that both trade deals could open for American businesses and its workforce. About 95 per cent of the world’s consumers, representing 80 percent of the world’s purchasing power, live outside our borders. Both trade deals, all told, would give us access to almost two-thirds of the global economy.

The second reason has to do with timing. We are at a critical moment in our ongoing negotiations, especially with TPP. If Congress authorizes Trade Promotion Authority, otherwise known as TPA, we can accelerate our progress, not only on TPP but on our trade deal with the Europeans.

We’ll be able to press for greater ambition and stronger, more comprehensive high-standard agreements, knowing that we have the confidence of the Hill.

We are cautiously optimistic that the new Congress strongly supports free trade. We are also encouraged that Senator Orrin Hatch, chairman of the Senate Finance Committee, has declared his intention to put trade promotion authority at the top of his list.

Let me start by talking about the importance of exports to our own economic growth.

As you know, our economy is in the best shape we have seen since the 1990s. American businesses have set a new record for consecutive job growth. Since 2010, we’ve created more jobs here in the United States than Japan, Europe, and all advanced nations combined. We’ve created half a million jobs in the auto industry alone.

Exports have been a powerful factor, supporting one in four new jobs in the manufacturing sector.

Last year, our businesses sold a record $2.3 trillion of Made in America goods and services, supporting more than 11 million American jobs at more than 300,000 companies. That’s 1.6 million more jobs than just four years ago.

Perhaps even more importantly, export-related jobs are paying 13 to 18 per cent more on average than non-export related jobs. Those higher wages are critical if, as the President has said, we want our middle class to remain an engine of prosperity.

Closing both trade deals would boost exports even more. That’s why we are so excited about completing the Trans-Pacific Partnership trade deal, which would facilitate trade between the U.S. and 11 countries: Canada and Mexico; Chile and Peru; Australia and New Zealand; Japan, Malaysia and Singapore; Brunei Darussalam and Vietnam.

The potential markets are extraordinary. In Asia, alone, there are currently 525 million middle class consumers. That number is expected to grow to 2.7 billion by 2030.

That means in just 15 years, our workers, farmers, businesses, and entrepreneurs could be exporting to, or benefitting from, markets that are six times bigger than our own market at home.

Our efforts continue with T-TIP – the Transatlantic Trade and Investment Partnership – an equally ambitious agreement that we are presently negotiating with the European Union.

By reducing tariffs and other barriers to trade, we will not only add to the more than 13 million American and 13 million EU jobs that our trade and investment relationship currently enjoys. We will also build on the transatlantic ties that undergird our national security.

Beyond our efforts to make our economy stronger through these historic deals, we are actively negotiating a bilateral investment treaty with China.

The U.S.-China Business Council estimates that, if China’s citizens were to consume American-made goods and services at the same rate as their neighbors in Japan currently do, our exports to China could grow to as much as $700 billion a year.

That could turn a $300 billion trade deficit into a $300 billion trade surplus and create nearly three million new American jobs. With the right reforms, we could see that outcome over time.

We are also looking to deepen our economic relationship with India, as Secretary Kerry emphasized in his recent visit. With India, we already enjoyed an annual two-way trade in goods and services of almost $100 billion in 2013. That represented an increase of more than 400 percent since 2000. We believe we can build on this by greatly improving our two-way investment flows.

Clearly, it is squarely in our interests to close all these pending and potential trade deals, not only for our prosperity, not only for our security, but for one last benefit – and with that, I’d like to conclude my remarks.

I believe that these trade deals, if we can achieve the comprehensive and ambitious agreements that we are negotiating for, will not only help American manufacturers, service providers, farmers and ranchers increase U.S. exports and compete in a highly competitive, globalized economy.

They will not only help create more American jobs with higher earning power.

They will help us speak to the size and value of the economic leadership role the United States can play, and continues to play, in the world.

That means having the opportunity to set the standards that will support the kind of world we want to live in; and not leave it to other nations to do so, especially when it comes to quality of life issues like environmental and labor standards.

It means making sure that the most innovative economy in the world, ours, is protected by intellectual property rights and has the opportunity to expand and, as the President has also said, to “raise standards so that everybody is on a higher, but level playing field.”

Ultimately, it means having the power to help create the kind of world that we want our sons and our daughters to grow in.

By definition, that is a more secure world.

If you’ll permit me to return to those cocktail party conversations I talked about – you know, the ones that stop dead at the word “economics,” here’s what I would like to tell them:

“Economics is the Roman road to our national security. A robust economy at home, and innovative economic policies abroad are the most direct route we can take to bring jobs home, strengthen our middle class, and ensure that Americans are safe in sustainable ways.”

I would then walk away, leaving them either to visualize Roman gladiators or to think about economics as the direct road to a safer, more prosperous world.

Thank you.

Philippine Catholic Church struggl

Philippine Catholic Church struggles with social costs of labour migration by Rosemarie Francisco
Thu 15 Jan 2015 at 08:47

NNA – Almost 5,000 Filipinos left their homes every day between 2010 and 2013 to seek work overseas, government data shows, mos…

Political preference crowding out enterprise in Malaysia

Author: Hwok-Aun Lee, University of Malaya

Malaysia’s government-linked companies (GLCs) are, relatively speaking, among the most extensive and powerful in the world in terms of capitalisation, market presence and socio-political mandate.

GLCs reportedly comprise 36 per cent of the Malaysian stock exchange’s capitalisation and 54 per cent of the entities that make up the Kuala Lumpur Composite Index. The Malaysian government controls GLCs through its government-linked investment companies (GLICs) — gargantuan and powerful investment arms including Khazanah Nasional, Permodalan Nasional Berhad — and the Ministry of Finance.

GLC market presence varies by industry, as measured by share of value-added. Based on data from publicly listed companies, Asian Development Bank lead economist Jayant Menon estimates that in 2012 GLCs accounted for 93 per cent of income in utilities, 80 per cent in transportation and warehousing, and over 50 per cent in agriculture, banking, formation and communications, and retail trade. Menon further notes that GLCs invest at a higher rate than private companies due to their superior reserves and political connections, which give them added leverage and privilege. Menon argues that GLCs crowd out private capital, significantly accounting for Malaysia’s anaemic private investment rate since the 1997–98 Asian financial crisis.

The statistical finding that GLCs crowd out more investment than they stimulate makes sense intuitively. It also appears to be consistent with the economic situation in Malaysia. But Menon’s data limits his empirical analysis to publicly listed companies. The omission of privately held businesses, especially in manufacturing and in service industries such as retail, probably leads him to overstate the dominance of GLCs.

Yet the Malaysian government cannot deny the crowding-out phenomenon. As part of its GLC Transformation Program the government has committed itself to divesting certain GLCs. But, as expected, the divestment project targets smaller entities within its massive portfolio and has progressed behind schedule.

The durability of GLCs as a domain of government policy underscores the need for reform prescriptions to be informed by historical and political economy perspectives and to acknowledge GLCs’ socio-political mandate. Developing the Bumiputera (ethnic Malay) Commercial and Industrial Community (BCIC) has been at the forefront of policy since the New Economic Policy was launched in 1971. The BCIC passed through various phases, from reliance on state development agencies, to heavy industry, then to privatisation from the late 1980s until the Asian financial crisis, which saw the renationalisation of many failed companies.

These entities, rebranded as government-linked companies, have become the primary agents for the BCIC agenda, which remains, like it or not, an unfinished business and political imperative. In other words, affirmative action, through managerial development and preferential procurement, is deeply embedded and cannot be drastically rolled back.

Interestingly, criticisms of the BCIC never oppose the policy objective of Bumiputera participation and ownership. Instead arguments typically assume that scaling down GLCs, divestment and privatisation, and rolling back preferential treatment will jolt Bumiputera entrepreneurs and capitalists into emerging as a competitive, innovative force. Competitive Bumipitera capitalists, it is argued, should be the true beneficiaries of affirmative action. But this argument is invariably asserted as an article of faith, unsupported by evidence. Logically, the shortfalls of the BCIC agenda drive the conclusion that privatisation would diminish Bumiputera participation.

If the policy has failed to produce a critical mass of competitive Bumiputera entrepreneurs — as it was widely supposed it would — wouldn’t sudden removal almost definitely cause a downturn in Bumiputera participation? This would be a politically unpalatable outcome regardless of any boost it might bring to private investment rates. Failure or reluctance to openly acknowledge these eventualities and their political consequences often precludes robust examinations of GLC performance and their preparedness for phasing out their role in supporting the BCIC.

Malaysia’s GLC policy, on the other hand, preserves its role in promoting the BCIC, but also introduces its share of equivocation. The GLC Transformation Program articulates merit-based selection as a key feature of the new government policy, implicitly distinguishing the current regime from former practices that bred inefficiency. This is only partly correct: ‘merit-based’ means selecting more capable Bumiputera managers, subcontractors and vendors over less capable Bumiputera managers, subcontractors and vendors.

Amid the misinformation, the program lacks a clear plan on how to move away from overt Bumiputera preference. The government needs to come clean and acknowledge that ‘merit-based’ selection remains exclusive to Bumiputera participations. A fuller transformation would entail ensuring that these Bumiputera business empowerment programs are conducted effectively, so that transition plans can also be developed to phase out overt ethnic preferences.

The GLC Transformation Program, under the oversight of the government investment agency Khazanah, involves the 17 largest and most strategically important GLCs, including Tenaga Nasional (power), Telekom (telecommunications), Malaysia Airlines, diversified conglomerate Sime Darby, CIMB Bank and Maybank.

Market conditions and the business performance of these GLCs vary. Some, such as CIMB, Maybank and Axiata (under Telekom) are expanding to be regional players, while others are confronted by structural challenges or, like Malaysia Airlines, beleaguered by recent tragedies.

Internal reviews of GLCs have written glowing reports. It is not surprising that GLCs generally outperform private companies, given their structural and political advantages. Also, GLCs have not, in the past decade, been engaged in the pervasive profligacy and profiteering seen in the 1990s.

GLCs continue to serve key roles providing services, generating profits for GLICs and other stakeholders, serving as training grounds for managers, directors and entrepreneurs through the employment they offer, and by providing linkages through procurement and subcontracting. But the efficacy and integrity of these programs has not been rigorously and independently analysed. Too much of the GLCs’ and GLICs’ operational performance, financial flows and pursuit of their socio-political mandate remain under-researched.

Hwok-Aun Lee is Senior Lecturer in Development Studies at the University of Malaya.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘The state and economic enterprise’.


Press Release No: 99
Dated: 1/13/2015

The Finance Minister, Senator Mohammad Ishaq Dar here at the Finance Ministry late Monday, chaired a meeting to review the proposed Aviation Policy.

At the outset of the meeting Special Assistant to Prime Minister on Aviation, Capt. Shujaat Azeem said that in order to encourage aviation sector in Pakistan a dynamic and forward looking draft aviation policy had been formulated on the directives of the Prime Minister after a gap of 14 years. All stake holders including airlines, flying clubs, charter operators, cargo operators, ground handling agencies and general aviation were consulted in the process, he said.

He briefed the meeting about contours of the draft Aviation Policy, emphasizing relaxation in the overall tax regime which he deemed essential to encourage growth of the aviation sector. He said that in contrast to other countries in the region, aviation sector’s contribution in Pakistan was under 0.01%. For countries like India, Malaysia, Philippines and Thailand it ranged between 1.5% to 9.0%. Only 8% of the 180 million strong Pakistani population had access to air travel, he informed the meeting. The situation could change with provision of proper incentives to prospective investors, he observed.

The draft policy among other things also recommends tax free investment in aviation and calls for outsourcing all major airports (Lahore, Karachi, Islamabad); landside and international buildings to prominent foreign companies in airport business through a transparent process. The Policy emphasizes developing quality indigenous repair and maintenance facilities in the country to save huge expenses on seeking such services from abroad. The meeting was informed that investment in the aviation sector would not only generate more revenue but also create a large number of job opportunities thus helping alleviate unemployment.

Senator Ishaq Dar appreciated the initiative taken by the Aviation Division in formulation of the said Policy. He added that the Finance Ministry, specifically the FBR would study fiscal aspects of the Policy and apprise the aviation division of its standpoint as early as possible. 

Senior officials of the Ministry of Finance, FBR and Aviation Division attended the meeting.

The tricky economic tasks facing Najib Razak

Author: Shankaran Nambiar, MIER

After a year of solid achievement on the economic front, Malaysia’s leaders will face difficult circumstances as they implement reform in 2015.

One of the more impressive achievements of the Malaysian government in 2014 was the resolve it demonstrated in trying to balance the budget. Prime Minister Najib Razak inherited a budget situation characterised by a lack of fiscal discipline from previous administrations, and he made a concerted effort to address this problem .

Malaysia army personnel loading food and goods inside a boat in the Kuala Krai district of Kelantan, Malaysia, 28 December 2014. (Photo: AAP)

He has implemented policies that will see a reduction in the fiscal deficit from 3.5 per cent of of GDP in 2014 to 3.0 per cent of GDP in 2015. The government has also rationalised subsidies. It cut petrol and diesel subsidies by about 20 sen (about 6 US cents) per litre on 2 October. Fortuitously, the global price of oil has been falling, lending a fine sense of timing to the subsidy cuts which are best executed when market prices are declining, as they are now.

Equally commendable was the decision to introduce a goods and services tax (GST) in April 2015. The announcement for this plan was also cleverly timed. With the elections safely behind him, and with the 14th general elections not for another five years, Najib can undertake unpopular reforms in 2015, like introducing the GST, and then work to improve his political goodwill in the next few years, with the hope that the GST will be forgotten by the time the elections are due. Timing is again in Najib’s favour, since, although low oil prices will slash government revenue, this will be compensated to some extent by the broad ranging GST revenue collection that will begin in the months to come.

Concerns about public and household debt have haunted Malaysia last year. Household debt currently stands at about 87.1 per cent of GDP and government debt is about 53 per cent of GDP. Government spending needs to be further scrutinised and reviewed, the size of the public sector (a vote bank though it may be) has to be reconsidered, and the worthiness of large projects have to be questioned with the circumspection of a fussy accountant.

There are undeniably many good targets from which to cut. The Auditor-General’s report on government spending in 2013 documents enormous cost blowouts: computers worth RM3,000 (US$850) being procured for RM 84,000 ($2400), facilities costing millions not being used, and a whole plethora of items whose inflated prices suggest gross mismanagement. If the Auditor General’s report is any indication of the extent of public sector mismanagement, then the government should be tackling issues of project management, transparency in procurement and efficiency and productivity in the public sector even before it rolls out the GST.

Inflation rates moderated in the last few months of 2014. Early last year inflation was running at about 3.4 per cent and softened to about 2.7 per cent  towards the end of 2014. Though these rates appear reasonable, actual inflation as it is experienced by the Malaysian people (or felt inflation) is higher; and  public perception of the rising cost of living is, indeed, critical.

At any rate, the official inflation rate can be expected to spike in May 2015 with the introduction of the GST, possibly as high as 4.5 per cent. This is to be expected. International experience suggests a one-time price spike of anything from an additional 1 to 2 per cent following the implementation of the GST. In the case of Malaysia, household spending in 2015 will be constrained both because of limited disposable income and eroded purchasing power due to the GST-induced price hikes.

The external sector does not seem ready to lend any solace. The Malaysian ringgit is taking a beating against the US dollar. Declining confidence in the ringgit, mainly because of the decline in oil prices, could stretch for the next few months. That might do Malaysian exports, particularly those from the electrical and electronics sector, some good.

But there are dark clouds hanging over the markets for Malaysian exports. China, Malaysia’s biggest trade partner, is set for more domestic reforms that are more inward-oriented. The anticipated lower growth rate in China, forecast to be 7 per cent or slightly less, will lower demand from China, which in turn will have an impact on Malaysia’s economy.

The forecast for Japan’s growth next year is not terribly encouraging at 1 per cent and the European Union is expected grow at about the same rate, touching perhaps 1.2 per cent. The IMF has downgraded its global growth forecast for 2015 to 3.8 per cent from 4 per cent. The saving grace will come from stronger US markets. While the improving US market will help Malaysian exports, it will result in higher interest rates in the US, and the resulting interest rate differential will see funds flow out of Malaysia. All these factors in combination could cause the growth rate in Malaysia to weaken, perhaps within the range of 4.8 to 5 per cent.

All of these factors will combine to produce a tough political environment for Najib’s government to navigate as it pursues reform.

The last days of 2014 were tragic. The Air Asia crash followed two other crashes. Then there were the massive floods that have affected several states, displacing more than a 100,000 people and resulting in over 20 lost lives. The cost of compensation, resettlement and redevelopment will be a huge burden on the government, but one that will necessarily have to be borne.

On the external front, Najib will also have to be decisive about the Trans-Pacific Partnership agreement, since little has been done politically to allay fears on the agreement, particularly for the potential losers who would constitute a small but powerful group. Then there is the ASEAN Economic Community agenda and the Regional Comprehensive Economic Partnership agreement which have to be managed while Malaysia holds the chair of ASEAN. The chairmanship will be a demanding task in its own right.

Thus 2015 is set to be a busy year for the Najib government.

Dr Shankaran Nambiar is a Senior Research Fellow at the Malaysian Institute of Economic Research. He is author of the recently published book, “The Malaysian Economy: Rethinking Policies and Purposes” All views in this article are his personal views.

This article is part of an EAF special feature series on 2014 in review and the year ahead.

Airliners should report position every 15 min, suggests UN aviation body

8 Jan 2015

Listen /

Celebrating 70 years of the Chicago Convention – ICAO

Passenger planes should start reporting their position every 15 minutes, according to a proposal by the UN aviation body, ICAO.

The new standard would be part of a global tracking initiative in the aftermath of the disappearance of Malaysia Airlines flight MH370.

The loss of MH370 last March sparked a global drive for a system that would make it possible to pinpoint the exact route and last location of an aircraft.

John Illson, Chief of ICAO’s Operational Safety Section says the standard, if adopted, could go into effect soon.

“Well the proposal is to ensure that aircraft operating in oceanic airspace that is not covered by an air navigation surveillance system such as radar, that these aircrafts report the back to their operations at least on a 15 minute basis to ensure that the position of the aircraft is known on a more frequent basis that is currently the situation today.”

ICAO, the International Civil Aviation Organization, would like the tracking system to become effective as early as this year so that airlines could begin to implement the procedures.

Countries would need time to create the regulations and rules before the standard become mandatory, adds Illson.

ICAO could effectively force airlines to act because the standards it sets typically become regulatory requirements in its 191 member states.

But the agency prefers to make decisions by consensus.

Jocelyne Sambira, United Nations.

Duration: 1’45”