US making trouble & provocation out of nothing; China warns US Navy in South China Sea

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The USS Lassen on Oct. 27 sailed within 12 nautical miles of artificial islands built and claimed by China. © AP

By sending its warship within 12 nautical miles of China's isles in the South China Sea, the United States is raising tensions in the waters and sending a dangerous signal to the region.

On Tuesday, the US warship USS Lassen illegally entered waters near Zhubi Reef, part of China's Nansha Islands, without the permission of the Chinese government. Such a blatant provocation was naturally met with strong condemnation from China, which deems the US move as a threat to China's sovereignty and security interests.

To justify this reckless move, high-ranking US officials have been raising their voices recently accusing China of militarizing the South China Sea and claiming the US operation is to exert "freedom of navigation" in the waters.

These are just pretexts the US is using to mislead the public and confuse right with wrong.

China has repeatedly said it has no intention of militarizing the Nansha Islands in the South China Sea. All its deployments at the islands and reefs are necessary, limited and defense-oriented. As a nation that relies heavily on the sea lanes in the waters, militarization would threaten, instead of serving, its interests in the region.

As to freedom of navigation and overflights in the waters, they have never been a real issue of concern. China has reiterated many times that its reclamation work is primarily for civilian purposes and does not in any way hamper freedom of navigation.

Yet, these words have apparently fallen on deaf ears. By challenging a threat that does not exist, the US move is creating a bigger and more real threat itself. By flexing its muscle on China's doorstep, the US is using coercion to challenge China's legitimate territorial claims.

The US warship displays exactly who is the real hand pushing the militarization of the South China Sea.

The US' so-called freedom of navigation operations also go against its own public statements that it takes no stand over the territorial claims in the South China Sea.

The US calls itself a Pacific country and claims it too has a stake in peace and stability in the region. If that is the case it should be playing a more constructive role in the waters, rather than stirring the waters at the risk of regional peace and stability.

If the US still deems itself a responsible power, it should refrain from making further provocations. - China Daily

China warns US over incursion


http://english.cntv.cn/2015/10/27/VIDE1445955726138180.shtml 

File photo: China's Lanzhou Missile Destroyer.

• Chinese warships gave warnings to US navy ship

• Chinese warships gave warnings to US navy ship. Chinese Defense Ministry has also slammedUS over its warship patrol near Zhubi Reef. It says two Chinese warships, Lanzhou guided missile destroyer and Taizhou patrol ship, gave warnings to US warship USS Lassen. The ministry has lodged serious representations...
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China's foreign ministry on Tuesday expressed "strong discontent" over a US warship's "illegal entry" into waters near a reef in the South China Sea, threatening to take whatever measures are necessary against any deliberate provocations.

Experts said the announcement represented a warning from China, but that the nation is not willing to see an escalation into military conflict. Experts called for both parties to resort to legal and diplomatic approaches.

According to a Reuters report on Tuesday, one US defense official said the destroyer USS Lassen sailed within 12 nautical miles of Zhubi Reef.

A second defense official said the mission, which lasted a few hours, included Meiji Reef.

Earlier this year, China revealed that it was building civil and military facilities over both reefs, which are part of its Nansha Islands.

The operation was approved by US President Barack Obama, CNN reported on Tuesday, citing an anonymous official as saying that the mission was "routine."

The US warship was monitored, tracked and issued a warning, said Lu Kang, a spokesperson for the Ministry of Foreign Affairs, on Tuesday

A guided-missile destroyer and a patrol boat gave warnings to the US warship, Yang Yujun, a spokesman for the Ministry of National Defense, said on Tuesday.

He said the reoccurrence of similar incidents should be prevented in the future.

China will continue to watch the situation and "do whatever is necessary," Lu said during a regular press briefing in Beijing.

Stressing that China's sovereignty over the Nansha Islands and its adjacent waters is "irrefutable," Lu said China is prepared to respond to any deliberate provocation by any country and urged the US to "immediately correct its wrongdoing."

Lu said that China is firmly opposed to any action that harms China's sovereignty and security in the name of freedom of navigation.

China's Vice Foreign Minister Zhang Yesui also summoned US Ambassador Max Baucus on Tuesday to protest against the US naval patrol, calling it "extremely irresponsible."

'Predictable' act

The dispatch of the US warship was predictable since the US had reiterated the plan several times, Zhu Feng, a professor of international security at Nanjing University, told the Global Times on Tuesday. He said the US had to follow through with its action to maintain credibility with its allies.

The US will take such measures against any country that is considered by the US as curtailing its freedom of navigation, in a bid to show that it aims at defending the right, an expert at the Academy of Military Science, who asked for anonymity, told the Global Times.

A US defense official told Reuters that "It's not something that's unique to China."

US warships have defended this right against almost all coastal countries, a research fellow at the Chinese Naval Research Institute, who asked not to be named, told the Global Times on Tuesday, citing the passage of US warships from the Mediterranean into the Black Sea during the Cold War as an example.

Given the current situation, the US is unlikely to let go if its demands are not met, said the research fellow at the Chinese Naval Research Institute.

The second US defense official said additional patrols would follow in coming weeks and could be conducted around features that Vietnam and the Philippines have built up in the Nansha Islands, according to Reuters.

Probe reaction

"The US move is more of a probe of China's reaction rather than a showdown," Zhu said, adding that China needs to have a well-considered plan in response, such as getting ready to monitor US warships or planes, or driving them off when necessary.

But China should move carefully to avoid military conflict, he said.

The expert at the Academy of Military Science said the passage of the USS Lassen is the least serious move available to the US, compared with other options like conducting military drills and joint passage of Japanese and Philippine warships.

China also made a minimal response, he said.

Unlike the intense relationship between the US and former Soviet Union, the US is also worried that radical military actions would harm Sino-US cooperation, the research fellow at the Chinese Naval Research Institute added.

The research fellow suggested setting up a "security alert zone" by China in the controversial waters in order to prevent further conflicts.

China and the US in September signed two documents on "notification of military crisis" and "encounters in the air" in a bid to avoid military conflicts caused by miscalculation over the seas, according to the Xinhua News Agency.

It has to be noticed that China has already carried out construction work in the area. This is the concrete achievements Beijing has gained. Completing building the islands still remains as a major task for China in the future. At present, no country, the US included, is able to obstruct Beijing's island reclamation in the region.

In face of the US harassment, Beijing should deal with Washington tactfully and prepare for the worst. This can convince the White House that China, despite its unwillingness, is not frightened to fight a war with the US in the region, and is determined to safeguard its national interests and dignity.

Beijing ought to carry out anti-harassment operations. We should first track the US warships. If they, instead of passing by, stop for further actions, it is necessary for us to launch electronic interventions, and even send out warships, lock them by fire-control radar and fly over the US vessels.

Chinese should be aware that the US harassment is only a common challenge in China's rise. We should regard it with calm and be confident of our government and troops. It is certain that the Chinese government, ordering the land reclamation, is able and determined to safeguard the islands. China is gradually recovering its justified rights in the South China Sea. China has not emphasized the "12 nautical miles." It is the US that helps us to build and reinforce this concept. Then, it is fine for us to accept the "12 nautical miles" and we have no intention to accept 13 or more than 13 nautical miles.

By Chen Heying Source:Global Times

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Assalamualaikum: Islamisation of Malaysia

The role and impact of Islam in Malaysian politics

In his latest book, former law minister and current opposition party member Zaid Ibrahim explores the nature of political Islamisation and what it means for Malaysia. Photo: The Star/ Izzrafiq Alias

Assalamualaikum: Observations On The Islamisation Of Malaysia

Zaid Ibrahim is quite a character. Lawyer-turned-government-minister-turned-opposition-party-member, and he had time to head his own political party on top of that. That’s quite a CV. That’s someone worth having a teh tarik with.

For the time being, we have to make do with Assalamualaikum, his latest collection of essays exploring the contradiction between the laws of God and the laws of man in Malaysia. Subtitled “Observations on the Islamisation of Malaysia”, it gives a strong indication which side of the fence he sits on.

As with most books, it starts at the beginning, with a brief history of Islam in Malaysia. He focuses on some history in there, and says that Malaysia has now adopted “political Islam”, influenced by a Saudi Wahhabism style. He then contrasts this with practices and policies in other Muslim countries, some of which would also claim to be Islamic despite also seeming more liberal.

The impact of this politicisation is explored further in the second chapter entitled “Education, culture, economy”. It is a sober (some may say “cynical”) view about what happens when you mix religion and politics, and his points are fired as a broadside. “In Malaysia,” he writes, “Islamisation has been the main cause of the deterioration we have seen in our education standards.”

On the cultural transformation in Malaysia, he bemoans the loss of local cultures and festivals since they have been deemed “not Islamic”. He writes, “(Islamists in Malaysia) think that if Malays can remove all traces of the past and embrace Wahhabism, then their world will be truly Islamic. This is what Pol Pot in Cambodia believed too.”

The third chapter is on Shariah law in Malaysia and its apparent clash with the Federal Constitution. Being a lawyer, he delves into some detail in what he sees as a deterioration of the ideals laid out in the Federal Constitution, aided by the willingness of the courts to bow to their political masters (despite the theoretical separation of powers that exists). He posits that Islam has been used as a political tool, writing “it is clear that in Malaysia, the authorities have the power to use Islam as a means of controlling Muslims”.

By the time we reach the book’s conclusion, he presents a sentiment that could apply to any religion: “Islam is perfect, but humanity is not”.

As it is, this book gives a good overview of the role and impact of Islam in Malaysian politics, even if it is intrinsically biased. Unfortunately, in the same way that the author criticises some Islamists as being broad in their understanding but without much depth, Assalamualaikum doesn’t really give the reader great insight into its issues. Apart from some ideas in the chapter on law, things are just boldly stated and are expected to be taken at face value.

Perhaps this apparent brevity is understandable given that it is a collection of essays that cover many topics quickly. But what is truly unfortunate is that it feels like we have not been given the full benefit of the author’s political experience.

This is somebody who has stood on both sides of the political divide, and was even the Law Minister at one point. He would have been privy to a large number of internal debates on the issues and might even have helped shape policy.

From my experience working on projects involving government agencies, what most people understand of how public policy is formed is almost always wrong. What can seem callous and short-sighted is in fact usually tempered by a hundred factors – pressure from conflicting parties, horse-trading to gain benefits elsewhere, even sometimes just the accident of being at the wrong place at the wrong time.

Much happens out of view, and Zaid must have seen and argued about issues and policies. But he gives almost none of this away.

And when it comes to answering, “What next?” – when his experience would have counted for the most – he chooses not to say anything except to keep fighting the bad ideas and keep talking about the good ones. Apart from his encouragement to support Parti Amanah Nasional in the very last paragraph, there is nothing concrete about how to move forward.

Perhaps Zaid is silent about this because he feels constrained by decorum. Or the Official Secrets Act. Or because he has taken so many sides and seen so many contradictions, that the only opinion he can give with confidence is his own.

Perhaps this is not the last we will hear from him on the subject. I believe he has the eloquence and knowledge to better explain the state of Muslims in Malaysia than is shown in this book. I’ll happily take that, even if it is over a teh tarik.

Review by Dzof Azmi The Star

Zaid: We can be more moderate

Malaysia can be a Muslim country other Muslims can be proud of but first, that opportunity must be taken.

DATUK Zaid Ibrahim takes on critical questions with his latest book, Assalamualaikum: Observations on the Islamisation of Malaysia.

As promised in the jacket blurb, the former de facto Law Minister explores the nature of political Islamisation, its origins, its chief personalities, how it has grown and what it means for Malaysia.

Instead of introducing the religion’s true moral and ethical frameworks, he writes in the preface, Islamisation proposes “to replace them with harsh criminal punishments for Muslims whom the ulama regard as deviationists. Human rights and dignity suffer as a consequence.”

The founder of the largest law firm in the country told Sunday Star he doesn’t understand, for example, why the Syiah are ­treated as enemies of Islam and not proper Muslims, although they are allowed to perform the pilgrimage to Mecca.

“I don’t remember Islam recognising all these categories,” he says. “A Muslim is a Muslim.”

And in the Quran, he points out, “there are a lot of verses about freedom of expression, which remind people that only God knows best. We must be humble enough to accept we can be in error.”

The only way to have a vibrant Islam is to allow an interflow of ideas, he says, but Muslims in Malaysia are not allowed to give public talks about religion without tauliah approved by the Federal Government.

“Even laws of Parliament can be questioned but you can’t do that with religious authorities,” says the lawyer with over three decades of experience.

And if there’s any action taken by any religious department or the syariah courts or there’s any violation of civil liberties or improper conduct, he adds, “the civil courts will not hear anything about it on the grounds that they have no jurisdiction”.

He lists the reasons cited: Islam is the official religion. Article 121(1A) of the Federal Constitution provides that jurisdiction of civil and syariah courts is separate. And the Constitution does say that Parliament can limit some of the fundamental liberties.

“Our Federal Court is no longer willing to look at whether those limitations are reasonable,” he adds.

Since Islam is a state matter, every state is allowed to legislate on Islamic matters but, Zaid says, “there is no common definition of what is unIslamic, what is hukum syarak”.

For example, Selangor and Penang have gazetted fatwa that smoking is haram and Selangor, Pahang and Penang have issued fatwa declaring Amanah Saham Bumiputra and Amanah Saham Nasional as haram.

“There is a lack of uniformity and yet these diverse personalities controlling the state can impact on your basic liberties and basic rights,” he says.

“There has to be precision and specific meanings. You cannot say it is whatever the authorities decide, because you also have a duty to protect the Constitution, human rights and dignity.”

Coming from Kelantan, Zaid writes about Puja Umor and Puja Pantai, which were later banned.

“If you want to insulate yourself against extremism and violence like Islamic State’s,” he argues, “you must allow people that freedom to cultivate and base themselves in their culture and tradition.”

He wrote the book, he says, in the hope of encouraging “an Islam which is kind, forgiving, compassionate, wants to live with everyone in peace and cares about the welfare of others and not only personal interest. That should be the guiding force of the country.”

If that kind of Islam shaped the laws, he says, “our laws would then become more open, liberal-minded and more inclined towards encouraging freedom of thought which is what Islam, at least in its golden years, is about”.

But so far, Malaysia has abandoned its chance to showcase a truly Islamic renaissance, Zaid believes.

“We could have built a moderate Muslim country other Muslims could have been proud of, but we have not taken that opportunity.”

By Santha Oorjitham The Star

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The politics of meat

China-Britain bilateral relations in Golden Era

Putting economics first

Despite Britain’s role as the closest US ally, its leaders have surprised the world by surging forward in relations with a rising China.

FOR centuries, relations between Britain and China have been undulating, rising rather more than declining.

In that time, Britain has been more ­anxious to penetrate Chinese markets and forage for what China has to offer than the other way round.

The Queen and Chinese president Xi Jinping are driven by carriage along The Mall to Buckingham Palace Photograph: POOL/Reuters

The super-gala treatment that President Xi Jinping and Mrs Xi received in London ­during the week was not necessary to prove the point, but it helps. There was Xi, royally seated next to the Queen, in the gold-trimmed horse-drawn royal carriage parading through London and shown on television screens around the world.

The visiting presidential couple also lodged at Buckingham Palace, the Queen’s official residence, during their trip. Clearly, this was no ordinary state visit.

The Queen called the visit “a defining moment”, Prime Minister David Cameron called it “a golden era”, and Chancellor of the Exchequer George Osborne called it “a golden decade” for their bilateral relations.

An array of gilded items were spread among the vast gilt-edged dining chairs for Xi and his host, the Lord Mayor of London, at the second banquet after the Queen’s.

Gold, the auspicious colour in Chinese culture, went well with the red of the carpet and the Chinese flag.

And Britain was only too happy to oblige.

This was Xi’s first state visit, coming a full decade after his predecessor’s, Hu Jintao’s. But British leaders had been somewhat more proactive.

Only a few years ago, hiccups in relations occurred after British officials stumbled over such sensitive issues for China as the Dalai Lama. After the ruffles were smoothed over came the slew of mega business deals.

Britain wanted to ensure those deals were on and Xi’s state visit would seal them, so Osborne was dispatched to Beijing last month. To make doubly sure he made a side trip to Xinjiang, the alleged epicentre of China’s human rights violations, to talk trade rather than human rights.

China critics condemned that move. But it paid off for Britain in Xi’s high-powered four-day visit and all that it represented and contained.

On Tuesday, China’s Central Bank issued its first offshore renminbi bond in London. On the same day, Cameron appointed Chinese tycoon Jack Ma to his business advisory group. The next day, deals were signed amounting to £40bil (RM260bil), generating nearly 4,000 jobs in Britain. And this was only the beginning.

Critics tend to underrate the importance of business success for both Britain and China. They are perhaps the most enduring of the world’s major trading nations, Britain historically and China in the past and the future.

Even before becoming “the workshop of the world”, Britain had embarked on a glo­bal empire that would span centuries. It lost its sparkle after the Second World War and decolonisation.

British interest in East Asia had centred on China, particularly trade with China. Even its presence in Borneo – Brunei, Sabah (British North Borneo) and Sarawak – were only as a staging post for trade with China on sailing ships and steamships.

The British phrase “not even for all the tea in China” is a measure of one’s resistance to temptation. And tea was only one of many traded items from China.

With the colonial period, parts of China were tugged and torn by European, Russian, US and Japanese imperial powers. China fought and lost two “opium wars” and suffered unequal relations with Britain.

Then they agreed on the return of Hong Kong to China in 1997. But even decades before that date, the buzz in Britain was what would happen to Hong Kong after the “handover”.

Hong Kong had long been known as the world’s classic capitalist enclave, while in the 1990s the West still regarded China as a communist state.

Hong Kong was in quiet panic, as celebrities and stars worried what would happen to them and their work under communist rule.

Many contemplating migration purchased homes abroad from Vancouver to Kuala Lumpur. Jackie Chan bought a luxury condominium in Damansara Heights.

At the time, an Englishman from off the streets in central England put that crucial question to me: What would happen after China “takes over” Hong Kong? I replied that Hong Kong would instead take over China in many ways that mattered. Soon after 1997, Deng Xiaoping’s credo of “it’s glorious to be rich” was abundantly clear throughout the land, often excessively so.

In time, anxieties over the handover were soothed, and it ceased to be an international issue. After moving to the United States and working in Hollywood, Chan returned to Hong Kong and even began work in China itself. His trajectory has been instructive and symbolic. So his presence as an invited guest at a reception for Xi in London’s Lancaster House on Wednesday evening said it all.

While London and Beijing are only too happy to see their relations on the upswing again, their critics have been at work. They have called Britain’s grand welcome for Xi fawning and embarrassingly servile.

Western criticism comes from two broad angles: the US and Europe. Both are not without their own self-interests.

In the European Union, Germany has been an early and the most extensive investor in China. Then earlier this year, Britain stole a march on all other Western countries by signing up as an early co-founding member of the China-led Asian Infrastructure Investment Bank (AIIB). After that, other US allies joined in: several EU countries including Germany, as well as Australia, New Zealand and Singapore. The US, which tried hard to stop the trend, had only Japan and Canada as recalcitrant holdouts for company.

Many Western and pro-Western countries are happy enough to do business with China in the lead, in the process helping China grow. This is despite strategic thinkers knowing that the AIIB is also a means for extending China’s reach through Central Asia and Russia to the West.

This takes the form of the infrastructure-­heavy Maritime Silk Road and the One Belt, One Road projects offering connectivity between East Asia and Europe. They possess both economic and strategic advantages.

US critics of Britain’s close partnership with China have something of an identity crisis. They have a long list of complaints against Beijing, yet they cannot stop their own corporations doing increasing business with China.

Worse still, the glittering welcome accorded to President and Mrs Xi in London compares too favourably with the one in Washington just weeks before.

Beyond some formal diplomatic niceties, President Obama reportedly threatened to impose sanctions on China. He also remains committed to the largely military “rebalancing” in China’s backyard, while keeping China at bay with the Trans-Pacific Partnership proposal dividing East Asia.

Whether the British or US approach to working with China is better, and for whom, also depends much on which is more enduring. Britain had presided over a global empire for centuries. China, a global superpower before, has millennia of experience to draw on.

Both countries share the approach of making trade their primary purpose, with any political or military posture being secondary to protect those economic interests.

The US in contrast opts for a forward military posture abroad, with any economic interest secondary by comparison. And despite Pax Americana being only 70 years old, it is already showing signs of wear.

By Bunn Nagara, who is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia - The Star

Open, inclusive partnership exemplary for development

China's President Xi Jinping and Britain's Prime Minister David Cameron attend a joint press conference in 10 Downing Street, in central London, Britain, Oct 21, 2015.[Photo/Agencies]

President Xi Jinping's pledge that China and the United Kingdom will build a "global comprehensive strategic partnership" in the 21st century will bring China-UK relations to a new level and endow their ties with a significance that goes beyond the bilateral scope.

In his talks with British Prime Minister David Cameron on Wednesday, Xi described the upgraded China-UK partnership as opening up a golden era for an enduring, inclusive and win-win relationship that will enable the two sides to jointly create an even brighter future for their relationship.

The noticeable improvement in China-UK ties has been the result of the strong political will from both sides to transcend their differences and shore up mutual respect, reciprocal cooperation and mutual learning.

During Xi's ongoing visit to the UK, the two sides have signed a number of intergovernmental and business deals worth about 40 billion pounds ($62 billion), including an eye-catching agreement that means China will partly finance a UK nuclear plant.

This nuclear project will be China's first in the West, and according to Cameron, it will create thousands of jobs in the UK and provide reliable, affordable energy to nearly 6 million homes when operational.

Such fruitful results show China and the UK are substantiating their cooperation with concrete deals. And as Cameron has said, a strong economic relationship can withstand frank disagreements on some other issues.

With the UK pledging to be China's best partner in the West and China looking to build a golden decade with the UK, the two sides have set a good example in developing ties between a major developing country and a major Western power.

Xi has stressed the open and inclusive nature of the China-UK comprehensive strategic partnership, which means the stronger bond between Beijing and London does not target any existing alliance or partnership the two have forged with other countries.

Under the principle of voluntarism, the partnership can be expanded to include other partners so as to bring benefits to more countries.

The quick reconciliation and warming of bilateral ties would not have been possible if the two sides had not deepened their mutual understanding, built mutual trust and committed to reciprocal and meaningful interaction.

We have every reason to believe China and the UK will continue to build on the current good momentum in their relations, which will not only cater to their interests but also contribute to the common prosperity of the entire world. - China Daily

Xi trip success narrows divide with West

• 
  Dialogue 10/24/2015 President Xi visits UK

In the 1950s, China's stated aim was to surpass the industrial achievements of the UK, which however failed. Decades later, the UK welcomed Chinese President Xi Jinping with pomp and pageantry and announced the two countries were entering a "golden age." China has roughly overtaken the UK in gross GDP, although the living standards of the Chinese still lag far behind the British.

During Xi's stay, China and Britain signed contracts worth 40 billion pounds ($61.62 billion). London will become the top offshore yuan center apart from Hong Kong. The UK also adopted measures to relax visa rules for Chinese tourists. These combined give people more faith in the comprehensive strategic partnership between China and the UK.



The embrace of China and the UK with open arms primarily proves that the West's economic alliance designed to counter China does not exist or has been overthrown. Economically, the West has more noncompliance than consent across the board to challenge China. Militarily, the West has NATO at the core, but inside it is still not united enough to pressure China. China's military pressure mainly comes from the US-Japan alliance, which is trying to involve smaller countries around China to enhance the deterrence. As China's economic development has bolstered its military might, it has increasing confidence in safeguarding the country's security.

The UK seems to have distanced itself from the Western group that may threaten China and explicitly wants to befriend us. As an important member of the Western world, the UK's decision to usher its ties with China into a "golden age" has symbolic significance.

But when it comes to ideology, the old divide comes up again between China and the West. Over political and values conflicts, countries like the UK, Germany and France, which endeavor to advance their bonds with China, return to the Western formation.

The external ideological pressure is one of the thorniest issues for China currently, and has huge influence on China's domestic values debate.

Common values have been the prominent bond in the West after WWII, but it is definitely not omnipotent. The divergence on values is the biggest difference between China and the West, which requires mutual respect and will to accept. We often feel the West is arrogant and aggressive in terms of ideology, which may partly come from a sense of insecurity due to internal divergences.

The UK mirrors our own changes and informs us that the times when the outside world united to counter China have ended or never existed. But there is still a long road before disputes on ideological issues between China and the West can be solved. Yet we have more achievements and hopes in this regard than difficulties and uncertainties. Compared with the huge pressure from the West in the past, we have gone so far and clearly know our future path. - Global Times

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Sino-UK ties herald golden time with West

Buckingham Palace prepares for Xi Jinping visit President Xi Jinping's visit will also receive a warm welcome from the British...

State of Malaysian economy: to grow 4~5% in 2016, lead by domestic demand

PETALING JAYA: The Malaysian economy is expected to remain steady in 2016, with real GDP growth between 4% and 5% led by domestic demand, according to the Economic Report 2015/2016 drawn up by the Ministry of Finance (MoF).

Private sector expenditure will remain the main driver of growth with private consumption and investment expected to grow by 6.4% and 6.7%, respectively.

The government also remains committed to fiscal consolidation, with the fiscal deficit expected to further decline to 3.1% of gross domestic product (GDP) in 2016 (2015:3.2%) while the Federal Government debt level will remain manageable with the prudent limit of 55% of GDP.

Meanwhile government expenditure is forecast to expand, albeit at a moderate pace, in line with efforts to strengthen the fiscal position.

On the supply side growth is expected to be broad-based, with all the sectors registering positive growth, the MoF said.

Malaysia's external position is forecast to remain positive supported by better prospects for global growth and trade.

Against this backdrop, the nominal gross national income (GNI) per capita is expected to increase by 5.6% from RM36,397 in 2015 to RM38,438 in 2016.

With total investment surpassing savings, the savings-investment gap is expected to narrow between 0.5% and 1.5% of GNI.

The economy will continue to operate under conditions of full employment with the unemployment rate remaining below 4%.

Despite the weak ringgit, inflation is expected to remain benign attributed to low oil prices and the waning impact of GST.

For 2016, inflation is expected to range between 2% - 3%.

Slower GDP growth in 2016

THE Malaysian economy is expected to grow between 4% and 5% in 2016 as domestic demand is expected to offset the drag on the economy from a slowdown in growth in emerging markets, particularly China.

Lower commodity prices, depreciating currencies in emerging markets and volatility in financial markets will be hurdles to economic growth but that will be counterbalanced with activity by the private and public sectors..

“Strong economic fundamentals such as benign inflation and stable employment supported by accommodative monetary policy are expected to support growth,” says the report.

Private investment is expected to rise by 6.7% with higher investment by the manufacturing and services sectors.

Private consumption is expected to rise by 6.4%, aided by stable employment and favourable wage growth. In the public sector, public expenditure is expected to grow by 2.7%.

Public investment is forecast to grow by 2.3%. Public consumption is expected to increase by 3%.

The services sector is projected to grow by 5.4% and see its share of GDP increase to 54% with all subsectors posting growth.

The information and communication subsector is projected to grow by 9.6% and real estate and business services subsector by 7.1% aided by construction activity while the transport and storage subsector is projected to grow by 5% helped by the expansion in port and rail services, along with improved bus services.

Manufacturing is projected to grow by 4.3% aided by growth in advanced economies.

The agriculture sector is forecast to expand by 1.3% with improvement in the plantation sector and stronger growth in the food commodity subsector.

Production of crude palm oil is expected to grow by 1% to 20.1 million tonnes and rubber by 0.7% to 680,000 tonnes.

Malaysia is expected to register a smaller current account surplus with gross exports anticipated to increase by 1.4% led by manufactured exports.

Gross imports are expected to turn around and grow at a faster pace of 3% supported by higher public investment and capital spending in the manufacturing and services sectors.

Import duty exemption on 90 tariff lines in the manufacturing sector is expected to provide relief to about 900 companies.

Stable wage growth and employment prospects are expected to support demand for consumption goods and as import growth rise faster than exports, the trade surplus is projected to be lower at RM73.2bil of 5.9% of GDP compared with RM85.3bil in 2015.

For 2016, the transport and other services accounts are expected to remain in deficit following improved prospects for trade-related and investment activity. The surplus of the travel account is projected to grow to RM33.9bil from RM29.8bil driven by higher tourist arrivals.

Malaysia is expected to register a smaller current account surplus with gross exports anticipated to increase by 1.4% led by manufactured exports. Gross imports are expected to turn around and grow at a faster pace of 3% supported by higher public investment and capital spending in the manufacturing and services sectors.

Stable wage growth and employment prospects are expected to support demand for consumption goods and as import growth rise faster than exports, the trade surplus is projected to be lower at RM73.2bil of 5.9% of GDP compared with RM85.3bil in 2015.

The services account is expected to improve to RM11.4bil from a deficit of RM14.7bil in 2015.

With higher imports projected, the goods and services account is envisaged to post a lower surplus of RM63.7bil.

The primary account is expected to register net outflows of RM33.7bil in 2016 from RM33.2bil due to higher repatriation of profits, dividends and interests accuring to multinational corporations in Malaysia.

The secondary income account will still be in deficit amounting to RM18.7bil mainly due to sustained demand for foreign labour.

As inflows will be larger than outflows, due to the surplus in the goods and services account, the current account is forecast to be in a surplus of between 0.5% and 1.5% of gross national income.

State of the Malaysian economy



THE economy is expected to grow at a lower pace next year compared with 2015 as the government projects slower growth in the manufacturing, services and construction sectors.

The report said GDP was expected to expand between 4% and 5% in 2016 compared with the 4.4% to 5.5% growth estimated for the current year.

Domestic demand was expected to offset the drag on the economy from a slowdown in growth in emerging markets, particularly China.

Lower commodity prices, depreciating currencies in emerging markets and volatility in financial markets will be hurdles to economic growth.

However, these would be counterbalanced with activity by the private and public sectors, with private expenditure the main anchor while public expenditure will increase moderately.

To boost the economy, the Government has raised allocation for development spending by 6.1% to RM49.2bil, while operating expenditure will remain at RM215.2bil.

The increase in spending will be matched by higher revenue in 2016 forecast at RM225.6bil. The fiscal deficit in 2016 is projected at 3.1% of GDP.

Trade surplus is projected to be higher in 2015 at RM85.3bil, or 7.3% of GDP.

Debt level



The level of Government’s debt is projected to increase RM627.5bil, or 54% of GDP in 2015 from current RM582.8bil last year, or 52.7% of GDP. Household debts level remained high at 88.1% of GDP at end of August, up from 86.8% of GDP at the end of 2014.

Fiscal consolidation

The government will continue its fiscal consolidation in 2016 as it seeks to achieve a balanced budget by 2020 but it acknowledges there will be challenges from external sources.

It emphasises that while it ensures strong public finances, fiscal policy will continue to support economic growth and improve the people’s well being.

“With all the measures in place, the fiscal deficit is projected at RM38.8bil or 3.1% of GDP in 2016 (2015: 3.2%),” it said.

The fiscal deficit has come down from 6.7% in 2009 to 3.4% of GDP in 2014.

Revenue collection



The government expects revenue to increase by 1.4% to RM225.70bil due to higher tax revenue.

For instance, collection from oil-related revenue is expected to increase by 1.7% to RM265.2bil (2015: RM260.7bil).

Due to the implementation of the managed float fuel pricing system, subsidies, incentives and assistance will remain low at RM26.1bil (12.1%), reflecting a more targeted subsidy mechanism to reduce market distortions and leakages.

GST



The government projects to collect RM39bil from the Goods and Services Tax (GST) in 2016 – which is about 3.1% of the GDP as it seeks to achieve a balanced budget by 2020.

Since the GST was implemented in April, collection was RM27bil, higher than the earlier projection of RM21.7bil.

For 2016, GST’s collection will reflect a full 12-month of the tax implementation that had replaced the Sales and Services Tax (SST).

The higher collection will offset the contraction in oil-related revenue that has been the main revenue source for the Government.

Inflation, employment



Inflation rate is expected to increase from 1.9% in 2015 to between 2% and 3% in 2016.

However, the government expects the unemployment rate to decline from 3.1% in 2015 to 2.9% in 2016.

Strong economic fundamentals such as benign inflation and stable employment supported by accommodative monetary policy are expected to support growth.

Medium-term fiscal framework



The government also announced under the medium-term fiscal framework (MTFF) for 2016 to 2018, its revenue was estimated to be RM729.50bil.

The projection for the three years was based on the assumption that US light crude oil would be between US$48 and US$60 per barrel and oil production to be 600,000 barrels per day.

On Friday, US crude oil was trading below US$46, which is sharply lower than the near US$100 in July 2014.

The three-year framework expects non-oil revenue to be RM631.60bil and non-oil revenue RM97.9bil.

The government’s operating expenditure is expected to be RM685.7bil during the period and gross development expenditure RM153bil.

http://www.thestar.com.my/Business/Business-News/2015/10/23/The-very-rich-to-pay-more-income-tax/?style=biz

http://www.thestar.com.my/Business/Business-News/2015/10/23/Business-highlights-of-Budget-2016-proposals/?style=biz

http://www.thestar.com.my/Business/Business-News/2015/10/23/Slight-increase-in-Federal-Government-revenue/?style=biz

http://www.thestar.com.my/Business/Business-News/2015/10/23/Govt-sees-oil-trading-US$48-to-US$60-in-2016-to-2018/?style=biz

http://www.thestar.com.my/Business/Business-News/2015/10/23/Domestic-demand-to-drive-GDP-growth/?style=biz

http://www.thestar.com.my/Business/Business-News/2015/10/23/Business-highlights-of-Budget-2016-proposals/?style=biz

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Budget 2016: Malaysia not bankrupt ! PM said

Prime Minister Najib Abdul Razak is tabling Budget 2016 themed ‘Prospering the Rakyat’ in the Dewan Rakyat. Budget 2016 is the fir...

Budget 2016: Malaysia not bankrupt ! PM said

http://english.cntv.cn/2015/10/24/VIDE1445654042676167.shtml

Prime Minister Najib Abdul Razak is tabling Budget 2016 themed ‘Prospering the Rakyat’ in the Dewan Rakyat.

Budget 2016 is the first budget under the 11th Malaysian Plan but it is also the toughest the prime minister has had to work on.

This is amid falling revenue due to the drop in commodity prices, on top of the need to keep the country's deficit in check.

In his speech, the prime minister said Malaysia is not a failed state or bankrupt and stressed that the fundamentals are still strong.

The house erupted when Najib took a jibe at the opposition, saying that the opposition, which at first opposed the goods and services tax (GST), has now included it in their alternative budget.

Budget allocations:

- 2016 Budget allocates a total of RM267.2 billion, an increase from a revised allocation of RM260.7 billion for 2015. The initial allocation for 2015 was RM273.9 billion.

- For 2016, federal government revenue collection is projected at RM225.7 billion, up RM3.2 billion from 2015.

Taxes:



- Income tax increased from 25 percent to 26 percent for people earning between RM600,000 and RM1 million. Increased to 28 percent for those earning above RM1 million.

- Goods and services tax to increase government revenue by RM39 billion, versus RM27 billion in the first eight months of 2015. Some basic goods to be zero-rated, including over-the-counter drugs, baby milk, nuts-based food, noodles.

- Price of oil expected to remain low in 2016, so collection from oil-related resources expected to be around RM31.7 billion.

- Prepaid phone users will get GST rebate, which will be credited to their accounts. From Jan 1 next year.

- For medicine, it would be increased from 4,215 kinds of medicine to 8,630 kinds of (zero-rated GST) medicine.

- If Malaysia has no GST, national deficit will be 4.8 percent. With GST, deficit expected to be 3.1 percent for 2016.

- If Malaysia stuck to the sales service tax (SST), collection would only be RM18 billion. Whereas GST has netted RM39 billion.

- National revenue would reduce by RM21 billion if there was no GST.

- GST flat rate: all controlled medicine, including 95 brands of over-the-counter medicine used for diseases such as cancer, high blood pressure and heart diseases.

- More Small-time farmers can register under flat-rate GST scheme and increase two percent income - threshold for those who can apply decreased from RM100,000 to RM50,000.

- Exemptions from GST for all items that are being re-imported after being temporarily exported for promotion, research or display.

- For oil and gas industries, GST exemptions given to re-import of equipment exported temporarily for rent. For teaching material and equipment, for skills and vocational training. Tax relief:

- Parents with disabled children get RM6,000 tax relief and another RM14,000 if their child furthers their studies.

- Tax exemption of RM8,000 instead of RM6,000 for children above 18 in an education institution both local or overseas.

- Children supporting parents, even if not living together, will receive a tax relief of RM1,500 for both parents, if the parents are above 60.

- Tax exemption of RM4,000 instead of RM3,000 for those with a spouse with no income.

- Middle class families with a household income between RM3,860 and RM8,320 will get RM2,000 tax relief for every child under 18.

BR1M:

- BR1M to be continued. Based on response, Najib says the people are thankful for the help. BR1M allocations to be increased, with one new category.

- For those earning below RM1,000, BR1M increased to RM1,050

- Those earning below RM3,000, BR1M increased from RM900 to RM1,000

- Those earning RM3001-RM4,000, BR1M increased from RM750 to RM800

- Single people aged 21 and above earning not more than RM2,000, BR1M increased from RM350 to RM400

Minimum wage:

- Minimum wage to increase from RM900 to RM1000 a month for Peninsular Malaysia, except for domestic workers.

Expenditure:

- RM50 million to improve prison security measures

- RM13.1 billion to improve safety and national security.

- RM4.6 billion for vaccine, consumables, medicine in public hospitals.

- RM30.1 billion is allocated to the economic sector.

- RM13.1 billion is earmarked for education and training, health, housing and the well-being of the people.

- RM5.2 billion is allocated to the security sector.

Development:

- 2,000 affordable homes for the military, starting 2016.

- RM180 million to set up the National Disaster Management Agency.

- The government has allocated RM52 million for 328 1Malaysia clinics. Apart from this, 33 new 1Malaysia clinics will be opened.

- Five new hospitals will be constructed in Pasir Gudang, Kemaman, Pendang, Maran and Cyberjaya. Kajang Hospital to be redeveloped.

- RM150 million will be allocated to improve 11,000 homes belonging to the poor in rural areas.

- A total of 5,000 Rumah Pr1ma housing units and PPA1M to be built in 10 locations near LRT and Monorail stations, whereas 800 units of affordable homes by GLCs near MRT stations in the city centre.

- 20,000 houses for Felda, with the maximum price reduced to RM70,000 compared to RM90,000.

- The government will build 22,300 flats and 9,800 terrace houses under the Rakyat Housing Scheme.

- 100,000 houses, priced between RM90,000 and RM300,000 for civil servants will be ready by 2018.

- 10,000 Mesra Rakyat houses to be built, with RM20,000 subsidy for each unit. The government has allocated RM200 million for this.

- New boats and facilities for 1Malaysia clinics in rural areas.

- RM864 million to procure offshore patrol vessel and patrol boats.

- RM70 million interest-free loans for longhouse building in Sabah and Sarawak. Limit of RM50,000 loan for each longhouse unit.

- RM360 million will be used to improve National Service and RM160 million allocated for NGOs.

- The Pan-Borneo Sarawak Highway that is set to be completed in 2021 will be toll-free. It is 1,090km-long and costs RM16.1 billion.

- RM900 million allocated for 'Project Traffic Dispersal' at Jalan Tun Razak, to be executed immediately with the strategic cooperation of public-private sectors.

- RM42 million to build Mukah Airport in Sarawak and upgrade Kuantan and Kota Bharu airports.

- Develop Malaysian Vision Valley, 108,000 hectares from Nilai to Port Dickson, with forecast investments starting with RM5 billion in 2016.

- Execute Cyber City Centre in Cyberjaya with development valued at nearly RM11 billion over a five-year period

- Develop Bandar Lapangan Terbang or Aeropolis KLIA in 1,300 acres of land and expected to attract as much as RM7 billion investments.

- Investments estimated at RM18 billion for 2016 for RAPID Complex Project in Pengerang, Johor.

- The government will pump RM515 million for efforts to improve electricity supply in Sabah.

- RM67 million allocated for bus operation routes outside the city.

- The government will fork out RM60 million for social amenity projects and flood prevention efforts.

- RM1.2 billion will be allocated to improve Internet speed from 5mbps to 20mbps.

- The government will continue negotiations regarding high speed rail with Singapore.

- RM28 billion for new MRT projects, which would benefit two million residents

- RM730 million for the development of chemical industry, electronic and electrical machinery, aviation, medical equipment and services.

- For Felda settlements, RM200 million will be used improve roads in these areas.

- The government will fork out RM1.4 billion to improve rural roads nationwide. Aid:

- Aid for students slashed from RM540 million to RM350 million. In the past, RM100 aid was for all primary and secondary students. However, it has now been limited for students whose household income is less than RM3,000.

- A total of 1.2 million students will receive the 1Malaysia book voucher worth RM250.

- RM300 a month aid for poor senior citizens.

- RM662 million has been set aside to help children from poor families - aid of RM100-RM450 a month.

- RM2 billion allocated for aiding the disabled, senior citizens and poor families. RM350/month for working disabled persons, RM200 for those who are unemployed. RM300 a month for those who are bed-bound.

- Skim Khairat Kematian - RM1,000 to be continued

- RM100 aid for households with income below RM3,000. Expected to benefit 3.5 million students.

Others:

- To enable more workers to benefit from Socso, there will be compulsory savings of up to RM4,000 instead of RM3,000.

- RM200 million for first home deposit funding scheme.

- RM40 million to do infrastructure and easy loan programmes for Chinese residents of new areas to pay land premiums and house restorations.

- RM50 million by SME Bank to help small Indian entrepreneurs.

- RM100 million for Indian socio-economic development programmes.

- Tekun to provide RM100 million loan for Indian entrepreneurs.

- RM90 million allocated as micro-credit loans for small traders and Chinese businessmen.

- RM300 million allocated to improve the welfare and development of the Orang Asli community.

- Government aims for 30 percent women involvement in decision-making levels in public and private sectors.

- All economy class flights will be exempted from GST for rural routes.

- Malaysia has agreed to the Trans-Pacific Partnership Agreement (TPPA) in principle, while it has inked 13 Free Trade Agreements (FTA).

- For farming, RM5.3 billion will be used for the purpose of modernisation.

- The tourism sector is expected to contribute RM103 billion. To make it more convenient for tourists, e-Visa for seven countries will be made available in mid-2016.

- The poverty rate has been reduced to 0.6 percent in 2014 from 3.8 percent in 2009. In fact, extreme poverty has almost been wiped out.

Related:

Budget 2016 Sets Stage for Next Five Years



Malaysia's Tax Structure No Longer Competitive: Deloitte's Yee