Sunday, July 22, 2018

The rich are becoming richer

They are becoming richer at a faster rate too

DON’T the rich always grow richer, while the poor well, remain poor.

If you’re already disheartened, it gets worst. The rich are getting richer, and at a faster rate too.

A 36-page report released by the Boston Consulting Group (BCG) last month showed that global personal financial wealth grew by 12% in 2017 to US$201.9 trillion.

This total, roughly 2.5 times as large as the world’s gross domestic product (GDP) for the year (US$81 trillion), more than doubled the previous year’s rate, when global wealth rose by 4%.

It also represented the strongest annual growth rate in the past five years in dollar terms.

“The main drivers were the bull market environment in all major economies, with wealth in equities and investment funds showing by far the strongest growth and the significant strengthening of most major currencies against the dollar,” said BCG in the report.

The increasing millionaires and billionaires now hold almost half of global personal wealth, up from slightly less than 45% in 2012, says BCG. In North America, which had US$86.1 trillion of total wealth, 42% of investable capital is held by people with more than US$5mil in assets. Investable assets include equities, investment funds, cash and bonds

In terms of asset classes, US$121.6 trillion (60%) of global wealth took the form of investable assets – mainly equities, investment funds, currency and deposits, and bonds, with the remaining US$80.3 trillion (40%) held in non-investable or low-liquidity assets such as life insurance, pensions funds, and equity in unquoted companies.

Residents of North America held over 40% of global personal wealth, followed by residents of Western Europe, with 22%. The strongest region of growth was Asia, which posted a 19% increase. All wealth segments grew robustly, but high growth rates were especially prevalent in the uppermost wealth segments.

The market sizing review encompasses 97 countries that collectively account for 98% of the world’s gross domestic product.

The personal wealth bands are generally measured as such:

1. Retail: below US$250,000

2. Affluent: between US$250,000 to US$1mil

3. Lower High Net Worth (HNW): between US$1mil and US$20mil

4. Upper HNW: between US$20mil and US$100mil

5. Ultra HNW: above US$100mil

Everybody is getting richer

The US is home to the largest number of people with more than US$20mil. Globally, the classes of the ultra-rich are expected to reach 671,000 by 2022.

Meanwhile, the Middle East is the region with the greatest share of wealth held in investable assets US$3.1 trillion of a total US$3.8 trillion. Western European residents held 56% in currency and deposits, while in North America the attention was on equities and investment funds, with 62% of US$47 trillion of investable wealth parked in those assets.

Should personal wealth creation continues at the rate of the past few years, BCG forecasts a compounded annual growth rate of about 7% from 2017 to 2022, in US dollar.

Events like stock market corrections and geopolitical uncertainties could knock that down to 4%.

In a worse-case scenario, such as a major economic crisis, global wealth might produce a compound growth rate of only 1% over five years, the study found.

BCG says opportunities abound for wealth managers seeking to increase their focus on different client segments.

For example, despite being far apart on the wealth spectrum, both the above US$20mil segment (upper HNW and ultra HNW) and the affluent segment are attractive because they represent very large wealth pools with high growth rates.

In 2017, the upper HNW and ultra HNW segments held more than US$26 trillion in investable wealth.

US residents held over 30% of this wealth, making the US easily the largest country of origin.

Other economic areas with large pools of ultra HNW investable assets include developing markets such as China (in second place), Hong Kong, India, Russia and Brazil, and developed markets such as Germany (in third place), France and Italy.

The share of wealth held by upper HNW and ultra HNW individuals varies widely aong the top 15 countries, ranging from 47% in Hong Kong to 8% in Japan.

Over the next five years, the upper HNW and ultra HNW segments wealth is likely to post the highest growth across all regions.

“Financial institutions looking to acquire and serve these segments will need to bring a broad international skill set to the table,” said BCG.

Affluent individuals

Afluent individuals is a segment whose population is burgeoning, hold a large and increasing amount of the world’s personal wealth at US$17.3 trillion or 14% of investable assets in 2017. (see chart)

This group of about 72 million people represents the growing middle class and many of its members will become the millionaires of tomorrow.

“We expect the wealth of this segment to post a compound annual growth rate (CAGR) of around 7% over the next five years, increasing its pool of wealth to nearly US$25 trillion. To successfully tap into this segment, wealth managers must have at their disposal an efficient service model and significant skill in and innovative digital technologies,” said BCG.

Entrepreneurs

The entrepreneur segment represents another attractive opportunity for wealth managers to tap into money in motion and provide needed services.

“We expect these individuals, who have equity in their own companies – recorded as unquoted equities (non-investable wealth) – to significantly increase their pool of investable assets, by liquidating some or all of their equity through sales and by earning new wealth through their entrepreneurial activities. The largest pools of entrepreneurial wealth are in the US, France, Italy and Japan.

Asia

Personal wealth in Asia grew by 19% to US$36.5 trillion, with residents of China holding nearly 57% of that amount, and the region registered per capita wealth of US$13,000. Although the asset allocation share of equities ad investment funds has grown over the past five years (from 22% in 2012 to 31% in 2017), Asia remains a cash-and-deposit-heavy region, with 44% of personal wealth held in this asset class. We project regional wealth to grow over the next five years at a CAGR of 12%.

Meanwhile Switzerland remains the largest offshore centre, domiciling US$2.3 trillion in personal wealth in the country. The next largest booking centres are Hong Kong (US$1.1 trillion) and Singapore (US$0.9 trillion) which have grown at yearly rates of 11% and 10% respectively – more than three times the rate (3%) of Switzerland over the past five years.

Over the next five years, BCG feels off

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Sunday, July 15, 2018

Judged on merit and nothing less

It’s official: The Yang di-Pertuan Agong Sultan Muhammad V presenting the letter of appointment to Malanjum at Istana Negara. Looking on is Prime Minister Tun Dr Mahathir Mohamad. — Bernama

Judicial diversity and meritocracy are inseparable in order to win the faith of society. The appointment of Tan Sri Richard Malanjum, a Sabah-born Kadazandusun, as the top judge is a first for a non-Malay Malaysian and is welcomed as a major step towards winning greater confidence in the Judiciary, CHELSEA L.Y. NG writes.

IT’S a fairy tale come true for some Malaysians banking on a better Judiciary grounded on merits when news of Tan Sri Richard Malanjum having been sworn in as the ninth Chief Justice of Malaysia started to trickle down to the media late Wednesday evening.

Just several hours before that, the witty Malanjum had brushed off talk of him being selected as the next top judge.

“Itu cerita dongeng (It’s a fairy tale),” he told reporters in Kuching before walking off quickly.

But by then there were already some pictures of him attending an alleged rehearsal session being circulated among a few privileged ones.

Well, going by some of the not-so-welcoming responses from those who thought that the position was reserved for only Malay judges, the initial hush-hush circumstances were understandable.

But we cannot really fault those who think the positions are reserved purely for Malays. If you have only been exposed to Chief Justices (CJ, top post) and Chief Judges of Malaya (CJM, top three) after 1994, then you might be forgiven for thinking that the posts are for Malaysians of Malay origin only (see lists of LPs and CJs).

In the last two decades, top posts had been taken by Malay judges but if we look further back, the situation was much different prior to 1994. There used to be a good mix of judges from different races at least for the CJM post, which was then known as the Chief Justice of Malaya (a No.2 post then and not to be confused with the current CJ post, which is a top post). The top judge was known as the Lord President (LP) then or Lord President of the Supreme Court in full.

The LP position was created after the abolition of appeals to the Judicial Committee of the Privy Council in 1985.

Below the LP were the Chief Justices of the High Courts of Malaya and Borneo.

In 1994, the LP was renamed CJ when the Supreme Court reverted to the name of Federal Court, which was the name used prior to 1985 but with the Privy Council as the highest authority.

In 1994, Parliament amended the Federal Constitution and approved a reorganisation of the court system and significantly set up the Court of Appeal as the second highest court and renamed the highest court Federal Court (previously Supreme Court). After 1994, there was a new No.2 position created called the President of the Court of Appeal. The CJM hence moved to the third position.

For senior lawyer Datuk Roger Tan, judicial diversity is an essential element.

“It is pivotal in creating confidence in a multi-racial society. Diversity can be on the grounds of race, religion and gender.

“In Britain, they just had the first female President of the Supreme Court in hundreds of years,” said Tan.

Lawyer Fahri Azzat said there is nothing in the Constitution that demands that a Chief Justice, President of the Court of Appeal or the Chief Judge of Malaya must be of Malay heritage, or dictates that the racial composition of the Federal Court or even the Court of Appeal contain a majority of citizens of Malay heritage.

In fact, Article 123 of the Federal Constitution which deals with the qualifications to be a High Court judge and above provides the following:

A person is qualified for appointment und

er Article 122B as a judge of the Federal Court, as a judge of the Court of Appeal or as a judge of any of the High Courts if – (a) he is a citizen; and

(b) for the 10 years preceding his appointment he has been an advocate of those courts or any of them or a member of the judicial and legal service of the Federation or of the legal service of a State, or sometimes one and sometimes another.

For Fahri, that a persistent racial pattern at the appellate courts continues in the Judiciary suggests that race is a more influential factor than abilities or merits when it comes to the appointment and promotion of a judge.

Fahri even wrote about it in 2010 on the LoyarBurok website about the racial composition of the Judiciary.

“Any litigator who is in the thick of litigation practice in our civil courts will acknowledge that at the level of top senior counsel, the composition is the opposite of the nation’s racial population.

“Where top senior legal counsel are concerned, the ratio of Malaysians of Indian heritage are highest as compared to those of Chinese heritage who come in second as compared to those of Malay heritage who have the lowest numbers. That is how I know it to be from experience and conversation,” Fahri wrote then.

However, on Malanjum’s appointment, Fahri has this to say: “I think it is a step or start in the right direction. Whether it closes the gap in terms of judicial diversity and meritocracy remains to be seen with subsequent appointments of both the top judges and the High Court judges.

“I think it will be the starting point for the public to renew its faith in the Judiciary but that again remains to be seen from their judgments, judicial statements and the Judiciary’s actions collectively.

“Just as a swallow does not a summer make, a few judicial appointments do not guarantee rejuvenation of the Judiciary,” he said, adding that these positive developments if seen through over the long term will help foster faith and trust in the Judiciary and the administration of the justice system as a whole.

Retired Federal Court judge Datuk Seri Gopal Sri Ram said the appointment is definitely a welcome move and expected to improve the Judiciary.

“This is the first time we have a non-Malay being made a top judge. Prior to this we had non-Malay judges being appointed to the second highest positions. But that was before 1994.

“From the time of independence until then, no one had looked at the appointments on racial or religious angle. Only in recent times did people start to do so.”

He named a few prominent top judges then such as Tan Sri H.T. Ong, Tan Sri S.S. Gill and Tan Sri Gunn Chit Tuan.

“Richard’s appointment verifies the oneness of Malaysia. That there is only one Malaysia. That there is no East Malaysia or a West Malaysia,” said Sri Ram.

Sultan of Perak Sultan Nazrin Shah had in his special address at the book launch of Tun Arifin Zakaria last year mentioned a valuable quote by his father Sultan Azlan Shah, who was also a respectable Lord President.

“I quote, ‘The rules concerning the independence of the judiciary ... are designed to guarantee that they will be free from extraneous pressures and independent of all authority, save that of the law. They are, therefore, essential for the preservation of the Rule of Law,” he said.

The Sultan hit the nail on the head. Justice and judges should be free from any extraneous pressures and everything has to be based on the merits of the law.

The Ruler had on the same occasion called on Federal Court and Court of Appeal judges to write dissenting judgments if they do not agree with the majority of the Bench.

“Sometimes, the brave dissenting voice is transformed into law. A classic case is that of Brown v. Board of Education 347 US 483 (1954) when the US Supreme Court gave weight to the spirit of Justice Harlan’s dissenting voice in Plessy v. Ferguson 163 US 537 (1896).

“As a result, and in a historic judgment, then-chief justice Warren held that racial segregation in public schools constituted a violation of the US constitutional guarantee of equality of rights,” he said.

The Sultan added that judges should be free to express reasons in their judgments as they thought fit, and in other words, for the Rule of Law to flourish, courts and their participants should be allowed to express a variety of ideas and principles.

In the case of Malanjum, some critics even brought up the point that he was not qualified to be made the Chief Justice because of his dissenting judgments in the case of Lina Joy and the use of the Allah word in the Bible.

In Lina Joy, she lost a six-year battle in 2007 to have the word Islam removed from her identity card after the Federal Court dismissed her appeal in a majority decision.

In his dissenting judgment, Malanjum said the department responsible for issuing identity cards should have just complied with Lina Joy’s request to remove the word from her IC. He accused the National Registration Department of abusing its powers.

“In my view, this is tantamount to unequal treatment under the law. She is entitled to an IC where the word Islam does not appear,” Malanjum said.

In the second case, the Federal Court was divided again with Malanjum dissenting and arguing that the Constitution must remain the supreme law of the land.

In his column, constitutional law expert Prof Dr Shad Saleem Faruqi had also written about Malanjum’s boldness in voicing out his stand and daring to dissent.

According to Dr Shad, in PP v Kok Wah Kuan in 2008, the Federal Court had in a majority judgment “mocked the doctrine of separation of powers as having no legal basis” in the Constitution.

The judgment went further to say that the power of the courts was limited to whatever Parliament bequeathed.

“Fortunately, there was a bold dissent from Malanjum, our Sabah and Sarawak Chief Judge, who insisted that separation of powers and judicial independence are firm pillars of our constitutional edifice.

“He rejected the view that ‘our courts have now become servile agents of a federal Act of Parliament and that the courts are now only to perform mechanically any command or bidding of a federal law’.

“Justice Malanjum was eminently correct on both scores. A Constitution is not mere words written on paper,” Dr Shad wrote in his column.

These words by the eminent professor were enough to back Malanjum as a strong guardian of the rule of law and is definitely fitting for the grand position of a Chief Justice.

Enough said, time will tell if we have taken the right path.

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Malaysian policy changes and new initiatives soon

Putting our house in order

WITH the announcement of the new Housing and Local Government Minister, Zuraida Kamaruddin, there have been a lot of news and interviews on her proposals to put our housing industry in order.

Her new plans will help create a new housing environment in our country if well executed. I particularly like the minister’s assurance that there won’t be any political intervention in decision-making, especially in housing development matters.

The key objective of the ministry is to synchronise all affordable housing schemes under one roof with the establishment of the National Affordable Housing Council, which is expected to be announced in August.

The streamlining will involve four agencies, Syarikat Perumahan Negara Bhd, 1Malaysia Civil Servants Housing Programme (PPA1M), Rumah Mampu Milik Wilayah Persekutuan (RumaWIP), and 1Malaysia People’s Housing Scheme (PR1MA).

With this prompt move, the housing ministry will have better control over the construction of affordable houses, and will attempt to resolve the mismatch between market supply and demand in certain housing segments.

Apart from the new supply, we should also look at our current housing supply. As at end-2017, we have 5.4 million houses, of which 21% or 1.15 million were low-cost houses and flats. This should be sufficient to accommodate the critical housing needs of our Rakyat if they were allocated to the right group of people.

In my last article, I mentioned that there were potential leakages in our previous distribution system that had caused the failure of qualified applicants to buy or rent a low-cost home.

In early June 2018, the new Housing Minister requested owners of People’s Housing Projects (PPR units) who were renting out their units to foreigners to evict their tenants within 90 days.

It is important for the authorities to carry out surveys on residents of low-cost housing after certain grace period to ensure the ownership and tenancy of government housing fall into the right hands.

By addressing the current leakages and with the identification of the right target audience, the issue can be quickly resolved.

Our new government plans to set up an online platform for application of affordable housing in the future. This would be an effective way to gather market demand based on the actual requirement and ensure greater transparency in the allocation process.

In addition, the government promises to build one million affordable homes within 10 years. It also suggests the housing price for the B40 group (with a median monthly household income of RM3,000) to be around RM60,000, and equipped with basic facilities such as a park and a community hall.

Based on the contributing factors of housing development which include land, the approval process and resources, only the government can build houses at the price of around RM60,000.

Only the government can gather land bank through compulsory land acquisition of agriculture land, then to convert the land for housing development, and increase housing projects with public funds.

As taxpayers, I believe we are more than happy to help elevate the living standards of the B40 group knowing very well that our money is well-spent in making a difference for the future of our nation.

I applaud the new government for taking the bold measures in putting things in order, and walking the talk by planning for more affordable housing.

Offering affordable housing and a comfortable living environment are essential criteria in building a sustainable future for our country. Whenever the government announces more constructive measures and makes things more transparent, the market environment becomes more optimistic. With this confidence, the Rakyat will be more than willing to do our part as taxpayers to achieve the common goals for the benefit of all.

Food for thought Alan Tong

Datuk Alan Tong has over 50 years of experience in property development. He was the World President of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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Sunday, July 8, 2018

China hits back after US imposes tariffs worth $34bn

https://youtu.be/5p5sA5i6XYs

US tariffs on $34bn (£25.7bn) of Chinese goods have come into effect, signalling the start of a trade war between the world's two largest economies.

The 25% levy came into effect at midnight Washington time.

China has retaliated by imposing a similar 25% tariff on 545 US products, also worth a total of $34bn.

Beijing accused the US of starting the "largest trade war in economic history".

"After the US activated its tariff measures against China, China's measures against the US took effect immediately," said Lu Kang, a foreign ministry spokesman.

Two companies in Shanghai told the BBC that customs authorities were delaying clearance processes for US imports on Friday.

The American tariffs are the result of President Donald Trump's bid to protect US jobs and stop "unfair transfers of American technology and intellectual property to China".

The White House said it would consult on tariffs on another $16bn of products, which Mr Trump has suggested could come into effect later this month.

The imposition of the tariffs had little impact on Asian stock markets. The Shanghai Composite closed 0.5% higher, but ended the week 3.5% lower - its seventh consecutive week of losses.

Tokyo closed 1.1% higher, but Hong Kong fell 0.5% in late trading.

Hikaru Sato at Daiwa Securities said markets had already factored in the impact of the first round of tariffs.

list of products

Mr Trump has already imposed tariffs on imported washing machines and solar panels, and started charging levies on the imports of steel and aluminium from the European Union, Mexico and Canada.

He has also threatened a 10% levy on an additional $200bn of Chinese goods if Beijng "refuses to change its practices".

The president upped the stakes on Thursday, saying the amount of goods subject to tariffs could rise to more than $500bn.

"You have another 16 [billion dollars] in two weeks, and then, as you know, we have $200bn in abeyance and then after the $200bn, we have $300bn in abeyance. OK? So we have 50 plus 200 plus almost 300," he said.

The US tariffs imposed so far would affect the equivalent of 0.6% of global trade and account for 0.1% of global GDP, according to Morgan Stanley in a research note issued before Mr Trump's comments on Thursday.

Analysts are also concerned about the impact on others in the supply chain and about an escalation of tensions between the US and China in general.

Timeline

US-China trade war

16 February, 2018

US Commerce Department recommends a 24% tariff on all steel imports and 7.7% on aluminium. It's seen as a policy directed at China, which is the world's largest maker of steel.

22 March, 2018

China says it will impose tariffs on US goods worth $3bn.

22 March, 2018

President Trump announces a plan to impose further tariffs on Chinese imports worth $60bn but grants temporary exemptions from aluminium and steel tariffs to the EU, South Korea and other countries.

2 April, 2018

China imposes 25% tariffs on 128 US products including wine and pork.

3 April, 2018

The US Government proposes new additional tariffs on Chinese imports worth $50bn. These include: televisions, medical equipment, aircraft parts and batteries.

4 April, 2018

China proposes tariffs on US goods worth $50bn.

5 April, 2018

President Trump announces he's considering additional tariffs on Chinese products worth $100bn.

15 June, 2018

President Donald Trump announces new tariffs on goods worth $34bn will come into force on 6 July 2018. He also proposes a new list of tariffs for imported goods worth $16bn.

15 June, 2018

China says it will respond to these new US impositions with it's own new tariffs on agricultural products and manufactured goods.

6 July, 2018

New tariffs announced by both countries in June come into effect.

Source: bbc.com/news

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Tuesday, July 3, 2018

Najib arrested, charged and pleaded not guilty

https://youtu.be/CkmYbnVaO_s

Former premier Najib Abdul Razak was arrested at his residence in Jalan Duta, Kuala Lumpur, this afternoon, according to MACC chief commissioner Mohd Shukri Abdull.

The arrest was carried out in relation to the commission's investigation into the SRC International issue.

Speculation is also rife that the former premier could be charged tomorrow.

Shukri Abdul told the media that the arrest took place at 3pm and the former premier has been taken to the commission's headquarters in Putrajaya for further questioning.

Previously, MACC had recorded Najib's statement twice with regard to the SRC International issue.

Last Friday, Malaysiakini had reported that there is a strong likelihood the former premier would be arrested this week.

[More to follow]

LIVE: Najib arrives in court

https://youtu.be/IFZhcT6t1Pw

Penang undersea tunnel developer CZC 'duped into paying RM22mil' at gun point?

GEORGE TOWN: The developer of the Penang undersea tunnel project claims it was duped into paying two individuals RM22mil to stop graft investigations.

Consortium Zenith Construction Sdn Bhd (CZC) senior executive director Datuk Zarul Ahmad Mohd Zulkifli (pic) said they were told that action would be taken against them if they did not pay.

“They (the duo) claimed to be the powers that be. Eventually, we found out it was not true. We were conned,” he said.

He said the company had previously followed all the rules.

“But at that particular period of time, we didn’t know what was the rule of law. It’s not bribery but the act was akin to putting a gun to my head,” he said.

Zarul Ahmad said he could not disclose the details because the case was still being investigated by the Malaysian Anti-Corruption Commission (MACC).

“I believe soon they will come out with something pertaining to those issues,” he said.

Zarul Ahmad said things were different now after the outcome of GE14 on May 9.

“On May 10, I opened my window and I took a nice breath of fresh air and it was wonderful.

“Last time, I couldn’t answer certain things but now, I can because there is freedom of speech. I know I won’t get into trouble for making statements that I want to make,” he said at a hotel here yesterday.

In March, a 37-year-old Datuk Seri was picked up by MACC for allegedly receiving RM19mil from CZC to “help settle” investigations into the controversial RM6.3bil mega project comprising an undersea tunnel and three highways.

Former chief minister Lim Guan Eng said the state government was shocked at the news that CZC allegedly paid RM19mil to an unnamed businessman and RM3mil to an MP.

Zarul Ahmad said they had provided an explanation about the incident which was accepted by the Penang government two weeks ago.

CZC, the special purpose vehicle of the Penang project, had come under the spotlight after its two senior directors were picked up to assist in MACC investigations over alleged corruption claims.

MCA deputy president Datuk Seri Dr Wee Ka Siong had raised numerous concerns about the project, including why the special purpose vehicle did not meet the RM381mil minimum paid-up capital requirement during the tender process.

Zarul Ahmad said they were adopting the just-in-time (JiT) philosophy, meaning the paid-up capital would only be increased when necessary.

He said 90% of the financing was done through the banks and they did not want to incur interests for nothing.

“That is the only way to reduce our cost and maximise returns.

“Why should we increase our paid-up capital to RM300mil or 400mil when we are only using a certain amount,” he said.

By Tan Sin Chow and Saran Yeoh The Star

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Monday, July 2, 2018

China staunch defender of free trade under WTO, meet the 'selfish giant' of global trade

Photo taken on April 12, 2018 shows the World Trade Organization headquarters in Geneva, Switzerland. [Photo/Xinhua]

China staunch defender of free trade under WTO

There can be no order without rules. And trade is no exception to this. The World Trade Organization regulates the trade between nations to ensure that trade flows as smoothly, predictably and freely as possible.

China has spared no efforts in honoring the promises it made to join the WTO, and the country has not only abided by the WTO rules over the past 17 years. It has contributed a great deal to the development of the world economy and is a staunch defender of the WTO trade system.

In contrast, the Donald Trump administration's unilateralism and trade protectionism pose an ever greater threat to free trade. Under the unjustifiable pretext of national security, it has violated the United States' WTO obligations by imposing tariffs on steel and aluminum imports, and discriminating among its WTO trade partners.

There is no denying that China has benefited a lot as a member of the WTO, which has facilitated its opening-up and reform. Without integrating its economy with that of the world, it would have been impossible for the country to maintain its double-digit economic growth for more than a decade.

Yet the other side of the coin is that as a rule-abiding member of the WTO, China has also contributed to the world economy. Had it not been for China's help and support, it would not have been possible for the US and other major Western countries to have emerged from the devastating effects of the 2008 financial crisis so quickly.

And without China's opening-up, it would not have been possible for so many transnational corporations to benefit from their business in China. And of course, those businesses have provided jobs for China and enabled the country to earn more from international trade.

Free trade is undoubtedly reciprocal. China is a beneficiary of free trade within the framework of the WTO, but it also benefits others. It is a contributor to the development of the world economy and defender of the current world economic order.

Because they fail to appreciate this, some Western countries regard China as simply a free rider on globalization and refuse to recognize China's status as a market economy as they should.

That the US refuses to settle its trade dispute with China within the framework of the WTO only points to its own lack of respect for the WTO trade rules.

China will continue to abide by WTO rules and firmly defend the current world economic order, as it believes that rules-based multilateralism is essential for the healthy development of the world economy.

By China Daily editorial

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Donald Trump has opened a Pandora's box which, if not shut soon, will cause mayhem in global trade and seriously undermine the multilateral trading system

At a time when globalization needs to be safeguarded and promoted, some countries are doing exactly the opposite by violating even the normative axioms of international relations. In particular, the Donald Trump administration seems hellbent on instigating a trade war with major economies by using anti-globalization and protectionist measures, which are disrupting the international trade order.

Claiming to resolve domestic structural problems and meet global challenges with a combative approach, US President Donald Trump has become the most powerful force behind the wave of trade protectionism. The trade disputes he has stirred up pose a big challenge to globalization, which is based on the division of labor in the global value chain. Trump's protectionist moves would disrupt the global production network, leading to a contraction, if not dismantling, of the global value chain. In fact, he has put the global free trade system and international trade order at great risk of being destroyed.

In his one and a half years in office, Trump has not only expedited investigations by the US International Trade Commission into anti-subsidy, anti-dumping allegations under Section 337 of the Tariff Act of 1930, but also used unconventional protectionist measures, such as Section 301 and 201 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962, to order investigations against imports, including those from China, and the trade practices of other economies.

'Trump trap' versus 'Thucydides trap'

No wonder many overseas scholars are more worried about a "Trump trap" rather than the "Thucydides trap", because the former will harm not only China but also the rest of the world.

Essentially, the Trump administration's trade policies are not different in nature from those of the Barack Obama administration. But compared with Obama's trade policies, Trump's policies exhibit some new features.

First, for Trump, his "America First" policy is more important than international rules and the world trade order. Trump has been exhibiting a tendency to either take advantage of or discard the multilateral global trading system to fulfill US interests. The president's 2017 Trade Policy Agenda stresses that the efficiency of the open and multilateral trading system, built by the US itself, needs to be reassessed to realize and promote US national interests.

Apart from complaining about China's so-called restraints on foreign capital's access to some service industries, including telecommunications, banks and healthcare, the US Trade Representative has also accused China of forcing technology transfers despite China gradually opening up these industries in accordance with the General Agreement on Trade in Services of the World Trade Organization.

Second, the US administration has raised economic security to a new level, by incorporating economic and trade policies into national security, with Trump's first National Security Strategy emphasizing that economic security is national security. Declaring that the US would use all applicable tools to defend national security, Trump has said the US will adopt a zero-tolerance policy toward any move it considers unfair or harmful to the US economy.

Third, Trump is trying to weaken, even overthrow the multilateral trading system, a system based on rules that has played a central role in promoting cooperation and opening-up of trade and investment, apart from offering a stable and reliable system for WTO members to resolve trade disputes.

Evidently, the Trump administration is making all-out efforts to skirt and marginalize the WTO, most recently by saying appeals against WTO rulings should not take more than the mandated 90 days to deal with. What it has conveniently ignored, however, is that the delay is caused as the US, from time to time, has thwarted the Appellate Body from starting the procedure of selecting new judges, leading to a paralysis in the WTO's dispute-settlement mechanism.

Trump mantra: Trade good, imports bad

Fourth, Trump is trying to defend fair trade, ironically, through unilateral trade sanctions. The Trump administration has ordered an estimated 94 investigations into so-called unfair trade practices involving dozens of countries in just one and a half years, a year-on-year increase of 81 percent. In fact, the fair trade principle advocated by Trump stresses a kind of equality that promotes a unilateral (as opposed to multilateral) open market and regards trade beneficial but imports harmful.

Generally speaking, the fair trade Trump demands mainly constitutes of even tariffs and competition on an equal footing. Yet the disparity in tariff rates among WTO member states is largely attributable to multilateral trade negotiations. More important, uneven tariffs have enabled smaller economies at a primary stage of development to enter the global trading system.

Since different countries are at different development stages, and have different economic scales, production factors and political sensitivity toward trade liberalization and tariff policies, it is practically impossible to fix a unified tariff rate, which Trump effectively demands.

So, what is the truth behind the uneven Sino-US trade tariff rate? This can be better explained using hard data, instead of selectively ignoring unfavorable facts like the Trump administration has been doing. China's actual trade-weighted average tariff rate is 4.4 percent, which is almost the same as that of developed economies, including Australia that has a trade-weighted average import tariff rate of 4 percent and the European Union 3 percent.

Correspondingly, more than 3,335 of the US' most-favored nation tariff rates are higher than 5 percent and 1,120 above 10 percent.

Also, to prevent others from catching up, the US has invoked more than 125 Section 301 investigations since 1974, causing significant damage to other economies－the EU has faced 27 investigations, Japan 16, and Canada 14.

In January 2017, the US President's Council of Advisors on Science and Technology recommended in a report titled "Ensuring Long-Term US Leadership in Semiconductors" that the US restrain the development of China's technology industries because China's rise in the field of semiconductors posed a threat to the US.

China's high-tech sector a key target

Besides, the US is attempting to thwart the Made in China 2025 plan by launching more Section 301 investigations. And the 578 high-tech products on the US' sanctions list against Chinese imports, which account for 43.36 percent of the total number and 56.15 percent of the total amount of high-tech products, show the US is indeed trying to contain the development of China's high-tech industry.

Trump also is seeking to restrict Chinese investment in the US' high-tech sector, by extending the power of the Committee on Foreign Investment in the US and accelerating the legislation procedure of the Foreign Investment Risk Review Modernization Act.

Do we need more evidence to prove the US is the most potent destructive force in the global market and technology competition?

Furthermore, Trump seems to be preparing to take new measures in the escalating Sino-US trade conflict to restrict Chinese enterprises from investing or acquiring US companies in strategic industries listed in the Made in China 2025 plan, by using the International Emergency Economic Powers Act.

And as part of its new tax reform, the Trump administration plans to prevent US companies from transferring their operating activities, high-value patents, copyright and trademarks to low-tax countries. Particularly noteworthy is a provision in the Senate version of the tax reform plan, which says a tax of 13.1 percent would be levied on global intangible low-taxed income. The move is aimed at foiling the efforts of US companies such as Apple, Google and Qualcomm to transfer their technologies to or conduct innovative cooperation with companies in other countries.

Trump is trying to instigate a trade war without realizing, rather refusing to accept, that a trade war will hurt all and sundry, including the US. The challenge for and obligation of the rest of the world is to find a way, and find it fast, to safeguard the multilateral trading system and protect it from the assaults of Trump Inc.

By Zhang Monan China Daily. The author is a researcher at the China Center for International Economic Exchanges.

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Friday, June 29, 2018

Goldman Lunch at Taste Paradise Sets Table for 1MDB Money Probe

https://www.bloomberg.com/news/videos/2018-06-28/goldman-bankers-in-focus-in-1mdb-money-probe-video

https://youtu.be/tW9Q7v8pioY

Low Taek Jho and an official from 1MDB had hired Goldman Sachs Group to underwrite the US$1.75 billion bond offering.

SINGAPORE: In a private dining room at Singapore's Taste Paradise restaurant, over a meal of abalone and suckling pig, two Goldman Sachs Group Inc bankers were explaining a US$1.75 billion bond offering to six executives of a Swiss bank.

It was early 2012, and joining Goldman bankers Roger Ng and Tim Leissner that day were a young Malaysian financier named Low Taek Jho and an official from state investment fund 1Malaysia Development Bhd, known as 1MDB, which had hired the New York bank to underwrite the bond sale.

Now, people familiar with the matter say, investigators from Singapore to the United States are looking more closely at the roles of Mr Ng and Mr Leissner, who have both left Goldman. And they're asking what happened in that private dining room named after the first emperor of a unified China, Qin Shi Huang.

In particular, they're examining how US$577 million in proceeds from a bond sale that May ended up a day later in an account at BSI SA in Switzerland - the same bank whose executives were at the Taste Paradise.

Click here for the full report: Goldman Sachs lunch at Singapore's Taste Paradise set the scene for 1MDB's money probe

The lunch, previously unreported, brought together the key parties in what has become the biggest financial scandal in Malaysia's history, involving the alleged misappropriation of US$4.5 billion of 1MDB funds. It was the culmination of numerous conversations as BSI bankers and compliance officials sought clarity on the deal.

The BSI account belonged to a British Virgin Islands entity known as Aabar Investments PJS Ltd., which US court documents say was used to siphon off about US$1.4 billion from two 2012 bond sales, including the offering discussed at the lunch.

The man who led BSI bank into the abyss

Mr Leissner, Goldman's former chairman of South-east Asia and lead banker for three 1MDB bond sales, is now barred from the world of finance in Singapore and the US.

Prosecutors in Malaysia and Singapore are turning their attention to Mr Ng, Mr Leissner's junior, who introduced several parties central to the scandal, the people said. Malaysian authorities are said to be preparing a warrant for Mr Ng's arrest, people familiar with the matter said earlier this month.

Mr Ng couldn't be reached for comment. A lawyer for Mr Leissner, Mr Marc Harris, declined to comment, as did Mr Edward Naylor, a Hong Kong-based spokesman for Goldman Sachs, and an official at EFG International AG, which acquired BSI in 2016. A representative for Mr Low did not reply to emails.

Recouping fees

The 1MDB investigation has quickened since Malaysian Prime Minister Mahathir Mohamad returned to power in May. Tun Dr Mahathir has called former premier Najib Razak, who set up the fund in 2009, a thief and made resolving the case one of his priorities. Several arrest warrants - including one for Mr Low, described by prosecutors as a key figure in the plot - have already been issued.

Dr Mahathir said in a June 22 Bloomberg Television interview that Malaysia is also seeking to recoup some of the almost US$600 million in fees Goldman made from the three deals, which were arranged by the bank's London-based unit.

"What we earned from the debt transactions reflected the risks we assumed at the time, specifically movement in credit spreads tied to the specific bonds, hedging costs and underlying market conditions," Mr Naylor, the Goldman spokesman, said last week in response to Dr Mahathir's comments.

Datuk Seri Najib has repeatedly denied wrongdoing and called the probe "political revenge."

Genteel banker

Mr Ng, a well-connected Malaysian banker, joined Goldman in 2005 from Deutsche Bank AG, where he won mandates for several bond deals. He provided an introduction to lawmakers in the state of Terengganu, which in 2009 hired Goldman to advise it on the creation of the Terengganu Investment Authority (TIA), the people said.

Mr Ng was promoted to managing director that year. At TIA, which eventually became 1MDB, Mr Ng crossed paths with Mr Low, a Malaysian dealmaker and adviser to the fund.

As Goldman won deals from 1MDB, Mr Ng and Mr Leissner forged a friendship, which extended to their wives, according to the people. Investigators are now also looking at a transfer shortly after the May 2012 bond sale of US$17.5 million to Mr Ng's wife, Malaysian lawyer Lim Hwee Bin, from Mr Leissner's former wife Judy Chan, who runs a vineyard in China, the people said. Ms Lim and Ms Chan did not reply to emails and phone calls.

Mr Ng is described by those who know him as the antithesis of a Wall Street investment banker - genteel, valuing personal ties and averse to asking hard questions. He was content letting his boss champion the 1MDB deals. Mr Leissner, who arrived late at the 2012 lunch and left early to catch a flight, made most of the presentation, leaving Mr Ng and Mr Low to fill in the gaps, according to the people familiar with the meeting.

While Mr Ng played an important role facilitating the US$1.75 billion bond deal, dubbed Project Magnolia, he wasn't involved in the two other bonds Goldman underwrote for 1MDB, the people said. Mr Ng left the bank in 2014, a few months before the missing 1MDB funds became public.

Now managing director for Asia at energy-drinks company Celsius Holdings Inc, where Mr Leissner and his current wife Kimora Lee are both investors, Mr Ng has been barred from travelling by the Malaysian Anti-Corruption Commission, the people said.

He and his wife live in a gated community in Damansara Heights in Kuala Lumpur, where houses sell for RM5 million (S$1.7 million) to RM25 million.

Mr Ng joined Boca Raton, Florida-based Celsius in 2016, the same year Mr Leissner became co-chairman of the board. Mr Leissner resigned in May 2017, though he remains one of Celsius' largest shareholders. Hong Kong billionaire Li Ka Shing and Mr Russell Simmons, the former husband of Mr Leissner's current wife, are also investors.

Ms Megan Bell, a spokesman for Celsius, declined to comment.

BLOOMBERG

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