Anwar conveys interest to Brazilian president and ‘will go through the process’
BUKIT MERTAJAM: Malaysia will seek to join the BRICS (Brazil, Russia, India, China and South Africa) intergovernmental organisation, says Datuk Seri Anwar Ibrahim.
The Prime Minister said he had conveyed Malaysia’s wishes to Brazil’s President Luiz Inacio Lula da Silva.
“We (Malaysia) will go through the process to enable the country to join the organisation. For the past two months, the Foreign Ministry has conducted a study on our policy before deciding to join BRICS.
“I have spoken to the President of Brazil about our wish,” he said after attending a gathering for local residents in Mengkuang Semarah here yesterday.
Anwar was earlier quoted as saying that Malaysia would begin the formal procedures to join BRICS.
In an interview with Shanghai-based news site Guancha, Anwar said Malaysia was now awaiting the final decision and feedback from the South African government.
On the ground: Anwar getting friendly with the children who attended the qurban ceremony with the Prime Minister at Masjid Jamek Cerok Tokun Bawah in Bukit Mertajam, Penang. — Bernama
BRICS was originally founded as BRIC, with the four original members being Brazil, Russia, India and China. It held its first summit in Yekaterinburg, Russia, in 2009.It was renamed BRICS when South Africa joined in 2010.
The group now comprises Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, the United Arab Emirates and Saudi Arabia.
Together, they make up about 30% of the world’s land surface and 45% of the global population.
The grouping, originally set up to highlight investment opportunities, has evolved into a geopolitical bloc where members meet annually at formal summits.
In July 2014, BRICS created a US$100bil (RM471bil) New Development Bank with a currency pool worth over another US$100bil.
Since 2012, it has been planning an optical fibre submarine communications cable system, known as the BRICS Cable.
During the summit in 2023, BRICS members committed to studying the feasibility of a new common currency.
To date, 15 summits have been held with Russia scheduled to hold the next one in Kazan, Russia, in October.
‘We do not have a problem with China’: Malaysian Prime Minister Anwar Ibrahim
MELBOURNE: As a “fiercely independent” nation, Malaysia will not be dictated to by anyone over its relations with China or any of its important neighbours, says Datuk Seri Anwar Ibrahim.
“While we remain an important friend to the United States, Europe and here in Australia, that should not preclude us from being friendly to one of our important neighbours, specifically China,” the Prime Minister said.
“We are fiercely independent. We do not want to be dictated to by any force.
“If they have problems with China, they should not impose them upon us. We do not have a problem with China,” Anwar said in a joint press conference with Australian Prime Minister Anthony Albanese during his official visit to the country yesterday.
Asked about how Sinophobia manifested itself and its effect on the region, Anwar replied that Malaysia upholds an “open trading policy to encourage investments from foreign countries.”
“They have levied some criticisms against us for giving additional focus to China. Right now, China seems to be the leading investor in Malaysia.
“Cumulatively, it’s still the United States of America,” he added.
On Feb 27, Anwar had decried “China-phobia” among US and Western allies in an interview with the Financial Times in the United States, questioning why Malaysia would “pick a quarrel” with China, its largest trading partner, in response to US criticism of Malaysia’s ties with Beijing.
“Why must I be tied to one interest? I don’t buy into this strong prejudice against China, this China-phobia.”
Calling China an important neighbour, he said Malaysia would give priority to enhancing relations with Beijing in terms of trade, investment and culture.
Anwar, who is in Australia with his wife Datuk Seri Dr Wan Azizah Wan Ismail and several ministers and leaders, will attend two major programmes – the Malaysia-Australia Annual Leaders’ Meeting and the Asean-Australia Special Summit.
Warm welcome: Anwar shaking hands with Albanese at Government House in Melbourne, Victoria. Looking on is Governor of Victoria, Margaret Gardener. — Bernama
On the Palestinian-Israeli conflict, Anwar lauded the Syrian government for supporting the call for a ceasefire and enhancing media efforts in Gaza.
“The consensus is in calling for a ceasefire and good humanitarian support, and probably avoiding the contentious issues between Palestine and Israel. At least for now, it is to cease fire and provide humanitarian assistance.”
Albanese also reiterated his call to end civilian suffering through a humanitarian ceasefire, the release of hostages, and a two-state political solution for Palestinians and Israelis to live with security and stability.
On the 10th anniversary of flight MH370, which went missing on March 8, 2014, Anwar said Malaysia would not hesitate to renew the search for the aircraft if there was “compelling evidence.”
“We will be glad to reopen (the search) because I don’t think it’s a technical issue. It is an issue affecting the lives of people, and whatever needs to be done must be done,” he said.
Both Anwar and Albanese also agreed that Malaysia and Australia would like to achieve more growth in trade and economic relations, especially in green energy and education.
“There’s a real potential for further institutional investment from Australia into Malaysia as well, with universities and tertiary education being a real prospect.
“Australia remains an important supplier of LNG to Malaysia. We have so much in common in our economies that is quite complementary,” Albanese said.
He also said Australia was focused on this region despite receiving critical commentary about it sometimes.
“We make no apologies for our focus being on South-East Asia in the Indo-Pacific because this is where our future economic prosperity will be determined.
“We’re living in this region, the fastest-growing region of the world. What that presents is an enormous opportunity for both our nations,” he said.
Anwar replied that Malaysia was committed to facilitating all avenues that both countries could explore – including renewable energy, green technology, digitalisation, food security and education opportunities involving top Australian institutions.
During China's two sessions, much attention is often paid to the country's GDP growth target. However, it is crucial to look beyond the numbers and understand the implications of new policies and measures to address economic challenges.
We also hope that the Philippines' expression of "hope for a peaceful resolution to the maritime disputes with China" is not just a diplomatic rhetoric shifting the blame onto China
2023 will be remembered as a tipping point year when almost all mega-trends of finance, technology, trade, geopolitics, war and climate heating showed signs of acceleration in speed, scale and scope.
You can call this a state of permacrises, a series of cascading shocks that seem to be building up to a bigger shock sometime in the future.
In finance, the year began with the collapse of Silicon Valley Bank on 10 March 2023, followed by Signature Bank. The Fed and FDIC (Federal Deposit Insurance Corporation) acted fast to guarantee all deposits to stop what is now called “Twitter Deposit Runs” against banks. In Switzerland, Credit Suisse was taken over by UBS on 19 March, after the bank lost nearly US$ 75 billion worth of deposits in three months. Swiss financial credibility was hurt when Credit Suisse AT1 (Tier One bonds) bond-holders became outraged that they should suffer write-downs ahead of equity holders.
Although prompt action by the Fed and Suisse financial authorities averted global contagion and restored calm to financial markets, the Fed hiked interest rates four times in 2023 to 5.25-5.5% to tackle inflation. This month, gold prices touched a record high of US$2,100 per ounce, signalling anticipated inflation abatement, but escalated geopolitical tensions.
In technology, 2023 marked the seismic arrival of generative artificial intelligence (AI), through the public launch of ChatGPT in November 2022. Commercialized AI is considered the next big thing after the internet, sparking off a US tech stock rally, led by the Magnificent Seven companies in AI-related software and hardware. The rally averted a year of portfolio losses in financial markets hurt by interest rate hikes.
In trade, the latest UNCTAD Global Trade Update found that global trade will shrink by 5% to US$ 30.7 trillion in 2023, with trade in goods declining by nearly US$2 trillion, whereas trade in services would expand by US$500 billion. The outlook for 2024 is pessimistic because trade issues are now geopolitical, rather than purely market-driven. Global supply chains are either decoupling or de-risking to avoid possible sanctions which have been imposed for geopolitical reasons.
Geopolitics dominated headlines in 2023, as diplomacy played second fiddle to the militarization or weaponization of everything.
The biggest risk faced by businesses today is national security risk, in case companies or financial institutions are caught in geopolitical tit-for-tat arising from binary differences in values. Where national security is concerned, the business must bear all the costs of supply chain restructuring with no questions asked, or face possible existential shutdowns.
War broke out in Gaza/Israel In October with a scale of civilian slaughter more horrific and intense than the Ukraine war, which began in February 2022. The latest war count to June 2023 by The Armed Conflict Survey 2023 (1 May 2022–30 June 2023), showed global fatalities and events increasing horrendously by 14% and 28% respectively.
The authoritative Stockholm International Peace and Research Institute (SIPRI) reported that 56 countries were involved in armed conflict in 2022, 5 more than in 2021. Three (Ukraine, Myanmar and Nigeria) involved 10,000 or more estimated deaths, with 16 cases involving 1000–9999 deaths. Expect more conflicts when natural disasters hurt food, water and energy supplies.
As 100,000 or so delegates leave the United Arab Emirates at the end of the COP28 this month, the UN painted an upbeat tone that the Conference marked the “beginning of the end” of the fossil-fuel era. Scientists confirm that we have already passed the point of being able to limit carbon emissions for the average global temperature to remain below 1.5 degrees Celsius above pre-industrial levels. Most studies show that if most governments fail to meet their current commitments to NetZero, the planet will be struggling with temperatures above 2 degrees Celsius, meaning more natural disasters, rising seas and/or migration/conflicts. Every three weeks, the US has experienced at least one natural disaster costing more than $1 billion in damages.
As one cynic said, natural disasters are where the rich just pay in money, but the poor pay in their lives.
Putting all these mega-trend micro-disasters together suggests that a mega-system disaster may be on the cards. Historically, these seismic-scale disturbances are settled through a massive recession, like the 1930s Great Depression, or wars, which wipe out debt and make everyone poorer.
So far, the world has neglected to address these looming issues by either denying or postponement - printing more money and incurring more debt. Painkillers do not fix structural imbalances.
As my favourite poet TS Eliot said, the world ends not with a bang, but with a whimper. The world is in permacrises, with no one fully in charge. Democratic governance is in flux when no one can agree on the problems, let alone the solutions.
2024 will see some decisive but messy elections, especially in the US where both Presidential candidates may either be impeached or convicted by then. This cannot auger well for everyone, because 2023 marks the turning point when the US lost the respect of the Global South over its catastrophic handling of Ukraine and Gaza, both of which will be fought to the last Ukrainian or Palestinian. The morality of allowing other people to fight and die for one’s benefit shows not hypocrisy but hegemonic-scale cowardice.
The bottom line is that there is no shortage of technology or money to deal with the global existential threats of climate change and social imbalances. We cannot align policy intent (what politicians say they will do) with the reality that current policies are not delivering.
If man-made or natural calamities are looming, do we mitigate or adapt? On a single planet, we can run but not hide. So each of us must decide to do what we can, rather than relying on politicians to fix themselves, let alone our problems.
There is a wise saying about Christmas charity: give with warm hands. Do that now, or we will be giving with boiled hands or none at all.
US debt ceiling impasse and a default’s impact on Malaysia remains a concern
US debt issue may affect global demand
PETALING JAYA: With the United States currently being embroiled in a debate as to whether it should raise its debt ceiling before the June 1 deadline, concerns over the impact on Malaysia of the world’s largest economy defaulting on its borrowings were understandably raised among certain quarters.
This is all the more relevant when one considers the fact that the United States is Malaysia’s third-largest trading partner, with World’s Top Exports reporting that Singapore, China, the United States, Japan and Hong Kong contributing to more than half of Malaysia’s export revenue – 51.8% to be exact – in 2022.
The website also revealed that the United States accounted for US$38bil (RM173.5bil) or 10.8% of Malaysia’s export income in 2021, again behind only Singapore at 15% and China 13.6%.
Thus, it is not difficult to understand the oft-used adage, “When the US sneezes, the world catches a cold”, including of course, Malaysia.
Chief economist for HSBC Global Research Frederic Neumann had remarked on Monday that should the debt ceiling issue be drawn out of proportion, it could lead to a depression of US growth, and adversely impact Malaysian exports stateside, possibly even reducing global demand because of an increase in financial uncertainty.
The current debt ceiling is known to be at US$31.4 trillion (RM143.4 trillion), and reports from yesterday indicated that a resolution could be imminent.
Shedding more light on the matter, Centre for Market Education chief executive Dr Carmelo Ferlito said the debt ceiling can be raised again, but only if it can be voted through the House of Representatives, which has a Republican majority.
“The Republicans are trying to use the deadline to pressure President Joe Biden to agree to spending cuts.
“On April 26, the House approved a bill to raise the debt limit by US$1.5 trillion (RM6.85 trillion), but only on the condition that spending would be cut to 2022 levels and then capped at 1% growth per year,” he told StarBiz.
A simple analogy to illustrate the ceiling standoff is the case of a parent providing a teenage child with a credit card.
If the teenager exceeds the spending limit, and asks the parent for an extension of credit, it is only natural for the parent to go over the spending habits of the child before deciding to provide more credit, which has to be repaid.
If the ceiling is not raised and the US officially defaults, Ferlito said the consequences for other economies – including Malaysia – should be looked at more in the light of a general financial turmoil that the default could cause rather than the more immediate link with American bonds that firms or governments may have.
“We do not see direct repercussions on Malaysia; rather, we foresee indirect effects in case of (a US) default, coming from a global financial turmoil,
He explained: “We do not see direct repercussions on Malaysia; rather, we foresee indirect effects in case of (a US) default, coming from a global financial turmoil.
“If there is a default, which is doubtful, there will be a financial shock and the entity of such a shock will determine how much it would impact Malaysia.”
He elaborated that a potential default and its effect on an exporting country like Malaysia can be seen as two separate phenomena, a sovereign debt default; and the business relationship between private entities.
Ferlito added: “Even if the US defaults, private companies can still transact independently from the scale of the mutual business relationship. What we have to fear more are the indirect consequences.”
Economists at Coface Services South Asia-Pacific Pte Ltd, Bernard Aw and Eve Barre, believe a breach in the debt ceiling would result in outlay cuts currently funded with borrowing while the US dollar would weaken, elevating yields.
“Such a default would also have an impact on global financial markets, which rely on the dollar as the world’s primary reserve currency and as a safe asset.
“For Asian exporters, a weakening of the dollar against their currencies would dampen their competitiveness, including for Malaysia as the United States represents its third-largest export market up to 2022,” they told StarBiz.
Although acknowledging that a negative impact on the US economy from reducing public spending would depend on the extent of those cuts, they pointed out that if an agreement leads to deep spending decreases, economic growth for the United States could be slower than the already sluggish 1.2% that Coface is forecasting for 2023.
Aw and Barre opined: “This would have a direct impact on Malaysia by reducing US demand for Malaysian goods but also on foreign investment.
“In 2021, the United States was the first source of foreign direct investment flows to Malaysia, accounting for roughly a third of the total.”
On the flipside, they projected that sharp cuts in US public spending are unlikely to be approved by the Senate, as it is controlled by the Democrats.
Meanwhile, approaching the problem from an investment perspective, chief investment officer for Tradeview Capital, Nixon Wong, echoed the economic view that a US default would have global ripple effects, including on the FBM KLCI.
“A default on US federal debt would disrupt imports of electronics and manufactured goods from Chinese factories to the United States, resulting in slower growth of orders in the entire supply chain that includes Malaysia.
“Reduced spending in the United States would lead to slower aggregate demand and import growth globally,” he said.
The effect could likely be seen on export-oriented companies on the local bourse, he said, including manufacturers of electrical and electronic and rubber products, as well as in the producers of metal, optical and scientific equipment.
He added that although Malaysia’s trade volume with the United States may be smaller compared to China, the repercussions from reduced US spending would still impact Malaysia’s exports, whether directly or indirectly.
History has shown that American political leaders have always managed to raise the debt limit before it becomes a crisis, and it is likely that this pattern will continue, Wong said.
“While there are debates and partisan divisions in Congress, it is expected that Republicans will seek spending cuts before supporting the raising of the debt ceiling.
“After all, the main agenda is to prevent a catastrophic event or severe fallout in the United States and global financial markets,” he observed.
US President Joe Biden
touted that the debt-ceiling deal will help the US avoid economic
collapse, but experts warn that the US debt-ceiling crisis is a systemic
problem that will erupt periodically, and that rising US debt is
severely undercutting the credit of US assets and status of the US
dollar.
A Chinese official on Tuesday warned of the significant spillover effect of US domestic policies and urged
Washington to avoid passing on domestic risks to the rest of the world just to protect its own interests. The comment came after US leaders
failed to reach a deal on the debt ceiling issue, with the deadline to avert the first-ever default approaching rapidly.
“This is all part of a broader discussion of possibilities for reducing the use of the dollar. This discussion is not new and has happened in the past but it appears to be more serious now and the actual changes are taking place,” - Prof Geoffrey William
Of late, the hot topic that is rapidly gaining pace is many countries, including Malaysia, are mulling the idea of reducing their trade dependency on the US dollar.
Prime Minister Datuk Seri Anwar Ibrahim has also lent heavy support to the thought of reducing Malaysia’s dependency on the greenback in terms of attracting foreign direct investments into the country, as well as in bilateral trades not involving the United States.
This came as Anwar announced on Tuesday that investments worth about RM170bil by China-based companies would be kicking off next month.
The prime minister has also last week proposed the setting up of an Asian Monetary Fund (AMF), stressing the need to lower reliance on the greenback as well as the US-backed International Monetary Fund (IMF), an idea that he himself reported has been well received by Chinese President Xi Jinping, who is open to discussing its implementation.
According to Geoffrey Williams, economics professor at Malaysia University of Science and Technology (MUST), what Anwar was saying is in line with a growing group of international leaders seriously questioning the role of the dollar and the US/European Union systems, hence the prime minister’s comment is a change of tone with possible action points.
“This is all part of a broader discussion of possibilities for reducing the use of the dollar. This discussion is not new and has happened in the past but it appears to be more serious now and the actual changes are taking place,” Williams told StarBiz.
He concurred with Anwar’s view that bilateral trade between two nations could use the currencies of the countries involved instead of the dollar, calling it “feasible” and is in fact growing in popularity.
“Most commodities are priced and traded in dollars but direct sale of oil between Russia and China as well as India is circumventing that arrangement.
“There is an increasing probability this will extend to more countries and more commodities,” Williams said.
Some parties have even suggested that Anwar may not be taking any sides in the global balance of power between China and the United States, despite his preference for dollar independence.
However, uneasiness remains on the geopolitical implications of the suggested move and how it will affect relationships between countries such as Malaysia and the United States as well as its allies.
While acknowledging such concerns, Williams said: “At the moment, many countries are understandably questioning whether the dollar dominance is beneficial to them and if better exchange arrangements could be found.”
Meanwhile, economist and chief executive at Centre for Market Education, Dr Carmelo Ferlito, said that while countries can ponder over better options in a multipolar world, alternatives need to be weighed in with painstaking care.
Ferlito said the appearance of the euro in 1999 was met with a warm welcome since it forced the dollar to face a competitor characterised by stronger monetary discipline, and that the emergence of something new in the East, if properly conceived, could strengthen the path towards monetary stability.
However, he added: “If global currency competition were to move in the right direction, the path will remain incomplete without an actual competition between currencies within countries.
“A competition that enables individuals to choose the currency to be used for their daily transactions, favouring the emergence of a virtuous competition among currencies toward stability.
“Our point is thus that the new and vibrant developments in the international monetary scene can be a source of benefit – rather than spawn geopolitical tension – only if accompanied by a true opening of national economies to competition among available currencies.
A novel Asean or BRICS (Brazil, Russia, India, China and South Africa) currency could become a strong alternative
“In this way, a novel Asean or BRICS (Brazil, Russia, India, China and South Africa) currency could become a strong alternative not as the result of a political will of power but simply as a consequence of market competition.”
On the setting up of an AMF, MUST’s Williams said such an idea is definitely attainable but would require participation across many Asian countries, especially to provide the finance and to agree to the terms on which access to that finance is made available.
As such, he remarked that it is not just a financial matter but also a geopolitical one.
“The main issue is who will fund the AMF and what will be the contribution rates for each member.
“It is likely that most will come from China, unless Japan and South Korea joins in. Otherwise most Asian countries are too small to contribute much.
“Ultimately, this will be driven by economic cost-benefit considerations and whether non-aligned countries like Malaysia can maintain good relationships with all parties without using the dollar,” he noted.
On the other hand, the move to bilateral currencies for trade and investment between two countries, while feasible, would be more at risk to exchange fluctuations and liquidity issues, Williams said, adding that this could be improved by a switch to multiple currency options.
Of note, and on something that has not been touched by Anwar, the economics professor said the dollar still provides stable, reliable and secure financial systems such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
“Cybersecurity is essential and the questions of geopolitical stability also arise but these may not be solved by breaking up international systems into smaller regional systems,” he said.
There certainly has been an influx of recent activities geared towards reducing the use of the dollar in international trade, such as the discussions between Brazil and Argentina to create a common currency or Saudi Arabia declaring its openness to trade in other currencies other than the greenback for the first time in 48 years.
But the fact that the International Monetary Fund data shows central banks worldwide are still holding about 60% of their foreign exchange reserves in dollars as at the fourth quarter of 2022 literally means it is extremely unlikely the currency would be losing its status as the global reserve unit anytime soon.
On the ground: Anwar getting friendly with the children who attended the qurban ceremony with the Prime Minister at Masjid Jamek Cerok Tokun Bawah in Bukit Mertajam, Penang. — Bernama
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