Malaysian experts hand over MH17 black boxes to Dutch investigators
THE HAGUE, July 22 -- The black boxes from the crashed flight MH17 have been handed over to Dutch investigators in Ukraine, the Dutch Foreign Ministry announced late Tuesday.
"The black boxes from flight MH17 have been handed over by Malaysian experts to the Dutch Safety Board (OVV) that is leading the international investigation," the ministry said.
According to local media, the black boxes will be sent to Farnborough in Britain, where experts can read the data stored in the black boxes and try to find the exact cause of the crash.
The ministry said, the experts from the Dutch safety board will travel with other experts from several countries together, to send the black boxes to Farnborough.
For now, the Dutch side is in charge of the investigation of the crash, which caused 193 Dutch citizens' lives.
The Boeing 777 en route from Amsterdam to Kuala Lumpur crashed near the eastern Ukrainian city of Donetsk Thursday, killing all 298 people on board.
The Dutch government announced early Tuesday that a flight with the first victims' bodies will arrive in Eindhoven, the Netherlands on Wednesday. Xinhua
Malaysian Transport Minister Liow Tiong Lai said Wednesday in a
statement that the international investigation team, led by the
Netherlands, had decided to pass the black boxes to the UK Air Accidents
Investigation Branch (AAIB) for forensic analysis.
PETALING JAYA: Datuk Seri Najib Tun Razak's successful brokering ... Airlines Flight MH17 victims, came in for praise from the international media. ... be a diplomatic success for Malaysia if all participants honoured the deal.
The whirling aftermath of the crash of Malaysia Airlines flight MH17 is now upon us, with Western-led international opinion turning the spotlight on Russia. We believe that the entire case must be investigated fairly and thoroughly. The United Nations or the International Civil Aviation Organization must play a leading role, and all sides must coordinate without preconditions or preconceptions.
US Secretary of State John Kerry and Russia Foreign Minister Sergei Lavrov have agreed that all evidence from the downed plane should be made available for international investigation, and that experts should be given access to the site.
This is good news. Moscow must take a proactive stance toward this investigation.
The West has fingered Russia as the main suspect in the tragedy. Under such circumstances, any hesitation on Russia's part will provoke more blame from the West. If there is no result to the investigation, Russia will, by default, be named the perpetrator. Therefore, letting the facts of the case speak suits Russia's interests.
The Western rush to judge Russia is not based on evidence or logic. Russia had no motive to bring down MH17; doing so would only narrow its political and moral space to operate in the Ukrainian crisis. The tragedy has no political benefit for Ukrainian rebel forces, either.
Russia has been back-footed, forced into a passive stance by Western reaction. It is yet another example of the power of Western opinion as a political tool.
Politically speaking, shooting down a passenger jet would be ridiculous. It could have been an error, the precondition for which is the chaos within Ukraine.
The truth is the most persuasive tool of all. As the targeting of civilian air traffic is a mortal threat to all air passengers, a fair investigation is in the interest of all sides. The investigation process must steer clear of any political interference. The truth must be made public once it is found out.
Without a doubt, we live in a highly politicized world. Political zealotry has always been part and parcel of revolutionary passions.
The West has successfully put itself in a position to dictate "political correctness" in international discourse. Those unwilling to work with Western interests will often find themselves in a tough position.
The crash of MH17 is a tragedy of immense proportions. But the discussion swirling around this event has centered around three positions: shock at and condemnation of the event itself, quibbling over the Ukrainian crisis, and defining the opposition between Russia and the West. The first seems to be overwhelmed by the latter two, disrupting any investigation into the tragedy.
We sincerely hope the investigation will stick to factual and technological questions. People need the truth rather than another geopolitical rivalry.
[2014-07-19 06:47]
The cause of the downing of the aircraft, a Boeing 777-200, must be
found as soon as possible, and those responsible must be identified and
brought to justice.
While there is no doubt that shooting down MH17 was a grave crime, everything else remains uncertain.
ALL the big questions about MH17 began only after the passenger jet fell from the sky and crashed to the ground.
Up to that point, everything about it was routine and unspectacular: leaving Amsterdam’s Schiphol airport at a quarter past noon (6.15pm Malaysian time) on Thursday, it was scheduled to arrive at KLIA early Friday morning.
Flying at a cruising altitude of 10km over Ukraine, it was 300m above a closed airspace over a zone of conflict. The International Air Transport Association (IATA) had confirmed this was an established altitude for commercial aircraft.
Then at 10.15pm Malaysian time on Thursday, radio contact was abruptly lost. All the necessary answers for the fate of the plane also began from that point.
From there, uncovering the truth becomes a tedious and messy business. Among the challenges is that while politics should not interfere in investigations, just about everything in the politics of Ukraine comes wrapped within that tragedy.
For a start, all three principals in eastern Ukraine’s bitter conflict – the Ukraine government, pro-Russia separatists and Russia – deny any responsibility for downing MH17. Yet one of these parties has to be directly responsible for it.
Shooting down the aircraft by whatever means is a deliberate act of murder and destruction. The question that follows is whether the perpetrator did so in ignorance, mistaking MH17 for an enemy aircraft, or as a terrorist in the knowledge that it was a civilian plane.
Denial is familiar and predictable, especially for such a dastardly act and an international tragedy on such a scale. It serves two immediate purposes: avoiding blame, and damning the enemy further by shifting blame there.
As reliable information trickles in or not at all, the effective knowledge vacuum sucks in more predictable allegations and denials.
The resulting mass of claims, counter-claims, assumptions, suppositions, conjectures and fabrications form yet another unwelcome barrier to investigations.
In the absence of a forthright and verifiable admission of guilt, all three parties should be suspect.
The lack of reliable information only complicates the task of investigation, particularly at a time when all who seek the truth must be particularly prudent and patient.
Each of the three parties has its own mix of deniability and culpability. That makes any investigation even more difficult.
Identifying the guilty party and building a case against it depend on the known facts of the tragedy. Investigations then proceed as more facts become available – known, then verified, and then established.
MH17 was attacked in Ukrainian airspace and crashed near the village of Grabovo and the town of Torez in the eastern province of Donetsk, some 50km from the Russian border.
Local eyewitnesses said they saw a plane falling and hearing two explosions before the aircraft crashed to the ground and broke into two. Some debris was strewn over a 700km radius, with the bulk of the wreckage found within a tight 100m radius of the crash spot.
Separatist rebels blame the Ukrainian government, the government blames the rebels, and some in Kiev even allege a Russian hand – acting independently, or more plausibly in assisting the rebels.
What are the known indications so far? These depend on the kind of attack or weapon system used.
To both Ukraine and the private Russian news agency Interfax from the start, MH 17 was downed by a BUK missile. How could they be so certain when everything about the crash was still murky?
BUK missiles come in a set of four laser-guided, medium-range surface-to-air projectiles mounted on a tank or truck, with an altitude range of 22km to 30km. They travel at up to four times the cruising speed of a civilian aircraft.
The BUK (also known as the SA-11) is a Russian-made missile system used by both Ukraine and Russia. The rebels’ “standard” shoulder-launched missiles do not have anywhere near that range.
However, that does not clear the rebels necessarily.
There have been reports in recent days that rebels had taken over a Ukrainian military base in the area that housed the BUK missile system.
Other reports tell of Ukrainian forces having lately pushed back the rebels in eastern Ukraine and limited their room for manoeuvre.
How strong the rebels actually were in the territory where MH17 was attacked on Thursday is still unclear, that itself being indicative of the uncertainties that prevail.
Another missile “of choice” alleged to have been used on MH17 is the SA-17 or “Grizzly”, which has an 11% greater altitude range. Both missile systems operate more independently than more sophisticated Russian missile systems which can distinguish between civilian and military aircraft.
A local resident who saw the crash however said MH17 could also have been downed by a jet fighter.
Two implications follow from that: the attacker must have known the target was a civilian aircraft, and a national air force would have been responsible.
If a fighter jet had been involved, it would explain the tight debris field that some observers had noted.
It would also be consistent with witness reports of the plane breaking up upon crashing rather than disintegrating in the air.
Another version of events, reportedly from a Russian source, is that a (Ukrainian) Sukhoi Su-25 fighter jet had shot down MH17 and the rebels then shot down the assailant.
While that may explain some rebels’ remarks about having downed an aircraft at the time, it is too convoluted – even convenient – to be credible.
Such a scenario would mean the Ukrainian air force had been responsible. Russian-made Sukhois are used by both Russia and Ukraine, since Ukraine had been a part of the former Soviet Union.
The closest thing to a “smoking gun” piece of evidence within hours of the tragedy was the SBU’s (Ukrainian intelligence service’s) claimed possession of a recorded phone intercept of a conversation between some rebels and Russians.
Allegedly, a group of local Cossacks near the Chernukhin checkpoint were said to be the perpetrators. MH17 was apparently mistaken for an AN-26 Ukrainian transport plane, which rebels in eastern Ukraine had downed before.
Amid all the speculation and finger-pointing however, the consensus is that a missile or missiles had hit MH17. And the most likely perpetrators were a group of rebels in the area.
Conventional wisdom also says that this makes it more difficult for Russia to handle the situation. The reality could well be the opposite.
After Crimea (the autonomous republic of Crimea and Sevastopol) left Ukraine to join Russia earlier this year, rebels in eastern Ukraine had agitated to do likewise.
However, they have proven to be a diplomatic headache and embarrassment for Russia. Unlike Crimea, eastern Ukraine is a contiguous part of Ukraine politically and historically, even if the area also has numerous ethnic Russians like Crimea.
Moscow has thus been loath to see any part of Ukraine take the Crimea route, much as that may please Russian ultra-nationalists. Thus the civil war in Ukraine, concentrated as it is in the eastern provinces.
The rebels have since chafed at Moscow’s unwillingness to annex their territory. But if they are now seen to have committed a grave international crime in downing a civilian aircraft, the infamy presents Russia with the best opportunity yet to cut them off for good.
By Bunn Nagara Behind The Headlines The Star Columnists/Asia News Network
> Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.
Trade and open markets power China ahead. By embracing openness, China has transformed itself and perhaps even the world.
Change is the essence of life. Be willing to surrender what you are for what you could become
MY first impression of China when I first visited in 1985 was one of backwardness. There were bicycles and Mao suits everywhere.
I was fortunate because my second visit was 22 years later, in 2007. Frankly, I was astounded by what I saw. People went about in the latest fashions and cars had replaced the bicycles.
Fast forward to 2014 – when I again visited in conjunction with the 40th anniversary of Malaysia and China’s bilateral ties, accompanying Prime Minister Datuk Seri Najib Tun Razak – and we found that the pace of development was just as frenetic.
Incidentally, this was my second visit to China this year and I still have a couple more trips planned.
China is now the second biggest economy in the world and in Purchasing Power Parity (PPP) terms, the largest.
The World Bank estimates that the number of Chinese living under the international poverty line (US$1.25 a day) fell from 43% of the world’s total poor population in 1981 to 13% in 2010.
China’s Gross Domestic Product (GDP) per capita doubled to 38,354 yuan (RM19,672) from 2009 to 2012 alone.
Change, it seems, is the only constant in China. But how did this come about?
I would argue that it’s because they embraced reform and openness.
Under Deng Xiaoping, China sought “socialism with Chinese characteristics”: in effect, opening itself and its markets to the wider world.
One significant initiative which China embarked upon was joining the World Trade Organisation (WTO) in 2001.
This was a watershed and was not an easy decision for China.
Accession, especially in China’s case, is a lengthy and thorough process. Negotiations for China to join WTO took 15 years.
Countries often had to make significant concessions to the entire WTO membership and no exceptions were made for China.
However, the Chinese government proved willing to dismantle much of its restrictive institutional regime.
But WTO membership for China was not just to get better access to international markets.
It was also a defensive measure: to prevent unilateral actions from being taken against their goods by trading partners.
For instance, as a member of the WTO, China is protected from unilateral tariff hikes.
Other countries with grievances against it will have to bring their case to WTO’s tribunals.
Among the requirements for WTO entry, China also had to reduce its bound tariffs on industrial goods to an average of about 9% by 2005. Agricultural tariffs were cut to 15% while most quotas and licence requirements were eliminated.
All in all, China had to relax over 7,000 tariffs, quotas and other trade barriers.
Furthermore, it had to open up its markets to foreign firms and end state-controlled distribution of products.
China, significantly, made more market-opening commitments for services than most WTO members had.
From a centrally planned economy, China has now embraced capitalistic economic principles.
At the same time, China moved to strengthen its own capacities. It moved away from agro-based exports to manufacturing.
Also, the first of many Special Economic Zones were established in 1980, including today’s iconic Shenzen.
All of these were bold and unprecedented moves, all the more so given China’s strong nationalism and its traditional aversion to foreign entanglements. But open up it did and the results are clear for all to see.
In 2013, the WTO reported that China had overtaken the United States as the largest trading nation in the world, with total trade valued at US$4.16 trillion (RM13.23 trillion).
In that year, China’s total exports value was US$2.21 trillion (RM7.03 trillion) compared to US$1.58 trillion (RM5.02 trillion) for the US.
China, in fact, is now the largest trading partner for more than 120 countries, including Malaysia.
China is also the biggest market for automobiles, with 20 million cars sold in 2013. In comparison, the US sold only 14 million cars.
Indeed, from 2002 (after it joined the WTO) to 2013, the growth of its total trade rocketed to an annual average of more than 21%.
Its GDP for the corresponding period grew from US$1.3 trillion (RM4.13 trillion) to over US$9 trillion (RM28.6 trillion) in 2013.
Of course, China’s leaders had no way of knowing that all of these reforms would bear such remarkable fruit.
It was a risk they had to take, but it was one that paid off handsomely.
By embracing openness, China has transformed itself and perhaps even the world.
The lessons from China for Malaysia and other countries are clear: we have to be willing to embrace change.
Otherwise, the only other option is stagnation and decline.
By Datuk Seri Mustapa Mohamed
Datuk Seri Mustapa Mohamed is Minister of International Trade and Industry. The views expressed here are entirely the writer’s own. Fair and reasonable comments are most welcome at mustapa@miti.gov.my
China will surpass US to become leading superpower - global survey finds it will or already has surpassed the US
People the world over tend to believe that China will surpass the US to become the world's leading superpower, China News Service said, citing a global survey.
Conducted by the Pew Research Center, the survey of 48,643 respondents older than 18 in 44 countries found that 49 percent agree that China will eventually replace or has replaced the US as the world's leading superpower, while 34 percent disagree.
This view is shared across all regions surveyed, especially among European countries. Across the seven European Union nations polled, 60 percent think China will or already has replaced the US.
In general, global views of China are positive. China's growing economy is considered a good thing by most countries, though China's increasing prosperity is considered a threat in some, one of which is the US.
China's image in the US has deteriorated, with 35 percent expressing a positive view, down from half in 2011, the report said.
Meanwhile, the rising power of China is generating anxiety among its neighbors. More than half of respondents in 11 Asian countries surveyed worry that territorial disputes will lead to conflict with China, including 93 percent of Filipinos, 85 percent of Japanese, 84 percent of Vietnamese and 83 percent of South Koreans.
Two-thirds of Americans and 62 percent of Chinese also say they are concerned.
Respondents in Japan, the Philippines and Vietnam see China as their top security threat, while the US is seen as the top security threat in three Asian nations: China, Pakistan and Malaysia.
Across the globe, young people tend to have more positive attitudes toward China than older respondents. In 23 countries, people aged 18 to 29 give China higher ratings than those 50 and older. In the UK, Mexico, the US and France, the gap between older and younger respondents is 20 percentage points.
Despite relatively smooth development of its relations
with the other four BRICS nations, China cannot afford to ignore or
underestimate corresponding challenges.
Photo taken on July 17, 2014 shows the debris at the crash site of a passenger plane near the village of Grabovo, Ukraine. A Malaysian flight crashed Thursday in eastern Ukraine near the Russian border, with all the 280 passengers and 15 crew members on board reportedly having been killed. (Xinhua/RIA Novosti)
MOSCOW, July 17 (Xinhua) -- A Malaysian flight crashed Thursday in
eastern Ukraine near the Russian border, with all the 283 passengers and
15 crew members on board reportedly having been killed.
A Malaysia Airlines Boeing 777, which was flying from Amsterdam to Kuala Lumpur, started descending 50 kilometers before entering Russian airspace, and was subsequently found burning on the ground on Ukrainian territory," Interfax news agency quoted an aviation source as saying.
The plane disappeared from radar at an altitude of 10,000 meters and then crashed near the city of Shakhtarsk in Ukraine's Donetsk region, it said, citing Ukrainian law enforcement authorities.
An advisor to Ukrainian Interior Minister Anton Herashchenko wrote on his Facebook that "280 passengers and 15 crew members have been killed."
A Xinhua reporter was stopped by local militias some 5 km from the crash site, and was asked to wait for permission to move closer. Witnesses said they heard loud explosions and saw human remains and identity documents scattering around.
The Chinese Embassy authorities in Kiev maintained close contact with Ukrainian partners, and were verifying information on any potential Chinese casualties, an official told Xinhua.
Ukrainian President Petro Poroshenko said the plane could have been shot down, but the Ukrainian Armed Forces had nothing to do with it. Prime Minister Arseny Yatsenyuk said the government has formed a special investigative commission for the incident.
The Ukrainian Prosecutor General's Office said law enforcement authorities could not access the crash site for investigation, as it is controlled by the self-proclaimed Donetsk People's Republic (DPR).
Russian President Vladimir Putin Thursday informed U.S. President Barack Obama via telephone of the plane crash, and "had a detailed discussion on the acute crisis in Ukraine," the Kremlin press service said in a statement.
Putin said both of the conflicting sides have to cease fire immediately, and Russia had taken measures to resume consultations of the contact group "with participation of representatives of southeastern Ukraine."
The president has also offered his "deep condolences" to Malaysian Prime Minister Najib Razak over the deadly incident.
The cause of the crash was yet to be determined, but Kiev and eastern separatists have traded accusations over the responsibility. Kiev authorities said the militias shot down the plane with a Buk air defense system.
Meanwhile, Andrei Purgin, first deputy prime minister of the DPR, said they "simply do not have such air defense systems, our MANPADs have a firing range of only 3,000 to 4,000 meters," Interfax reported.
Purgin said they will give the plane's flight recorders to Moscow for testing.
"Of course, we most likely will give them to the Interstate Aviation Committee (IAC), to Moscow. High-level experts, who will be able to determine exactly the reason of the catastrophe, work there," he said.
The crash came on the same day the DPR separatists claimed they had shot down two Ukrainian warplanes, an An-26 transport jet and a SU-25 fighter, which Kiev laid the blame on Russia.
Malaysia Airlines said in a statement it had received notification from the Ukrainian air traffic control that it had lost contact with flight MH17 at 1415 GMT, some 30 km from the Tamak waypoint, approximately 50 km from the Russia-Ukraine border.
The Boeing 777 had left Amsterdam at 12:15 p.m. local time and was expected to arrive in Kuala Lumpur at 6:10 a.m. (2210 GMT) on Friday, the airline said.
Malaysian Prime Minister Najib Razak said Friday on his twitter account that he was "shocked by reports that a Malaysian Airline plane crashed," adding that they have launched an immediate investigation.
Meanwhile, Malaysian Deputy Foreign Minister Hamzah Zainuddin said that his ministry was working closely with the Russian and Ukraine governments on the tragic incident.
"We are working closely with both governments to get information," he said, adding, "currently we have some of the information, only waiting to be verified." - Xinhua
PETALING JAYA: A Malaysia Airlines plane flying from Amsterdam to
Kuala Lumpur has crashed in the Ukraine-Russia border, and Ukraine’s
president said the jet may have been shot down.
Reports said the Boeing 777-200ER carrying 280 passengers and 15 crew
is believed to have been shot down near the village of Grabovo in the
rebellion-wracked region of Donetsk.
MAS said it lost contact with the aircraft at 1415GMT (10.15pm Malaysian time).
Flight MH17 left Amsterdam’s Schipol Airport at 12.15pm local time
(6.15pm, Malaysian time) and had been scheduled to arrive in Kuala
Lumpur at 6.10am today.
Interfax-Ukraine news agency quoting unnamed security sources said
teams from the emergency services were trying to reach the scene.
However, it has not been determined who is responsible for the act and
whether it was intentional or accidental.
Crash site: Smoke rising at the site where MH17 is said to have crashed in the donetsk region in ukraine.
The fate of the passengers and crew has yet to be verified, but
reports have quoted the Ukraine Interior Ministry as saying there were
no survivors.
Ukrainian President Petro Poroshenko said in a statement in his
website that the Ukraine armed forces did not fire at any targets in the
sky.
The country’s Prime Minister Areseny Yatseniuk has ordered an investigation into what he said was an "airplane catastrophe".
However, Anton Gerashenko, an adviser to the Ukraine interior
minister, said on his Facebook page the plane was flying at an altitude
of 10,000m when it was hit by a missile fired from a Buk launcher. The
Buk missile system can fire missiles up to an altitude of 22,000m.
Rebel leaders have also denied involvement, telling Russian news
agencies that they were not responsible for shooting down the plane and
pledged to allow "international experts" access to the crash site.
The pro-Russian rebels, who are fighting central Kiev authorities, claimed the plane had been shot down by a Ukrainian jet.
"Witnesses saw the plane being attacked by a battle plane of the
Ukrainian forces," the government of the self-proclaimed Lugansk
People’s Republic said in a statement. "After that, the passenger plane
split into two in the air."
MAS said on its Twitter feed that it "has lost contact of MH17 from
Amsterdam. The last known position was over Ukrainian airspace. More
details to follow."
The region where the plane went down has seen severe fighting between
Ukrainian forces and pro-Russia separatist rebels in recent days.
On Wednesday evening, a Ukrainian fighter jet was shot down by an
air-to-air missile from a Russian plane, Ukrainian authorities said
yesterday.
Earlier this week, Ukraine said a military transport plane was shot down on Monday by a missile fired from Russian territory.
This is the second tragedy involving MAS in four months, when a
Beijing-bound airliner – also a Boeing 777-200ER – with 239 people on
board went missing an hour after it took off from Kuala Lumpur
International Airport on March 8. The search for Flight MH370 – in the
southern Indian Ocean – is still ongoing. - The Star/Asia News Network Related post: Malaysia's flight MH370 mistakes reflect Malaysia's stagnant politics ...
Chinese President Xi Jinping has delivered a keynote speech, mapping out the direction for cooperati...
New bank underscores BRICS unity
The BRICS New Development Bank was established Tuesday with an initial capital of $50 billion shared equally by the five BRICS countries. The Contingent Reserve Arrangement was also launched with an initial fund of $100 billion. The development bank's headquarters will be in Shanghai. Its first president will be from India, the first chair of the board of directors from Brazil and the first chair of the board of governors from Russia. The bank will have an African regional branch in South Africa.
The idea of a BRICS bank was first mooted by India. The five countries reached a consensus at last year's BRICS summit and the bank has been launched this year. The fast pace and its implications have created waves in the West. This landmark event shows that BRICS countries have turned from a forum to an entity and may signal a new beginning for global strategic trends.
The five emerging powers from four continents have formed a financial group. Prior to that, the world's financial power was held firmly by Americans and Europeans.
Without exception, Western opinions have all been centered on the deep-rooted discrepancies among the five BRICS nations. They didn't expect that the wishes and ability of the five countries to overcome these discrepancies were so strong.
Has the world's financial pattern changed? We cannot say this yet, but the old pattern in which the World Bank and the International Monetary Fund dominated the field will face competition from now on.
The BRICS bank not only forms a new financing channel, but also will display the democracy and equality that the old financial pattern lacks most.
Western opinions have tried to drive a wedge among BRICS countries and have speculated about China's hegemonic ambition to dominate the institution. The successful launch of the bank has dealt a heavy blow to them.
Western elites have expressed opinions on emerging countries with a biased mentality, which makes their views detached from reality.
That Shanghai is chosen to site the bank headquarters is good news. Shanghai is becoming a new geographic and financial center in the 21st century. It unites the development momentum of the whole of China and is a major international metropolis in the Western Pacific. It is bound to be an outstanding host city.
On the other hand, the opening of the BRICS bank will provide a new driving force for Shanghai.
China's reform and opening-up in the past 30 years have created huge potentials for this city, while the stage where it can display its strength is relatively small. The BRICS bank is a timely opportunity which will broaden the scope of Shanghai and boost its influence.
China is the most outstanding country among all the emerging powers. The launch of the BRICS bank with Shanghai as its headquarters is a testament to China's national strength, diplomatic capabilities and strategic position. The confidence of all the emerging countries will be boosted. The five nations used to be earthen BRICS, and with the development bank, they will truly become gold BRICS.
Source:Global Times Published: 2014-7-17
BRICS Agree on $50 Billion Bank With Something for Everyone;
Photographer: Nelson Almeida/AFP/Getty Images
Leaders of the five BRICS nations agreed on the structure of a $50 billion development bank by granting China its headquarters and India its first rotating presidency. Brazil, Russia and South Africa were also granted posts or units in the new bank.
The leaders also formalized the creation of a $100 billion currency exchange reserve, which member states can tap in case of balance of payment crises, according to a statement issued at a summit in Fortaleza, Brazil.
Both initiatives, which require legislative approval, are designed to provide an alternative to financing from the International Monetary Fund and the World Bank,
where BRICS countries have been seeking more say. The measures coincide
with a slowing of economic growth in the five countries to about 5.4
percent this year from 10.7 percent in 2007, according to economists
surveyed by Bloomberg.
“The BRICS are gaining political weight and demonstrating their role in the international arena,” Brazilian President Dilma Rousseff said after a signing ceremony.
Until
the eve of the summit, India and South Africa had vied with China to
host the headquarters of the bank, dubbed the New Development Bank. The
administration of Indian Prime Minister Narendra Modi gave in after it was reminded that his country’s previous administration had agreed to Shanghai as the bank’s headquarter, according to an Indian official, who requested not to be named because the talks were not public.
Shared Out
Russia’s
Finance Minister Anton Siluanov told reporters that the BRICS decided
in favor of Shanghai because the city offers better infrastructure,
opportunities to capture private funding, and is home to more investors
than the competitors.
Each member country got something out of
the deal. The first chairperson of the Board of Governors will be from
Russia, while the first chairperson of the Board of Directors will be
Brazilian. South Africa will establish an African regional center for
the bank, which may not get off the ground for another two years,
according to Carlos Cozendey, secretary for international affairs at
Brazil’s Finance Ministry.
Unlike the IMF and World Bank, which
are managed by Europeans and Americans, the BRICS bank “is quite
democratic,” Brazilian Finance Minister Guido Mantega told reporters.
Each
member country has the right to withdraw different amounts from the
joint currency reserves, according to a statement from Brazil’s central
bank. China can withdraw half the amount it earmarks or $20.5 billion.
Brazil, Russia, and India may withdraw the same amount they commit or
$18 billion, while South Africa can tap $10 billion, twice its
contribution.
“It’s a type of insurance policy, speculators
looking for weaker countries without backup, will run because those
countries will have sufficient solidity to face a currency problem,”
said Mantega.
Aiding Development
The BRICS have evolved from the original term coined in 2001 by then Goldman Sachs Group Inc. economist Jim O’Neill to describe the growing weight of the largest emerging markets in the global economy. In 2011, South Africa joined to give the BRICS a broader geographic representation.
Even
with slowing economic growth in BRICS countries, there are still plenty
of opportunities for business, and the newly-created development bank
will help those opportunities become reality, said Jorge Gerdau
Johannpeter, chairman of Brazilian steelmaker Gerdau SA.
“The bigger the financing possibilities, the bigger the chances of implementing projects,” Gerdau told reporters at the summit.
The
biggest winner among the BRICS and its newly created bank may be South
Africa, as it stands to gain financial expertise, investment and trade,
said Colin Coleman, the Johannesburg-based head of Goldman Sachs Group
Inc. in sub-Saharan Africa, who attended the BRICS Business Council meeting.
Greatest Benefit
“Arguably
we have the greatest amount to benefit because we’re partnering
diplomatically and otherwise with some of the world’s most important
emerging-market economies,” Coleman said in a phone interview.
While BRICS trade ministers in a joint communique yesterday said that member countries stood by the World Trade Organization’s
Bali agreement, Brazil’s Trade Minister Mauro Borges said he understood
India had certain concerns about its implementation and that the BRICS
countries didn’t intend to forge a common stance on the issue.
BRICS share of world exports rose to 16 percent in 2011, from 8 percent in 2001.
Russia
also proposed at the summit in the northeastern coastal city of
Fortaleza the creation of an Infrastructure Fund during the summit, Kirill Dmitriev,
chief executive officer of the Russian Direct Investment Fund, told
reporters today. The fund could start up as early as next year, he said
.- By Raymond Colitt, Unni Krishnan and Arnaldo Galvao Bloomberg
In tandem: Public Bank, Hong Leong Bank and Maybank are among banks which have confirmed that they have either adjusted or will be adjusting to the new rates.
A number of banks raise their base lending rates (BLR) and base financing rates (BFR) in tandem with Bank Negara’s announcement to raise the overnight policy rate (OPR) by 25 basis points (bps) from 3% to 3.25% effective yesterday, today and tomorrow.
As a result, the BLR and BFR has adjusted to 6.85% from 6.6% per annum previously.
The banks that have confirmed that the new rates effective from 16 July 2014 include Malayan Banking Bhd (Maybank), Hong Leong Bank Bhd (HLBB), CIMB Group Holdings Bhd, Public Bank Bhd, Alliance Financial Group Bhd and OCBC Malaysia, HSBC Bank Malaysia; effective 17 July 2014 include Citibank, Standard Chartered Bank; effective 18 July 2014: UOB
It is understood that some banks may announce the interest rate revision on a different date, as they are still considering the quantum of the deposit rates, which will impact their earnings eventually.
Bank Simpanan Nasional senior vice-president and head of distribution Akhsan Zaini told StarBiz: “ We are still studying the impact of the rate hike on our bank before we announce the adjustment next week, tentatively.”
He also said the bank had yet to decide on how much it would adjust for its deposit rates
CIMB Research expects the rate hike to enhance banks’ earnings by 1% to 2%, as their net interest margins (NIM) widen.
Maybank Investment Bank Research, on the other hand, anticipates NIM growth to be short-lived due to price competition.
The research unit had said in an earlier report: “Our forecasts already assume a 50-bps rate hike in 2014, and as a result, we are looking at a marginal four-bps aggregate NIM improvement in 2015 versus a seven-bps contraction in 2014.”
Some banks have also announced the revision of their deposit rates, but the quantum varies from one lender to another as well as the deposit tenure.
Among others, Maybank’s deposit rates will be revised upwards by up to 15 bps.
HLBB and Hong Leong Islamic Bank Bhd (HLISB) will increase their fixed-deposit and Term Deposit-I rates by up to 25 bps.
Following the revision, HLBB and HLISB’s new deposit rates for one, six and 12 months would be 3.05%, 3.2% and 3.3%, respectively.
Hong Leong Banking Group’s managing director Tan Kong Khoon said the group would continue to work closely with its customers to address their financing and savings needs. Meanwhile, OCBC Bank (M) Bhd and OCBC Al-Amin Bank Bhd will be increasing their fixed-deposit and General Investment Account-i rates respectively by up to 20 bps, depending on tenures effective July 21.
In a statement, Maybank said: “The last revision in Maybank’s BLR and Maybank Islamic’s BFR was on May 11, 2011 when they were revised from 6.3% to 6.6% per annum.”
OCBC Bank’s mortgage lending rate, the alternative to using BLR for home loans, will also increase, to 5.7% compared with 5.45% previously.
JP Morgan Research noted that it was cautious on banks, as the combination of rate hikes and subsidy rationalisation would test the credit risk management of Malaysia’s consumer-led loan growth in the past five years.
It preferred liquid banks and upgraded HLBB and Maybank to “overweight” from “neutral”.
