Tuesday, 11 September 2018

Tariffs won’t make US firms produce in US

https://youtu.be/gEmu3Dz--bM

"It would not be profitable to build the Focus Active in the U.S. given an expected annual sales volume of fewer than 50,000 units," automaker Ford Motor Company said in a statement on Sunday.

US President Donald Trump tweeted earlier on Sunday that "'Ford has abruptly killed a plan to sell a Chinese-made small vehicle in the US because of the prospect of higher US Tariffs.' CNBC. This is just the beginning. This car can now be built in the USA and Ford will pay no tariffs!" Ford quickly clarified the facts, evidently rebuffing Trump's tweet.

Likewise, tech giant Apple Inc. wrote a letter to US Trade Representative Robert Lighthizer, saying that a proposed 25 percent tariff on $200 billion of Chinese imports would cover a "wide range of Apple products."

In another tweet, Trump told Apple to make their products in the US instead of China. Apple hasn't responded.

According to the US media, the price of iPhone may increase to $2,000 if the company does as told.

The multinational companies that produce automobile and mobile phones have different manufacturing and sales layouts. Car manufacturers tend to produce their products where they are sold, while mobile phone manufacturers optimize their production chain costs worldwide. That's the natural law of economic globalization which can't be easily changed by a country's government.

The White House lacks understanding of the global production and value chains. "Make your products in the United States instead of China" seems naive. Instead of coercing companies to follow demands, imposing tariffs will only scare them off.

Simply making US companies produce in the US can't deal with the complicated global industry today. We have also learnt from history that neither side will gain in a trade war.

China is the world's largest automobile and mobile phone market. Setting tariff barriers between Beijing and Washington won't make US companies give up on China for the sake of their own country. As long as China doesn't make things hard for US companies, it's unavoidable that they will place production operations in China. The Chinese market can help them make money, but the White House can't.

Most American high-tech companies will face difficulties if they leave China. The larger the market is, the higher return the companies will get from their research and development. High-tech companies, if they can't grow to be giant, don't usually survive for long, and it would be fatal for many of them to lose the Chinese market.

There hasn't been a previous US government that dares to instruct multinational companies in production layouts, and the current administration has overestimated its executive power. The global industrial chain today is formed by market rules established over decades and can't be easily changed by one government.

It would be the White House's dream to expect that the US is not only the world's technology and financial center, but also the world's factory that sells its products globally. If the US doesn't want to wake up from this dream, then the outside world has to step in and rouse Washington.

Source:Global Times

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Monday, 10 September 2018

Blockchain Festival & Conference Week, Kuala Lumpur 26~27 Sept 2018

BLOCFEST www.blocfest.asia

SOUTHEAST ASIA’S INTERNATIONAL BLOCKCHAIN EVENT

Blockchain and beyond

Brothers Hway (left) and Tze-Co say networking will be a big part of the Blocfest conference. — ART CHEN/The Star

Educate yourself on blockchain technology which is transforming businesses around the globe.

What began as an experiment in buying Bitcoin for a holiday led two brothers to explore blockchain technology and eventually organise a blockchain conference – Blocfest 2018 – which will feature more than 30 international speakers.

Gwei Tze-Co, 49, started investing in Bitcoin four years ago, ahead of a trip to Brazil to attend the 2014 World Cup.

“I was planning to go to Argentina after the World Cup and read that the currency situation was so bad there that you could use Bitcoin instead. I bought some but didn’t end up using it,” he says.

But that initial investment got him hooked on blockchain and cryptocurrency, especially Ethereum.

Meanwhile, Gwei Hway, 43, who is a programmer and has worked in tech firms for the last 20 years, was drawn to blockchain and cryptocurrency because of his brother’s fascination for them.

Tze-Co says in Malaysia blockchain is still an emerging technology though a few good projects by local founders have been launched.

“However, lots of people just use blockchain and cryptocurrency for hype. To put it bluntly, there’s a lot of scams and many Malaysians are falling for them,” he says.

He says that a conference with legitimate speakers sharing their experience could go a long way in educating people on how blockchain can make a difference in their businesses.

He adds that once a person better understands blockchain technology and especially how it’s used in business, it will be easier for him or her to identify the fake ones.

This is one of the reasons the brothers are organising Blocfest through their company, Blockchain Asia Sdn Bhd, which is scheduled to take place at the Shangri-La Hotel, Kuala Lumpur, on Sept 26 and 27.

The two-day conference will focus on the potential of blockchain technology in South-East Asia and feature speakers from various backgrounds, including blockchain entrepreneurs, developers, global investors, academics and enthusiasts.

Discussions at the conference will be divided into three streams – Regulatory, Academic and Enterprise.

Regulatory will help you understand the current regulatory landscape and what’s in store in the future for blockchain; Academy will tackle academic concepts and their impact on blockchain; and Enterprise will highlight technological aspects of blockchain and potential use-case scenarios.

Hway expects half the attendees to come from enterprises which aren’t too familiar with blockchain technology but are exploring how it could be relevant to them, while the remaining will be investors, academics and experts in the field.

“Networking is definitely a big part of the conference, and as many solution providers will be present in the exhibition halls, we expect a lot of companies to ink deals or find partnerships,” he says.

Joining the conversation will be regulators from countries that have begun to explore the issue, including Taiwanese Member of Parliament Jason Hsu, better known as the Crypto Congressman due to his staunch support for the technology, and a representative from the Philippines’ Cagayan Economic Zone Authority which spearheads the country’s financial technology efforts.

Tze-Co says there have been talks to get Malaysian regulators to participate and share their thoughts on the laws required to facilitate blockchain in Malaysia but the discussion is ongoing.

Other key speakers that will be at Blocfest are cryptofinance platform Fusion’s founder Dejun Qian, blockchain veteran and ProximaX Ltd founder Lon Wong, anti-counterfeit system Wabi’s CEO Alexander Busarov, and dating marketplace Viola.AI’s CEO Violet Lim.

In addition to Blocfest, attendees can also take part in several other events during the KL Blockchain Week, which will be held between Sept 24 and 27, including a hackathon.

Those interested in attending Blocfest can get 40% off VIP tickets priced at US$450 (RM1,860) or normal tickets priced at US$375 (RM1,550) by keying in the promo code BLOC40D during checkout but this offer is only available for a limited time. Visit www.blocfest.asia for more information.

Credit:Qishin Tariq The Star online

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Be ready – financial crisis is near

Prepare Now for the Next Financial Crisis

THE financial crisis affecting developing countries arrived in full-scale fashion in our region last week when the Indonesian economy experienced shocks reminiscent of the Asian crisis 20 years ago.

With the crisis coming so close to home, it is time to contemplate what may unfold in the near future and list measures to respond to each scenario, so that we are not taken by surprise.

The agreement reached with Singapore to postpone construction of the Kuala Lumpur-Singapore high-speed rail (HSR) project until end-May 2020 (with Malaysia paying S$15mil [RM45.1mil] in cost) was an achievement. It allows us a gap of two years before having to meet the mega project’s large expenses.

The next couple of years will be crucial, as the country will be in the midst of managing the “perfect storm” of servicing the trillion-ringgit government debt and preventing the government deficit from ballooning, while facing the challenges of the emerging global financial crisis.

In this tight situation, every billion ringgit counts; indeed every single ringgit counts.

As more discoveries are made of missing money, whether due to the 1MDB scandal or unpaid tax refunds, there is increasing pressure to save money and cut costs to avoid wider deficits.

So the HSR’s two-year deferment helps a lot. It may be like kicking the can down the street, but hopefully, the situation will improve by the end of the two years to allow the can to be picked up, especially if during the period, ways are found to cut the overall cost of the project.

Other projects too have to be scrutinised. Besides the East Coast Rail Link and Trans Sabah gas pipeline projects, there are many other projects whose costs have to be examined, and whose implementation can be postponed or cancelled.

Besides the scourge of overpricing and kickbacks, there is the over-riding concern that a financial crisis has to be averted.

Indonesia’s Energy Minister last week announced that energy projects worth US$25bil (RM103.64bil) and representing half of President Joko Widodo’s grand electricity programme, would be postponed or restructured. This is to save US$8bil (RM33.1bil) to US$10bil (rm41.45bil) on imports for the projects.

Indonesia is also raising tariffs to 10% on over 1,000 goods in a move to reduce the import bill.

These are some measures the country is forced to take as its economy enters full crisis mode. It could even face a meltdown of the 1998-99 scale. The rupiah fell to almost 15,000 per US dollar, the lowest point since the 1998 crisis.

Indonesia is vulnerable to a financial crisis due to its dual deficits (in the current account and government budget), large external debt and high foreign ownership of equity and government bonds.

Indonesia is caught in a vicious cycle, which is typical when financially liberalised countries follow orthodox fire-fighting policies. When the markets perceive that the external reserves could be insufficient to pay for imports, service debts and absorb potential capital outflows, the currency depreciates.

The perception sparks a self-fulfilling prophecy. The fall in currency makes it more difficult for the government and companies to service foreign loans, and also prompts investors to pull out their money.

In such a situation, the government raises the interest rate to incentivise investors to retain their money in the country. Indonesian interest rates have risen by 1.25 percentage points since May.

However, the side effect is that homebuyers and companies find it more difficult to service their mortgage and business loans. Credit slows down, and so does the economy. This in turn causes the currency to drop further, prompting more rounds of interest rate increases, which lead to loan defaults and bankruptcies.

The economy goes into recession, leading to more capital outflows, including by local people. The currency drops again, recession deepens, and the cycle continues.

Indonesia is still at the start of this cycle. Hopefully it will find the policy tools, including unorthodox ones that work, to avoid a long stay in the spiral. But Indonesia is by no means alone. Argentina and Turkey are deep in their crises, and more and more countries are suffering the contagion effect, including South Africa, India, Iran and the Philippines.

Following the 2008-09 global financial crisis that especially hit the United States and Europe, many hundreds of billions of dollars rushed to emerging markets, including Malaysia, in search of higher yields. The liquidity was created by quantitative easing (government pumping money into the banking system) and low interest rates in the US and Europe.

Now the funds are leaving the emerging economies and returning to the US. This is due to the US policy reversing to quantitative tightening, the rise in its interest rates, and fears of an emerging market crisis and a worsening trade war.

Developing countries vulnerable to currency decline, a pull-out of funds and a crisis are those with significant current account deficits, government budget deficits and debts; low foreign reserves; large external debt; and high foreign ownership of local bonds and equities.

Malaysia is so far safe but it is wise not to be complacent. It is not easy to escape contagion once it spreads.

A few warning signs have appeared, such as a narrowing of the current account surplus and significant portfolio investment outflows (both in the second quarter), and a weakening of the ringgit, besides the larger than previously reported government debt and the need to prevent the budget deficit from increasing.

The old Scout motto, “Be Prepared”, comes in handy at times like this. It is good to prepare now for any eventuality, so as to avoid being caught by surprise.

Credit: Martin Khor Global Trends The Staronline

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