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Sinar Daily
26-05-2025
- Business
- Sinar Daily
Malaysia should leverage US-China tariff pause to reposition itself
KUALA LUMPUR - The 90-day tariff pause between the United States (US) and China offers Malaysia a critical opportunity to reposition itself economically, according to economists. After their first round of talks in Switzerland over the weekend since US President Donald Trump initiated tariffs on April 2 on every country, the US and China have struck a deal to reduce reciprocal tariffs by 115 percentage points. Under the deal, the US will lower its tariff on Chinese imports from 145 per cent to 30 per cent and China will reduce its tariff on US goods from 125 per cent to 10 per cent. Dr Mohamad Idham Md Razak, a senior lecturer at Universiti Teknologi MARA's department of economics and financial studies, told Bernama that Malaysia must capitalise on this period of relative stability to diversify its trade portfolio and strengthen its economic resilience. He said key strategies include deepening ASEAN-led partnerships through the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to reduce reliance on US-China trade. "Malaysia should (also) enhance export competitiveness by attracting firms looking to diversify their supply chains, particularly in high-value sectors such as semiconductors and renewable energy, while also advancing domestic reforms to position itself as a regional production hub through improved business operations, digital infrastructure, and workforce development,' he said. He also stressed the importance of monitoring geopolitical risks and preparing for potential disruptions. He said firms need to develop contingency strategies to address possible US-China decoupling scenarios by exploring new export markets and creating supply chain buffers. "A proactive approach will help Malaysia manage trade uncertainties and seize emerging global opportunities,' he said. Commenting on the broader implications of the deal, Idham said the 90-day suspension offers temporary relief to global trade tensions and could revive activity in sectors like electronics, agriculture, and manufacturing. However, he cautioned that the pause alone does not guarantee stability. Although the 90-day period provides an opportunity for dialogue, it fails to secure lasting peace without meaningful concessions, which could lead to a resumption of the trade war while at the same time expanding limitations on technology and investment. "Malaysia should remain vigilant, as the end of the truce could lead to renewed trade tensions, disrupting regional exports and investment flows,' Mohamad Idham said. Meanwhile, Center for Market Education chief executive officer Dr Carmelo Ferlito said Malaysia should respond to the development by actively pursuing new free trade agreements (FTAS) with global partners. "Malaysia should avoid taking sides in the ongoing trade tensions and instead focus on advocating clear, consumer-benefiting free trade policies that foster innovation. "This situation presents an opportunity for Malaysia to push for new FTAS, not just to lower tariffs, but also to tackle non-tariff barriers - such as regulations and quotas - that can hinder trade. He further emphasised that the 90-day pause represents a highly positive signal. "Trump shook the table and now the players are about to sit down for a new round of cards, trying to define new rules. "Trump was not aiming at tariffs per se but at pushing other countries to negotiate with him to reshape global trade,' he said. Lee Hwok Aun, a senior fellow at the ISEAS-Yusof Ishak Institute's Malaysia Studies Programme in Singapore, said the 30 per cent tariff on China remains substantial. "It is unclear whether this reprieve will avert a US recession and wider global contagion,' he said, adding that the truce reflects domestic pressures faced by the US and China. "Countries negotiating trade deals, especially Malaysia and its Southeast Asian neighbours caught in the US-China rivalry, should proceed tactfully and bide their time while awaiting greater clarity on the direction and substance of US-China negotiations,' he said. - BERNAMA
The Star
14-05-2025
- Business
- The Star
Economists: Malaysia should leverage US-China tariff pause to reposition itself
KUALA LUMPUR: The 90-day tariff pause between the United States (US) and China offers Malaysia a critical opportunity to reposition itself economically, according to economists. After their first round of talks in Switzerland over the weekend since US President Donald Trump initiated tariffs on April 2 on every country, the US and China have struck a deal to reduce reciprocal tariffs by 115 percentage points. Under the deal, the US will lower its tariff on Chinese imports from 145 per cent to 30 per cent and China will reduce its tariff on US goods from 125 per cent to 10 per cent. Dr Mohamad Idham Md Razak, a senior lecturer at Universiti Teknologi MARA's department of economics and financial studies, told Bernama that Malaysia must capitalise on this period of relative stability to diversify its trade portfolio and strengthen its economic resilience. He said key strategies include deepening ASEAN-led partnerships through the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to reduce reliance on US-China trade. "Malaysia should (also) enhance export competitiveness by attracting firms looking to diversify their supply chains, particularly in high-value sectors such as semiconductors and renewable energy, while also advancing domestic reforms to position itself as a regional production hub through improved business operations, digital infrastructure, and workforce development,' he said. He also stressed the importance of monitoring geopolitical risks and preparing for potential disruptions. He said firms need to develop contingency strategies to address possible US-China decoupling scenarios by exploring new export markets and creating supply chain buffers. "A proactive approach will help Malaysia manage trade uncertainties and seize emerging global opportunities,' he said. Commenting on the broader implications of the deal, Idham said the 90-day suspension offers temporary relief to global trade tensions and could revive activity in sectors like electronics, agriculture, and manufacturing. However, he cautioned that the pause alone does not guarantee stability. Although the 90-day period provides an opportunity for dialogue, it fails to secure lasting peace without meaningful concessions, which could lead to a resumption of the trade war while at the same time expanding limitations on technology and investment. "Malaysia should remain vigilant, as the end of the truce could lead to renewed trade tensions, disrupting regional exports and investment flows,' Mohamad Idham said. Meanwhile, Center for Market Education chief executive officer Dr Carmelo Ferlito said Malaysia should respond to the development by actively pursuing new free trade agreements (FTAS) with global partners. "Malaysia should avoid taking sides in the ongoing trade tensions and instead focus on advocating clear, consumer-benefiting free trade policies that foster innovation. "This situation presents an opportunity for Malaysia to push for new FTAS, not just to lower tariffs, but also to tackle non-tariff barriers - such as regulations and quotas - that can hinder trade. He further emphasised that the 90-day pause represents a highly positive signal. "Trump shook the table and now the players are about to sit down for a new round of cards, trying to define new rules. "Trump was not aiming at tariffs per se but at pushing other countries to negotiate with him to reshape global trade,' he said. Lee Hwok Aun, a senior fellow at the ISEAS-Yusof Ishak Institute's Malaysia Studies Programme in Singapore, said the 30 per cent tariff on China remains substantial. "It is unclear whether this reprieve will avert a US recession and wider global contagion,' he said, adding that the truce reflects domestic pressures faced by the US and China. "Countries negotiating trade deals, especially Malaysia and its Southeast Asian neighbours caught in the US-China rivalry, should proceed tactfully and bide their time while awaiting greater clarity on the direction and substance of US-China negotiations,' he said. - Bernama
Daily Express
26-04-2025
- Business
- Daily Express
Illicit cigarettes can harm Sabah's economy
Published on: Saturday, April 26, 2025 Published on: Sat, Apr 26, 2025 By: Carolyn Foo, Daily Express Text Size: Carmelo Ferlito and Rodney Van Dooren. Kota Kinabalu: Walking along the city's streets one can find shops offering the freshest produce to the best local crafts, from tiger prawns to Pinakol. But there is another item found in abundance in Kota Kinabalu and throughout much of the state; illicit cigarettes. While Sabah's famous seafood and handicrafts add value to the state's economy, providing jobs and business opportunities, the same cannot be said about illicit cigarettes. These cigarettes - the production of which is unregulated in neighbouring countries - take a toll on Sabah's economy in more ways than one. 'We have businesses on the ground which somehow adapted to the presence of illicit cigarettes, selling them as if they were regular products,' said Carmelo Ferlito, CEO of the Center for Market Education. According to a recent Illicit Cigarettes Study in Malaysia by NielsenIQ, the prevalence of illicit cigarettes at a national level is 54.8% as of May 2024. The situation is more dire in Sabah, where the prevalence of illicit cigarettes stood at 79.4%. This means that nearly 8 out of 10 cigarettes in Sabah are illegal. Ferlito said this situation leads to the loss of legitimate business and investment opportunities. This in turn means fewer job opportunities for Sabahans. Pankaj Kumar, Managing Director of Datametrics Research and Information Centre (DARE), shares a similar view. 'Without needing to follow strict regulations and taxes, illicit cigarettes create an uneven playing field for retailers and distributors of legal tobacco products,' said Pankaj. Not only does this affect the state's reputation as a business-friendly location, but it also threatens legitimate businesses and robs the state's much-needed revenue which could support public services and infrastructure development. Legitimate investors might be discouraged from entering the market as the prevalence of illicit cigarettes suggests weak regulatory enforcement, he said. In more recent times, the Federal Government has taken stringent measures to curb the illicit cigarette trade which costs Putrajaya an estimated loss of RM5 billion in tax revenue. These measures include a ban on transhipment, a freeze on the issuance of new import licenses for cigarettes and the strengthening of the Multi-Agency Task Force on the illicit cigarette trade. While the measures have helped put a dent in cross-border smuggling, resulting in a slight reduction in illicit cigarette incidents, the problem is far from being stamped out. Additionally, the measures put in place by the Federal Government largely involve federal agencies, and Pankaj said local authorities in Sabah also play a key role in curbing the illicit cigarette trade. He said this includes ensuring businesses comply with licensing regulations, conducting inspections, and assisting with public awareness campaigns. 'They can also work closely with law enforcement agencies to identify hotspots for illicit trade and support the dismantling of illegal distribution networks. 'Additionally, local councils can facilitate community engagement initiatives that raise awareness about the dangers of illicit products.' Pankaj said collaboration between state and federal agencies is vital in addressing the illicit trade as it is a complex cross-border issue. 'While federal agencies such as the police and customs have the resources, specialised knowledge, and jurisdiction, local support is critical in ensuring enforcement is impactful on the ground.' He said the state government also has an important role to play in coordinating enforcement efforts and driving community engagement. 'Local communities can act as the eyes and ears on the ground, helping to identify and report suspicious activities related to the sale of illicit cigarettes. 'Educating the public about the social, economic, and health risks associated with illicit trade is also crucial. 'When communities understand how these illegal activities harm them directly, they are more likely to support enforcement efforts and make informed choices that discourage the use of illicit products.' There are also the indirect costs of illicit cigarettes which presents itself in the form of health issues and a loss of productivity. Ferlito, a faculty member of Universitas Prasetiya Mulya, Indonesia, said recent data from the World Health Organization and the Khazanah Research Institute indicate that smoking-related healthcare costs amounted to RM1.9 billion in 2020. He said although efforts and measures to combat illicit cigarettes were largely driven by federal agencies, states could and should play a more active role, as local councils came under their purview. 'It is not just a moral obligation. State governments will lose out if they are not proactive in doing their part to stop the illicit cigarette trade. 'This is no different than from local councils taking action against illicit businesses be it gambling or prostitution dens.' Ferlito said unlike other illicit businesses, the costs to a state associated with illicit cigarettes were much higher. 'For one it sends a strong signal that institutions are weak or that there is no political will to uphold the law, and this can affect investor confidence, especially for businesses harmed by the illicit cigarette trade.' He said this included not only retailers but also supply chains that are involved in the legal cigarette trade. 'The bigger concern is of course costs linked to healthcare and a loss of productivity. This can hurt the state in the long run. 'We must remember that the damage from any kind of smoking activity is not limited to the smoker but those exposed to secondhand smoke.' However, the risk from illicit cigarettes was higher because the production of these cigarettes was unregulated, he said, adding there were many studies on this. Addressing this longstanding challenge is a priority for companies like Philip Morris International (PMI), who advocate for a smoke-free future but recognize the need to eliminate black markets for illicit cigarettes and tobacco products. Rodney Van Dooren, Regional Expert on Illicit Trade at Philip Morris International (PMI), highlighted the transnational dimension of this issue and stressed the critical role of ASEAN nations collaborating closely to combat it effectively. 'Local law enforcement in the Philippines is making great strides in shutting down illicit tobacco operations, but this needs constant attention as new threats are always emerging. What I want to emphasize today is that according to trade data and news articles in the Philippines, most non-compliant cigarettes in the Philippines originate from ASEAN countries and India, and from China for non-compliant e-cigarettes,' Van Dooren remarked. Van Dooren had urged ASEAN nations to strengthen cooperation in tackling illicit tobacco trade, emphasizing compliance with market regulations, harmonization of transit policies, and leveraging global trade agreements. 'An export without a corresponding import should trigger international action,' he stressed and however cautioned that illicit trade persists due to strong demand and price disparities. The illicit tobacco trade, therefore, hinders public health initiatives by restricting opportunities for smokers to move toward safer alternatives. With Malaysia facing one of the highest rates of illicit tobacco trade in the region, this is an issue that Malaysia must address, especially in light of Act 852, to mitigate the rise of illicit cigarettes and ensure a healthier future for its citizens.
