PRESENTATION OUTLINE

1. ASEAN’s relevance – Ready for the 21st century
2. The path to AEC – Already set in motion
3. Next level of integration – Of opportunities and challenges
4. Conclusion

CONCLUSION

• Amid going through a rough patch Post-Global Financial Crisis, ASEAN will emerge stronger
• By 2030, ASEAN will add another 120m people to its already vibrant population of 625m people and a potential GDP growth of 5%
• With ASEAN’s strategic location next to China and India, the two countries are largely viewed as a complementary force to ASEAN amid the high degree of competition they bring
• The path to AEC remains challenging. Weak institutional framework and the lack of an enforcement mechanism are impediments to comprehensive integration
• Lack of alignment of interest between political leaders and bureaucrats
• Loose implementation of AEC provisions will result in few immediate benefits

Bank Negara Malaysia’s initiatives to develop the onshore financial market

Broadening and deepening of the onshore foreign exchange market

Following the measure to reinforce existing rules that have been in place to prohibit facilitation of ringgit non-deliverable forward (NDFs) offshore, the Financial Markets Committee, in collaboration with Bank Negara Malaysia (BNM) has announced several initiatives and measures to enhance the liquidity of the foreign exchange (FX) market, including deregulate the onshore ringgit hedging with effect from 5 December 2016. The measures are as follow:

1. Liberalisation and deregulation of the onshore ringgit hedging market

• To provide greater flexibility for managing foreign exchange (FX) risks, residents (including resident fund managers) may freely and actively hedge their USD and CNH exposures up to a limit of RM6 million based on total outstanding of net ringgit position (notional) at any one time, per client, per bank, subject to a one-time declaration of non-participation in speculative activity. This flexibility allows residents to cancel and unwind the forward contract entered for hedging exceeding RM6 million, the normal due diligence process by the onshore bank applies.
• Resident and non-resident fund managers can now actively manage their FX exposure up to 25% of their invested assets on a net position basis. To qualify for this arrangement, registration with BNM would suffice. The investor is allowed to fully hedge their investment. For hedging more than 25% ringgit investment would require documentary evidence.
• To broaden accessibility of foreign investors and corporates to the onshore FX market, offshore non-resident financial institutions may participate in the Appointed Overseas Office 1 (AOO) framework which will be accorded additional flexibilities on ringgit transactions. These flexibilities include FX hedging (own account/on behalf of client) for current and financial account based on commitment, opening of ringgit account (bookkeeping) and extension of ringgit trade financing.

2.  Streamlining treatment for investment in foreign currency assets

• Resident entities with domestic ringgit borrowing are free to invest in foreign currency assets both onshore and abroad up to the prudential limit of RM50 million.
• Residents without domestic ringgit borrowing shall continue to enjoy flexibility of investing in foreign currency assets both onshore and abroad up to any amount.
• This gives equal treatment for residents with ringgit borrowings investing in foreign currency assets whether in the onshore or offshore market.

3. Incentives and treatment of export proceeds

• Exporters can retain up to 25% of export proceeds in foreign currency. They may hold higher balances with approval from BNM to meet their obligations in foreign currency.
• Payment by resident exporters for settlement of domestic trade in goods and services is now to be made fully in ringgit.
• All ringgit proceeds from exports can earn a higher rate of return via a special deposit facility. The special deposit facility for ringgit proceeds will be offered to exporters via all commercial banks and receive a rate of 3.25% per annum. This facility will be offered until 31 December 2017 subject to further review.
• In addition to the newly announced hedging measures, exporters are also able to hedge and unhedged up to 6 months of their foreign currency obligations.

CONCLUSION

We need to advocate best and responsible trade practices and fair competition in our marketplace. Consumers cherish fair prices while businesses need to make normal profits to be viable and sustainable and as rightful reward for their risk-undertakings and entrepreneurship but not too excessive.

Open competition, free pricing and profit incentives are the crucial elements of supporting the foundation of a free market. It is a fallacy that APM would lead to lower prices as the opposite price effect is likely occur as high direct and hidden costs associated with the compliance borne by the businesses would ultimately and eventually be pass onto consumers in the form of higher prices.

The imposition of APM on a well-functioning and free competitive market causes welfare losses to both consumers and producers. Consumers would have fewer choices of competitively priced and quality products and services. This is because of market and price distortions which not only waste resources and reduce economic efficiency but also discourage investors to invest and increase supply in the products market.

Excessive regulations stifle the growth of enterprises, reduce entry of new market players and dampen investment in the long-term as investors seek better returns elsewhere. The price controls and APM can cause hoarding, create black markets, incur costly enforcement for regulator and compliance for businesses.

The PCAPA 2011 is an adequate regulatory tool to protecting consumer interests and maintaining a competitive market. Our research show that Singapore does not have anti-profiteering law while Thailand’s anti-profiteering was superseded by Business Competition Act. Australia had disbanded the price exploitation regulation after 24 months of implementation when the GST was introduced. Canada only prohibits profiteering during emergencies while Philippines only targeted to selected goods, especially the basic necessity and primary commodity.

The gazetted price-controlled on essential consumer goods and services during festive celebrations, calamities or emergency situations should be maintained to ensure price stability and minimize the impact on the livelihood of households.

In a nutshell, a more practical and equitable approach of keeping a market economy in a globalized environment is to instill consumer activism and education that help consumers make right decisions. Businesses must be allowed to flourish in a freer open market, which reflects the dynamic interaction of supply and demand. The government must be an effective facilitator and not a deterrent to businesses. Most importantly, the PCAPA 2011 should not at all create a climate of fear and anxiety among the lawabiding businesses.

AGENDA

• Asia’s rise in the 21st century – Japan still relevant
• Japan-Malaysia relations – A Malaysian perspective
• Challenges and prospects heading toward stronger ties
• Conclusion

CONCLUSION

• Japan remained a significant partner for Malaysia. This long-lasting relationship was further improved via Malaysia’s Look East Policy (LEP) in 1982 and further enhanced via LEP2 in 2015.
• Malaysia’s strategic location acts as a gateway to connect ASEAN countries and other major economies via various trade deals and initiatives such as Regional Comprehensive Economic Cooperation (RCEP), ASEAN Economic Community (AEC), Belt and Road (B&R), as well as the good relationship with Middle-East
• Business-friendly policies and strong ties between government, business community and Japan makes Malaysia attractive for Japanese investors.
• As a way forward, both government and business community should further enhance the business relationship to go beyond the current stage, exploring potential new areas, such as new innovations and high-tech skills development, quality infrastructure, and high-end services for the manufacturing sector.