Cherry-picking the TPPA

November 25, 2015

Cherry-picking the TPPA

by Tan Siok Choo

Dato Mustapha Mohamed

Malaysia is fortunate that TPPA negotiations were led by International Trade and Industry Minister Datuk Seri Mustapa Mohamad – one of a handful of ministers who are intellectually competent, diligent and who are intellectually competent, diligent and without a whisper of corruption.-Tan Siok Choo

CONCLUDED on October 6 this year, the Trans-Pacific Partnership Agreement (TPPA) promises to usher in a new era of free trade among 12 countries that collectively contribute 40% of the world’s gross domestic product (GDP).

These countries include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

TPPA signatories have promised to cut or eliminate 18,000 tariffs on a vast number of goods and services. Tariffs ranging from 2% to 11% will be abolished for Malaysian made exports including wood products, palm oil, rubber, car spare parts as well as electrical and electronic goods.

Services covered include information and communication technology, retailing, entertainment, electronic payments systems and software.

Comprising 4,500 pages and 30 chapters while weighing a hefty 100 pounds, the TPPA offers thousands of issues for proponents and opponents to cherry pick.

Malaysia is fortunate that TPPA negotiations were led by International Trade and Industry Minister Datuk Seri Mustapa Mohamad – one of a handful of ministers who are intellectually competent, diligent and without a whisper of corruption.

Mustapa announced MPs will debate and vote on the TPPA at a special sitting of the Dewan Rakyat in January 2016.

Underscoring the remote possibility the TPPA will be rejected, the first reading of Budget 2016 last Monday received 128 votes in favour, 74 against and seven abstentions by PAS members of Parliament.

Two PAS MPs weren’t present in the Dewan Rakyat, three PAS MPs voted against Budget 2016 while suspended DAP MP Lim Kit Siang was unable to vote.

Could dislike for some TPPA clauses prompt BN MPs to risk giving the opposition a victory on this issue? This is unlikely. Mustapa succeeded in ensuring bumiputras, small and medium enterprises and those from Sabah and Sarawak will continue to be preferential suppliers for up to 40% of state-owned enterprises’ (SOE’s) annual purchases.

SOEs include Permodalan Nasional, Tabung Haji and MARA.Similarly, Petronas can continue to give priority to Malaysian enterprises to supply goods and services up to 70% of its annual budget for upstream businesses in the first year of the TPPA and scaled down progressively to 40% in the 6th year of the trade pact.

A major contentious issue in the TPPA is pharmaceuticals. Leading generic medicine manufacturer Mylan has warned it would be prohibited from doing business in TPPA member countries. By disallowing generic drugs, the TPPA could keep prices of drugs in this country higher for a longer period until patents expire.

Malaysian AIDS Council’s policy manager Fifa Rahman said a 12-week treatment for Hepatitis C using the generic version of Sofosbuvir costs RM750.06 to RM1,579.07 compared with an exorbitant RM357,000.


Writing in The Malaysian Insider, Joseph Stiglitz, a Nobel laureate in economics, and Adam Hersh, senior economist at the Roosevelt Institute, said economists at the UN Conference on Trade and Development have forecast joining TPPA would make Malaysia a net loser because its trade balance would fall by US$17 billion annually.

Sectors that would be hurt by the TPPA include iron and steel, aluminium, mineral fuels, plastics and rubber, Stiglitz and Hersh say.

Challenging the belief that intellectual property rights promote research, Stiglitz and Hersh noted after the US Supreme Court invalidated Myriad’s patent on the BRCA gene, a burst of innovation resulted in better tests at lower costs.

Another controversy is the investor-state dispute settlement (ISDS) system. Using arbitration to settle disputes rather than the courts, foreign investors will have new rights to sue governments for instituting regulations that diminish investors’ profits.

Instead of forcing manufacturers of harmful products like asbestos to shut down and compensate their victims, the ISDS could hit taxpayers twice – paying for the illnesses caused and compensating manufacturers for their lost profits, Stiglitz and Hersh argue.

Although tariffs will be abolished for Malaysia’s major exports like electrical and electronic products, will Malaysians be the biggest beneficiaries in a sector dominated by US and Japanese multinationals?

For products like palm oil, the campaign alleging plantation companies destroy the habitat of orang utans is a bigger barrier than high tariffs.

Hopes the TPPA will reduce corruption could be stymied by Malaysia’s high threshold exempting construction companies from competitive bidding for five years for contracts valued under 63 million Special Drawing Rights (SDRs) or RM374 million. After 21 years, the threshold will decline to a still hefty SDR14 million (RM80 million).

Kelana Jaya MP Wong Chen noted other TPPA countries accepted a much lower threshold of 5 million SDRs (RM30 million); only Vietnam’s threshold of SDR 65.2 million (RM387 million) is higher than Malaysia’s.

In summary, TPPA’s benefits must be spelt out in greater detail and more convincingly.

Opinions expressed in this article are the personal views of the writer and should not be attributed to any organisation she is connected with. She can be contacted at

Defiant Tawfik Ismail: Use JAKIM funds to rehabilitate Mat Rempits and the Poor

November 25, 2015

Defiant Tawfik Ismail: Use JAKIM funds to rehabilitate Mat Rempits and the Poor

by Anisah Shukry

Jakim Budget

Despite a sedition probe into his remarks on the Department of Islamic Development Malaysia (JAKIM), Tawfik Ismail maintained his stance that the federal Islamic agency was problematic and needed to be accountable to taxpayers.

G25Tawfik Ismail

The son of former Deputy Prime Minister Tun Dr Ismail Abdul Rahman and civil society activist said JAKIM’s budget was better used to uplift Muslims from poverty.

He said religious authorities, including the Minister and Deputy Minister in charge of religious affairs, as well as the Director-General of JAKIM, be redeployed to tackle problems ailing Muslims, such as urban poverty.

MALAYSIA–Parliamentary Approval for 2016 People’s Budget

November 17, 2015

COMMENT: The fight for change continues. The much anticipateddin-merican-and-dr-kamsiah1 move to reject Malaysia’s 2016 Budget did not materialise since the Opposition failed to garner biparisan support to defeat it. 128 votes in favour of it were convincing enough and our country is spared a fiscal crisis. It is  relief that our government can continue to function with money approved for its programmes in 2016.

While I have been critical of the Prime Minister’s misdemeanors, especially the USD 700 million that went into his personal bank, his lack of transparency and accountability on 1MDB, and his lavish spending ways, I am never comfortable at the prospect of our public administration and security services (defense and police) grinding to a halt at a time of global terrorism just because a disgruntled opposition is trying to use us Malaysians as pawns in their desire to cause the collapse of an elected government.

My message to our Prime Minister cum Finance Minister is that he must be be prudent and smart in spending our taxes. May I also remind him that every tax dollar spent must produce a satisfactory rate of return which is equal to the cost of our sovereign debt. Otherwise, we as citizens will be burdened with  more taxes. That is Fiscal 101 and pure common sense.

Confidence in our Prime Minister’s leadership may not return any time soon. However, if he comes clean on the 1MDB financial scandal, ceases using draconian laws against his critics and stops playing race and religion for his political ends by pandering to racist pressure  groups and religious extremists within and outside UMNO, there is a possibility for the ringgit to bounce back and for much-needed capital inflows to return. –Din Merican

MALAYSIA–Parliamentary Approval for 2016 People’s Budget

by Arfa Yunus

MOF Najib Razak

Prime Minister Najib Razak may still have the support of Barisan Nasional (BN) lawmakers, evident from the success of the vote on Budget 2016 last night, says UMNO veteran Tengku Razaleigh Hamzah.

He said he himself, voted for Budget 2016 to go through despite talks of him being part of a movement to bring Najib down.Tengku Razaleigh, speaking to reporters at the Parliament lobby here today, said that he had voted in favour of the Budget as he “believed in the government’s plan for the year.”

He, however, was coy when asked if his vote meant that he also supported Najib as the nation’s Prime Minister.“No, that means we support the government programme for the (next) year (as) it was presented by the Minister of Finance, who is also the Prime Minister,” said the Gua Musang Member of Parliament.

“Why these questions? You decide for yourself ok,” he added, refusing to comment further. The UMNO veteran has been linked to a group allegedly led by former Prime Minister Dr Mahathir Mohamad, who aims to have Najib removed from his top post.

Budget 2016 passed the policy stage last night after successfully garnering 128 votes. All BN legislators present, including former Deputy Prime Minister Muhyiddin Yassin voted in favour of it.

This came as a surprise to most as both Razaleigh and Muhyiddin were rumoured to be on the list of seven UMNO leaders currently under the party’s watch for openly criticising Najib.

The Fed’s Mixed Signals

November 8, 2015

The Fed’s Mixed Signals

by Kenneth Rogoff

Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. His most recent book, co-authored with Carmen M. Reinhart, is This Time is Different: Eight Centuries of Financial Folly.

Nothing describes the United States Federal Reserve’s current communication policy better than the old saying that a camel is a horse designed by committee. Various members of the Fed’s policy-setting Federal Open Markets Committee (FOMC) have called the decision to keep the base rate unchanged “data-dependent.” That sounds helpful until you realize that each of them seems to have a different interpretation of “data-dependent,” to the point that its meaning seems to be “gut personal instinct.”


In other words, the Fed’s communication strategy is a mess, and cleaning it up is far more important than the exact timing of the FOMC’s decision to exit near-zero interest rates. After all, even after the Fed does finally make the “gigantic” leap from an effective federal funds rate of 0.13% (where it is now) to 0.25% (where is likely headed soon), the market will still want to know what the strategy is after that. And I fear that we will continue to have no idea.

To be fair, deciding what to do is a very tough call, and economists are deeply divided on the matter. The International Monetary Fund has weighed in forcefully, calling on the Fed to wait longer before raising rates. And yet central bankers in the very emerging markets that the IMF is supposedly protecting have been sending an equally forceful message: Get on with it; the uncertainty is killing us.

Personally, I would probably err on the side of waiting longer and accept the very high risk that, when inflation does rise, it will do so briskly, requiring a steeper path of interest-rate hikes later. But if the Fed goes that route, it needs to say clearly that it is deliberately risking an inflation overshoot. The case for waiting is that we really have no idea of what the equilibrium real (inflation-adjusted) policy interest rate is right now, and as such, need a clear signal on price growth before moving.

But only a foaming polemicist would deny that there is also a case for hiking rates sooner, as long as the Fed doesn’t throw random noise into the market by continuing to send spectacularly mixed signals about its beliefs and objectives. After all, the US economy is at or near full employment, and domestic demand is growing solidly.

While the Fed tries to look past transitory fluctuations in commodity prices, it will be hard to ignore rising consumer inflation as the huge drop of the past year – particularly in energy prices – stabilizes or even reverses. Indeed, any standard decision rule used by central banks by now dictates that a hike is long overdue.

But let’s not make the basic mistake of equating “higher interest rate” with “high interest.” To say that 0.25%, or even 1%, is high in this environment is pure hyperbole. And while one shouldn’t overstate the risks of sustained ultra-low rates to financial stability, it is also wrong to dismiss them entirely.

With the decision about raising rates such a close call, one would think that the Fed would be inclined to do it this year, given that the chair and vice chair have pretty much told the market for months that this will happen. The real reason for not hiking by the end of the year is public relations.

Let’s suppose the Fed raises interest rates to 0.25 basis points at its December meeting, trying its best to send a soothing message to markets. The most likely outcome is that all will be fine, and the Fed doesn’t really care if a modest equity-price correction ensues. No, the real risk is that, if the Fed starts hiking, it will be blamed for absolutely every bad thing that happens in the economy for the next six months to a year, which will happen to coincide with the heart of a US presidential election campaign. One small hike and the Fed owns every bad outcome, no matter what the real cause.

The Fed of course understands that pretty much everyone dislikes interest-rate hikes and almost always likes rate cuts. Any central banker will tell you that he or she gets 99 requests for interest-rate cuts for every request for a hike, almost regardless of the situation. The best defense against these pressures is to operate according to utterly unambiguous criteria. Instead, however good its intentions, the net effect of too much Fed speak has been vagueness and uncertainty.

So what should the Fed do? My choice would be to have it explain the case for waiting more forthrightly: “Getting off the zero bound is hard, we want to see inflation over 3% to be absolutely sure, and then we will move with reasonable speed to normalize.” But I also could live with, “We are worried that if we wait too long, we will have to tighten too hard and too fast.”

Throwing out the rulebook made sense in the aftermath of the 2008 financial crisis. It doesn’t anymore. And today’s lack of clarity has become a major contributor to market volatility – the last place the Fed should want to be.

It’s wrong to vilify the Fed for hiking, and it’s wrong to vilify it for not hiking; if it is such a close call, it probably doesn’t matter so much. But, at this critical point, it is fair to ask the Fed for a much clearer message about what its strategy is, and what this implies for the future. If Fed Chair Janet Yellen has to assert her will over the FOMC for a while, so be it. Somebody on the committee has to lead the camel to water.

Politics is a danger to good data…

November 4, 2015

Politics is a danger to good data, but…

by Angus Deaton
The word data means things that are “given”: baseline truths, not things that are manufactured, invented, tailored or spun. Especially not by politics or politicians. Yet this absolutist view can be a poor guide to using the numbers well. Statistics are far from politics-free; indeed, politics is encoded in their genes.–Angus Deaton–2015 Nobel Prize In Economics Awardee
Angus Deacon- PU

The word data means things that are “given”: baseline truths, not things that are manufactured, invented, tailored or spun. Especially not by politics or politicians. Yet this absolutist view can be a poor guide to using the numbers well. Statistics are far from politics-free; indeed, politics is encoded in their genes.

This is ultimately a good thing.We like to deal with facts, not factoids. We are scandalised when politicians try to censor numbers or twist them, and most statistical offices have protocols designed to prevent such abuse. Headline statistics often seem simple but typically have many moving parts. A clock has two hands and 12 numerals yet underneath there may be thousands of springs, cogs and wheels.

Politics is not only about telling the time, or whether the clock is slow or fast, but also about how to design the cogs and wheels. Down in the works, even where the decisions are delegated to bureaucrats and statisticians, there is room for politics to masquerade as science. A veneer of apolitical objectivity can be an effective disguise for a political programme.

Just occasionally, however, the mask drops and the design of the cogs and wheels moves into the glare of frontline politics. Consumer price indexes are leading examples of this. Britain’s first consumer price index was based on spending patterns from 1904. Long before the second world war, these weights were grotesquely outdated. During the war, the cabinet was worried about a wage-price spiral and the Treasury committed to hold the now-irrelevant index below the astonishingly precise value of 201.5 (1914=100) through a policy of food subsidies.

It would, for example, respond to an increase in the price of eggs by lowering the price of sugar. Reform of the index would have jeopardised the government’s ability to control it and was too politically risky. The index was not updated until 1947.

In the US, the poverty line was set by multiplying by three the cost of a basket of recommended foods, with the science of food and nutrition heavily invoked. Yet this too was essentially a cover for a line that had been determined before the scientists were sent out to construct the cloak of objectivity.

Last year was the 50th anniversary of the subsequent war on poverty, declared by the administration of President Lyndon Johnson. According to official measures, there has been little progress. In 1988, President Ronald Reagan said: “The federal government declared war on poverty and poverty won.” Yet, if the US consumer price index is “corrected” as recommended by the Boskin Commission in 1996 — which argued that quality improvements were being understated — real incomes rise more rapidly, and poverty goes down. Poverty lost after all.

The same is true if we use not the consumer price index but the implicit price deflator of consumption in the national accounts. When important conclusions depend on details of price index construction, there is no check on arguments according to political prejudice.

For global data on poverty or hunger, there is no state; no one’s well-being depends on the numbers

These examples show the role of politics needs to be understood, and built in to any careful interpretation of the data. We must always work from multiple sources, and look deep into the cogs and wheels. James Scott, the political scientist, noted that statistics are how the state sees. The state decides what it needs to see and how to see it. That politics infuses every part of this is a testament to the importance of the numbers; lives depend on what they show.

For global poverty or hunger statistics, there is no state and no one’s material well-being depends on them. Politicians are less likely to interfere with such data, but this also removes a vital source of monitoring and accountability. Politics is a danger to good data; but without politics data are unlikely to be good, or at least not for long.

The writer is a professor at Princeton University and winner of the 2015 Nobel Prize in economics

Copyright The Financial Times Limited 2015.

1MDB Saga–The One that refuses to Go Away, Thanks Claire and The Relentless Sarawak Report

November 3, 2015

Auditor General's Report Proves KPMG Refused To Sign Off 1MDB's Cayman Island Fund!

Auditor General’s Report Proves KPMG Refused To Sign Off 1MDB’s Cayman Island Fund!

2 Nov 2015

Arul Kandasamy

Who is lying? 1MDB and Arul Kanda or the rest of the world?

Further documents from the Auditor General’s interim report on 1MDB have been acquired by the UK newspaper the Financial Times, the paper has revealed.

They confirm the long-standing suspicion that 1MDB’s previous auditors KPMG were not satisfied with the story of the so-called Cayman Island fund and were refusing to sign off the 2012-13 accounts until they had more proof.

According the FT’s latest story, published Friday, the Auditor General reveals that KPMG were demanding evidence that there was genuine value in the supposed Bridge Partners investment fund, which 1MDB management failed to provide for several months.

Finally, with the accounts astonishingly overdue by nearly a year, Najib sacked KPMG and hired Deloitte, who eventually produced belated accounts, while noting they could not be held responsible for the previous period.

Despite this evidence in the Auditor General’s report, 1MDB’s current CEO Arul Kanda is nevertheless continuing to claim the Cayman Island fund contained US$2.3 billion, allegedly made from the original joint venture deal with PetroSaudi.

The FT reports that the doubts over the existence of this fund in the Caymans lies at the centre of Najib’s credibility issues over 1MDB:

At the heart of the tangled web of global dealings lies a seemingly simple query: what is the story of the more than $2.3bn said to have been held in the Cayman Islands on behalf of 1MDB, the troubled Malaysian government-owned company?  A new Australian court case and documents compiled by Malaysia’s auditor-general raise questions about why the Caribbean investment was set up, how it was run — and what the holdings in it were actually worth….

The 1MDB Cayman story began in the fund’s early days, when it agreed a joint venture with PetroSaudi, an energy company. That tie-up — a contentious episode in itself — ended in 2012 after a complex chain of deals, according to a section of a draft report by Malaysia’s auditor-general completed in June and seen by the Financial Times.

1MDB said it sold equity and debt interests linked to the PetroSaudi venture to a company called Bridge Partners International Investment, generating $2.32bn of proceeds, according to the auditor-general’s report. The proceeds were in the form of promissory notes — or IOUs. 1MDB used these to buy, via a subsidiary known as Brazen Sky, portfolio investments in a Cayman-registered vehicle called Bridge Global Absolute Return Fund SPC. Bridge Global had been incorporated just a month earlier, in August 2012.

An early alarm about the Cayman dealings came from KPMG, 1MDB’s auditor, according to the auditor-general’s draft report. The accounting firm was unhappy because 1MDB would not give it documents it wanted to help it assess the ownership of the investments, their value and Bridge Global’s financial standing. On New Year’s Eve 2013, 1MDB sacked KPMG as its auditor — having cut loose Ernst & Young over another dispute three years earlier. The fund’s 2012-13 accounts were finally signed off by Deloitte instead.

KPMG, Deloitte and EY declined to comment. [Financial Times 30.10.15]

The detail of the respected news journal’s lengthy article entitled “Caribbean dealings stalk Malaysia’s 1MDB” spells out the shady and unorthodox nature of this dodgy fund, which was adopted by the Malaysian Government as an investment vehicle for this huge sum of money.

The fund managers themselves are now embroiled in an Australian court case, having been prosecuted by the authorities there over related matters.

Najib-Razak-and-Rosmah-Mansor-Thumb-Down1MDB’s Ultimate Decision Maker

The central point is clear. Had 1MDB genuinely been able to sell off its so-called interest in PetroSaudi for a healthy US$2.3 billion then it could have invested this hard cash publicly in all manner of safe, respectable and profitable funds anywhere in the world.

However, the Minister of Finance instead chose to put the entire portfolio into the hands of a shady subsidiary of a little known outfit, which had just opened shop in the dodgy Cayman Islands just a month before.

There is only one reason for investing through the Cayman Islands and that is secrecy. 1MDB was claiming whatever it liked about the contents of this fund, but no one could prove it.

Certainly, 1MDB’s own auditors could not prove it and the FT have now confirmed that to their credit they were refusing to sign off the accounts until 1MDB provided solid evidence there was really money (or equivalent value) in this fund.

1MDB never did provide that proof and yet Arul Kanda says he is not lying, everyone else is.

The evidence from Malaysia’s own respected Auditor General’s own report, adds to that of the other remaining institutions which command some trust and independence in the country, including the Bank Negara and the doughtier corners of the MACC.

These have all supplied evidence, compiled by the previous Attorney General before Najib unconstitutionally booted him from office, to confirm the information provided by PetroSaudi’s databases, which shows that in fact all the money from the original investment had been stolen.

Why we know there was no money left to invest in the Caymans

We know that of the US$1.83 billion invested by 1MDB in PetroSaudi, the vast majority (almost US$1.4 billion) was diverted into Jho Low’s company Good Star and the buy out of UBG, the company owned by himself and Taib Mahmud.

The rest went into paying off PetroSaudi and buying that company a drill boat, which enabled it to establish itself for the first time as a genuine oil company, obtaining a lucrative concession off Venezuela.

So, what was there left to sell off when 1MDB finally announced that it was going to sever its ties with this so-called joint venture partner and ‘cash in’ its investment?

Who was going to seriously pay US$2.3 billion for thin air? Enter Bridge Partners, whose identities, Malaysians should remember, were kept a mysterious and deadly secret for many months by 1MDB, until finally the information leaked out.

When questioned, the Finance Minister and company would only say that this so-called US$2.3 billion of public money was being managed by a “licensed institution” in the Cayman Islands.

The shocking reality, as it has now emerged, was that even this was not true. The Bridge Global Fund did not in fact acquire the requisite licence until a year after the Malaysian billions were invested in it (in November 2013).

At least the public can console itself that there wasn’t in fact any genuine money being risked in this fashion, because it long since been stolen.

So, the blatant scenario, now confirmed by the Auditor General’s own interim report is that, in order to shut down speculation about the billions missing from this joint venture, Najib/ Jho Low had rustled up this dodgy outfit to claim that it was buying 1MDB’s ‘investment’ for US$2.3 billion (boasting a fictional profit).

Except, because there was no money, 1MDB immediately ‘invested’ everything back into the buyer’s own fund – a fund which openly described itself as extremely high risk where people could lose 100% of their money – how convenient.

Of course, no actual cash had ever exchanged hands at any stage of the transaction. Bridge Partners was far too poky an outfit to be able to shell out US$2.3 billion in hard currency and this was all a matter of swapping so-called ‘promissary notes’ and units back and forth, which could mean anything and nothing. These were third-rate junk assets in return for Malaysia’s billions in hard cash borrowed three years earlier.

These were the self-same “units” which ended up in the bank at BSI Singapore, of course.  The Bank also reported to the authorities that Arul Kanda was lying when he said there was “cash” in 1MDB’s Brazen Sky account in their bank.

So, are the Auditor General, Financial Times, KPMG, Bank Negara, former Attorney General, BSI Bank, 1MDB Board minutes, PetroSaudi database and just about every other available source of evidence you care to mention retailing a pack of lies – or is the liar Arul Kanda and his team at 1MDB?