Hit by US automatic spending cuts, tax hikes, budget cuts

The government spending cuts in the United States as the President and Congress fail to reach a deal will also affect poor developing countries as the aid budget, especially for food and medicine, is reduced.


ON MARCH 1, the United States government had to introduce spending cuts of US$85bil (RM263bil) for this year, as President Barack Obama and the Congress failed to reach an agreement on how to reduce the budget deficit.

The so-called “sequestration” marked a new failure in relations between the President and the Republicans in Congress.

The term “dysfunctional” is now commonly used to describe the US government system, as the deadlock between the President and Congress, and the animosity between the Democrat and Republican parties have blocked laws, policies and agreements.

The most visible of this dysfunctionality is in the government’s inability to come to grips with economic policy, especially by how much and how to reduce the budget deficit.

Republican budget deficit hawks are obsessed with slashing government spending to reduce the budget deficit. Prominent Keynesian-influenced economists like Paul Krugman and Joseph Stiglitz argue that cutting government spending in the midst of a weak economy is unnecessary and will tip the country into a new recession.

Obama himself is in favour of deficit cutting but wants it done in a balanced way – by increasing government revenue through increased taxes on the rich (or closing loopholes that allow them to avoid taxes) and by lesser spending cuts that do not affect the poor.

The “sequestration” issue began in 2011 when a deadlock developed between Congress and Obama over the budget. Obama then proposed that a list of specific automatic spending cuts would go into effect on March 1 if no new deal was reached.

The proposed cuts were deliberately chosen to be so bad that Congress would not allow them to take effect. Or so Obama thought. He would use this as leverage to get the balance of tax increases and smaller spending cuts that he had in mind.

But, in the end, the Republicans called his bluff, and now the spending cuts have come into effect – US$1.2 trillion (RM3.71 trillion) over 10 years, starting with US$85bil (RM263bil) this fiscal year.

The effects will be felt not only by Americans but also the developing countries. They include the negative fallout on global growth and expected cuts in aid going to poor countries.

This comes at a bad time as the rich economies are already on a downward path.

Last week, the Organisation for Economic Cooperation and Development, the group of 34 rich countries, said that the gross domestic product of its members fell by an annual rate of 0.6% in the last quarter of 2012.

The European Commission, meanwhile, predicted that the Eurozone economies would contract by 0.3% this year, which could prove to be optimistic given the recent political uncertainties in Italy.

The spending cuts in the US would add to the contractionary trend in the rich countries.

The continuously weakening of the Western economies will have adverse effects on exports, tourism, workers’ remittances and incomes in developing countries.

There is another and more direct dimension to the “sequestration” on the developing world. The government’s spending cuts will affect the budget for aid given to poor countries and to development programmes such as provision of medicines and food, according to a report by the Inter Press Service (IPS).

The new secretary of state, John Kerry, revealed that the State Department and its aid agency Usaid, would have to cut US$2.6bil (RM8bil) from their 2013 budget.

The cuts would include US$200mil (RM619mil) from humanitarian assistance and US$400mil (RM1.23bil) from global health programmes.

For example, the US would reduce its contribution to the Global Fund to Fight AIDS, Tuberculosis and Malaria by US$300mil (RM928mil) this year, meaning there will be less medicine donated to poor countries.

Kerry has written to Congress stating that this reduction would reduce the United States’ ability to provide food assistance to two million people and Usaid would have to cease, reduce, or not initiate assistance to millions of disaster affected people, and would “gravely impede” efforts at reducing AIDS-related and child deaths.

The IPS report also quoted Jeremy Kadden of InterAction (an alliance of NGOs aiding developing countries) as saying: “These cuts will cost lives. We’ve made very significant progress over the past 10 years, with real people improving their lives, and this would set that process back enormously, devastating actual people on the ground.”

He estimated that the budget cuts would lead to some three million children losing access to the basic education they currently receive; two million people would suffer reductions in or stop receiving food aid, while 600,000 children would lose nutrition assistance.

Unlike in the United Kingdom, where the Cameron government decided not to cut its aid budget despite huge slashing of the overall government budget, there is no exemption for overseas spending in the US sequestration exercise.

The poor in America will also be affected. About 600,000 low-income women and children will stop receiving food aid.

Also affected in the US$26bil (RM80mil) cut in domestic programmes are health, education, drug enforcement, national parks and Hurricane Sandy relief.

Low-income families will also be affected by a cut in public housing subsidies, which could hurt about 125,000 poor families, according to The Guardian.

The National Institutes of Health, which will suffer a 5% budget cut, is cancelling hundreds of research grants.

Another US$16bil (RM49.5bil) in mandatory spending will be cut, including in medicare, agriculture programmes and unemployment benefits.

The main cuts will however come from the military budget, down by US$43bil (RM133bil) in 2013, on top of the US$500bil (RM1.55 trillion) budget cut over 10 years agreed to in 2011.

Global Trends By MARTIN KHOR

Related posts:
US Fiscal Cliff poses threat to economy worldwide!
The US Pacific free trade deal that's anything but free? 

The former Sulu Sultanate, a foreign problem in history that became Sabah's

AP In this March 1, 2013 photo, Sulu Sultan Jamalul Kiram III, centre, whose brother Rajamuda Kiram, along with more than 200 of their "Royal Army" followers has occupied a Malaysian village since February 9, joins a protest outside the Blue Mosque at the suburban Taguig city, east of Manila.

IT is too easy to dismiss the Lahad Datu standoff as typical of Sabah’s labyrinthine intrigue.

That would trivialise the rich history and cultural diversity of the state, besides mistaking a largely Philippine problem as being Sabah’s.

True, anywhere else in Malaysia with a significant Tausug population deriving from the former Sulu Sultanate’s diaspora, like the Klang Valley, would be unlikely to experience the drama of the past couple of weeks.

But none of the events in Kampung Tanduo, near Lahad Datu in eastern Sabah, was predictable or inevitable. The former Sultanate occupied only a small portion of Philippine territory and an even smaller portion of Sabah’s.

And yet, the peculiar combination of north-eastern Borneo’s demography, geography, history and political heritage provides a probable backdrop to just such a standoff. How did it all begin this time?

On Feb 9, nearly 100 Philippine nationals, several of them armed, arrived by boat to join a smaller group that had arrived earlier. They took over the village, claiming the area belonged to the Sultanate that they said they represented.

They also demanded recognition as the Royal Sulu Sultanate Army, as well as a meeting with an unnamed Malaysian leader. Malaysian authorities rejected both demands.

They further said they had come in support of Sabah’s Tausug population, alleging reports that following a Royal Commission of Inquiry into Sabah’s illegal immigrant communities, Tausugs would be deported.

Many locals would be surprised by the claim. Sabahan-Malaysian Tausugs, who prefer to be called Suluks, have long settled comfortably among Sabah’s three dozen or so ethnic groups.

Filipino Tausugs who arrived later as migrant workers, clinging more closely to their “Tausug” roots, may face a different reality. But ethnic persecution hardly if ever surfaces in Sabah because of, not despite, its rich cultural diversity.

The annual lease payment of RM5,300 agreed in 1903, increased from RM5,000 agreed in 1878, was also said to be insufficient. Others said the territory should be returned to the late Sultan’s descendants anyway.

Although British and Sulu versions of the 1878 agreement differed slightly, the Sulu version was clear enough: “… hereby lease of our own free will and satisfaction … all the territories and lands … forever and until the end of time, all rights and powers which we possess over all territories and lands tributary to us …”

Both the Philippines and Malaysia would rather do without such disturbances that serve only as irritants to bilateral relations. As modern nation states, both countries have evolved well past an extinct sultanate.

But there are also differences.

For Malaysia, the sovereignty and territorial claims of the former Sultan’s descendants are simply unacceptable. No such claims are negotiable.

The claimants argue that the sultanate’s territory had been leased only to Britain, with no agreement on incorporation into Malaysia. But their case is inconsistent.

Sabah, the former North Borneo, became a British protectorate from the late 19th century until it became a crown colony. It gained a brief period of independence before becoming part of the Malaysian Federation in 1963.

By then, the Cobbold Commission had determined that a majority of people in Sabah and Sarawak favoured the formation of Malaysia. For a century the former Sultan’s descendants did not retake territory, but instead agreed to continue accepting the lease payment under the previous arrangements.

The Philippine government, which subsumed the sultanate’s authority in the four provinces of Mindanao, also took over the role of pressing the claim to Sabah. Despite being a republic that had abandoned all royal authority, Manila continued with the claim before, during and after Malaysia’s formation.

Although the Philippine claim has since become dormant if not extinct, Manila found it difficult to renounce it. It has become an object of nationalists eager to strike populist postures in domestic Philippine politics.

The issue has a different spin among the Moro or Philippine Muslim community in Mindanao, of which Tausugs are a part. Despite Malaysia’s key role in peace talks between the two main Moro separatist groups and the Philippine government, both groups are not necessarily in Malaysia’s corner.

The MILF (Moro Islamist Liberation Front) disagreed with the takeover of Kampung Tanduo, saying negotiations should have been the way. This wrongly presumed that the issue was negotiable for Malaysia.

The MNLF (Moro National Liberation Front) is an even more enthusiastic supporter of the armed intruders. But it should be more mindful of the implications involved.

Since the former sultanate covered the Philippine provinces of Basilan, Palawan, Sulu and Tawi-Tawi in the ARMM (Autonomous Region of Muslim Mindanao), and only an eastern part of Sabah, followers of the former Sultan should first settle differences of territorial authority with the MNLF and the MILF before venturing into Sabah. They should also settle differences with Manila over such issues as hegemony, usurpation and compensation.

Both the Philippines and Malaysia, as sovereign states that had subsumed and developed beyond the Sulu Sultanate, have successfully concluded various agreements bilaterally and multilaterally. Those agreements confirm mutual acceptance of their respective statehood in their present configuration.

Besides, the former Sultan and his descendants had consented to the terms of the agreement in return for the lease payment. So long as payment is still made, they are obliged to continue abiding by the agreement.

That would make any unilateral attempt to retake territory by force of arms illegal and unjustified. Whether Malaysia will seek to prosecute after a resolution of the standoff is another matter.

Behind The Headlines by BUNN NAGARA

Related posts:

SABAH STANDOFF, invaders from the Philippines shoot dead!

Filipinos’ Sulu militant group in Sabah must leave Malaysia today

VIDEO: 15 KILLED IN MALAYSIAN STANDOFFWITH FILIPINO GANG CCTV News - CNTV English

SABAH STANDOFF, invaders from the Philippines shoot dead!

At least 14 people have reportedly been killed, after Malaysian police ended a standoff with nearly 200 members of a Filipino Muslim group.

Malaysia’s Foreign Affairs Ministry says police launched an assault on a coastal village in the eastern Malaysian state of Sabah early on Friday morning.

The village of Lahad Datu had been occupied by a group led by Agbimuddin Kiram, a brother of the head of a Filipino Muslim royal clan. The group from the southern Philippines landed in the coastal village on February 9th, claiming the territory as their own.

They cited documents from the late 1800s to back up their claim. The owner of the house where Kiram stayed was killed, and the Filipino group was reportedly chased towards the sea.



Najib: All-out action will now be taken against the intruders

Datuk Seri Najib Tun Razak said he was saddened by the deaths in the shootout at Tanduo village in Lahad Datu, because there had been bloodshed despite the Government's attempts to prevent it.

Expressing his sadness over the deaths of two police commandos who were killed and the three who were injured, the Prime Minister said the group of Sulu gunmen had opened fire at the security forces.

He said that with the deadline for them to leave now over, all-out action would be taken against the intruders, who had caused the deaths of the policemen.

“I have given the full mandate to Inspector-General of Police Tan Sri Ismail Omar and Armed Forces Chief Tan Sri Zulkefli Mohd Zin to take whatever action is deemed necessary,” he told a press conference.

“They have been given full powers. It is up to them and the ground commanders can take action.

“There will be no compromise; either they surrender or face the consequences.”

Najib said security had been strengthened and the intruders totally surrounded, adding that vessels of the Royal Malaysian Navy were patrolling the sea to prevent them from escaping.

“What is important now is that whatever means must be used to cripple the group,” he added.

Najib said he had received reports that 12 people from the armed group were also killed in the exchange of fire.

Source: Asia News Network

Related post:

Filipinos’ Sulu militant group in Sabah must leave Malaysia today 

Raising productivity growth

I REFER to the report “Malaysians lag in productivity” (see the related posts below). The recent findings by the Malaysian Productivity Corporation (MPC) shows that our worker productivity levels, productivity growth and productivity value are lower than several leading industrialised economies and even some developing countries in our region.

That’s serious and calls for a more specific analysis of the situation to identify the real causes and institute urgent remedial measures involving all factors that influence productivity. MPC is of the view that even with our 2011 productivity growth rate of 4.55%, we are still on track to become a high-income nation by 2020.

It must, however, be understood that when any single factor of productivity or total factor productivity is low, economic growth will not be sustainable over the long-term and will instead decline and with it bring down both employment and incomes.

Some reasons have been cited for our low worker productivity levels, such as workers who prolong working time to perform a job thus increasing costs, poor working conditions, low-level of worker motivation and lack of incentives, among others.

As the Malaysian Trades Union Congress (MTUC) and the SME Corp have pointed out, a major factor that keeps worker productivity levels low is the massive hiring and continuing dependence on low-skilled, especially foreign, workers, who make up a fifth to a third, or even more, of the workforce in various industries.

Also, the use of low, or even medium, level technology and the preponderance of low value-added industries dominating the economy, contribute to low worker productivity levels.

Clearly, in order to boost overall productivity levels, there is an urgent need to pursue quality growth by investing in and providing incentives for:

1. > Upgrading skills;
2. > Increasing local worker employment levels;
3. > Encouraging high value-added industries in all sectors of the economy; and,
4. > Tightening foreign worker policies.

Other measures should include increased partnerships with leading global companies, developing the talents and skills needed to support such businesses, promoting high-end local enterprises and investing in a strong 21st century education system.

While rewarding employees through increases in wages and benefits might please them, it should never be done on an adhoc basis nor as a mere handout exercise for whatever reason.

If rewards are to serve as incentives to increase productivity levels, such benefits must be for better performance that is measurable, and that leads to higher level and quality of output and gains.

Underlying the need to raise productivity growth and worker productivity levels is the importance of cooperation between the management or employers and workers in fostering a conducive working environment and increasing the quantum and value of goods produced or services delivered.

There has to be genuine scope for ongoing mutual dialogue among these “social partners” that promotes consensus-building and the democratic involvement of those with vital stakes in raising performance, productivity, profitability and personal rewards.

RUEBEN DUDLEY Former United Nations / ILO Regional Deputy Director for Asia & the Pacific

Related posts:
Malaysians lag in productivity 

Performance culture lacking, Malaysian workers!

Are we competent with competencies?  

Shy boys given rooms to grow as they are lagging girls

 

Schoolboys do relaxation exercises in an all boys class at the government-run Shanghai Number Eight High School. Shanghai, whose school system produces the world's top test-scorers, has launched China's first all-boys high school program with an eye on elite overseas institutions like Eton. Source: AFP

SHANGHAI: Teenage boys in a Shanghai school are on the front line of teaching reform after the world's top-scoring education system introduced male-only classes over worries they are lagging girls.

Rows of white-shirted boys are put through their paces as they are called up individually to complete a chemical formula by teacher Shen Huimin, who hopes that a switch to male-only classes will help them overcome their reticence.

"We give boys a chance to change," she said.

The Shanghai school system topped the Organisation for Economic Co-Operation and Development's (OECD) worldwide assessment tests of 15-year-olds in 2009, the most recent available, ahead of Korea, Finland, Hong Kong and Singapore.

But even so officials are concerned that some male students may be slower than their female counterparts in development and certain academic areas, such as language, and the shift towards single sex classes aims to boost boys' confidence.

Girls do better than boys in secondary school across the developed world, an OECD report found.

A prominent Chinese educator, Sun Yunxiao, found the proportion of boys classed among the top scholars in the country's "gaokao" university entrance exams plunged from 66.2 percent to 39.7 percent between 1999 and 2008.

Across the developed world, girls do better than boys in secondary school, the OECD's Programme for International Student Assessment (PISA) found in a 2009 report on the educational performances of 15-year-olds.

"There are significant gender differences in educational outcomes," it said, adding that high school graduation rates across the OECD were 87 percent for girls but only 79 percent for boys.

In response, Shanghai's elite Number Eight High School is halfway through the initial year of an experiment, putting 60 boys into two classes of their own - a quarter of its first-year students - and teaching them with a special curriculum.

Schoolboys solve a math problem in an all boys class at the government-run Shanghai Number Eight High School in Shanghai.

 "This is a big breakthrough," said principal Lu Qisheng. "There's lots of hope - hope that boys will grow up better.

"Boys when they are young do not spend enough time studying," he explained. "Boys' maturity, especially for language and showing self-control, lags behind girls."

-- "We lack confidence" -

China shut most same-sex schools after the Communist Party came to power in 1949, and the only all-boys junior high schools in the country are privately run.

The number of male students scoring top marks in China's university entrance exams has plunged from 66 per cent to 49 per cent

Shanghai does have an all-girls state-run high school, the former McTyeire School for Girls, which marked its 120th anniversary last year and counts the three Soong sisters - Qing-ling, Ai-ling and Mei-ling - among its former pupils.

Between them they married two leaders and an industrialist. Qing-ling married Sun Yat-sen, the first President of the Republic of China, while Mei-ling wed Chiang Kai-shek, who would also later become president.

Student Li Zhongyang, 15, said he felt less shy about answering questions in his all-boys class, but drew hoots of laughter from his fellows by suggesting an absence of girls let them concentrate more on study.

"We lack confidence," he said. "The teachers like girls, who answer more questions in class. This programme lets us realise we are not worse than girls."

It is something of a contrast to males' traditionally dominant roles in Chinese culture, but principal Lu said the programme "doesn't have much relationship to equality in society".

The scheme was launched after China's government called for more "diversification" in educational choices within the state system.

A Peking University professor has called for an even bolder reform, suggesting in September that boys should start school one or two years later than girls.

"The Chinese education system needs to improve and allow various education methods," Wu Bihu said on his microblog. Now Lu hopes to create China's first all-boys school one day.

"Ten or twenty years ago, there was no need for an all-boys class - just put everyone together," he said.

In an increasingly aspirational society, he added, some families saw the new programme as having connotations of top overseas private schools, and so promising an advantage in the highly competitive gaokao.

"The parents know: England has Eton," he said. - AFP

Are we competent with competencies?

Are you thinking of having or reviewing a competency model? Here are some tips on it

UNFORTUNATELY, the answer to this question, for many organisations, is a resounding NO!

Ever since psychologist David McClelland suggested that we should move away from the traditional measures of predicting job performance in Testing for Competence Rather than for Intelligence, in the early 1970s, many businesses and organisations have used some form of competency model as a key business tool.

Think about your own business or organisation, I am sure that you “have had, have, are thinking of having or are reviewing...” a competency model at this time.

Where are you on that continuum? The key questions are, “Why hasn't competency modeling delivered on its promise for many organisations?” and “Do competencies really add value to businesses and organisations?”

Have competencies been “a HR toy” and not a business tool? Let's look at some of the research behind competency modeling and see if we can answer these questions.

The use of competency models started with McClelland's work in the early 1970s.

A decade later, in 1982, Richard E Boyatzis illustrated a logical, integrated model of managerial competence in his seminal book called The Competent Manager.

His model provided a context for understanding the demands of management, and helped managers understand the competencies required to be more effective.

So, given that we had a reasonable start to the use of competencies in business why haven't competency models delivered greater impact into organisations?

In The Leadership Machine, Lombardo and Eichinger showcase research indicating that most organisations and their leaders identify the wrong competencies for success they don't know how to get at the essence of competency requirements.

They also show that many competency models are too compound trying to cram too many competencies into just five to 10 statements and hoping that will do the job!

In addition, a set of “Core Competencies” can't do the whole job for an organisation either jobs and roles are unique and generally require 20-25 competencies to describe the “Success Profile”.

The truth is all organisations need multiple competency models to fit their many different needs.

Yet, many organisations seem to think that a “one size fits all” approach will work. It's not that easy, I'm afraid.

A great starting point for an organisation, however, is a “Strategic Leadership Model”.

At least, that will let your leaders and aspiring leaders know what the organisation (normally the CEO and the board) thinks is going to be required to be a successful leader over the next five years or so.

A global Conference Board study from 2012 asked senior executives what were the most important items on their talent agenda. The top four (in order) were:

• Grow talent internally;
• Improve leadership development;
• Provide training and development; and
• Hire talent in the open market.

These are all great things to do high on your agenda, too, no doubt!

My question is the same for each point grow to “what”, improve against “what”, develop to “what”, hire against “what”?

I'm sure that you get my point.

Unless you can clearly define what you need in each area usually through a good Competency Model then you really don't know how to direct, focus or orient your growth, leadership development or hiring. Competency models are very powerful tools in this regard.

There are many good researches that show how the effective use of competency models can make a powerful business impact for an organisation.

Here are just a few. A longitudinal study by Russell in 2001 showed that top-level corporate executive performance can be reliably predicted by a leadership competency model. In addition, he showed that a competency-based executive assessment and selection process lead to an increase of US$3mil (RM9.29mil) in annual profit per candidate selected into the organisation.

Pluzdrak conducted a study in 2007 on the effectiveness of a Leadership Development programme and showed that positive changes on the key leadership competencies of individual leaders were positively correlated with both increase in net revenues and profitability!

A 2008 study by Clark and Weitzman used regression analysis to show that the demonstration of 13 core management competencies accounted for 54% of the difference in first-year sales commission and 30% of the difference in levels of retention.

They also found that developing people to be one standard deviation better on the key competencies driving performance generated an additional US$467,000 (RM1.45mil) per person every year!

The original question for this article was “Are we competent with competencies...?” Take a good, hard look at your own organisation and ask the same question.

If your answer is “No, not really... Not as good as we should be...” then remember that you can be and that there is every reason “Why you should be” and “Why you need to be”.

Talking HR with Graeme Field

Graeme Field believes that doing the basics' right getting the fundamentals in order is key to driving organisational success in the future. What we do operationally' today really does impact what happens strategically' tomorrow!

Performance culture lacking, Malaysian workers!

PETALING JAYA: Malaysian workers lack performance culture and generally spend half their working hours on matters unrelated to their job, said experts.

Leaderonomics chief executive officer Roshan Thiran said the laid-back working culture was partly to blame for the country’s low labour productivity.

“We tend to mix our working hours with bonding with colleagues and relationships whereas in other countries, working hours are made full use of,” he said.

He advised employees to perform self-audits to identify unproductive activities in the office that drained their working hours.

A check by The Star with several human resource practitioners revealed that Malaysian workers in general only spend four hours in a regular nine-to-five work period being productive.

Another two hours are spent on social networking sites or browsing through the Internet, whilst long lunches, cigarette breaks, tea breaks and office chatter make up for the other two hours.

Malaysian Employment Federation executive director Shamsuddin Bardan said our low productivity levels could drive away investors to neighbouring countries.

Shamsuddin said the unprofessional attitude among workers was in stark contrast to high-performance nations which encouraged a professional working culture with a focus on developing human capital.

“Some here have the ‘so long as I show up to work, it’s enough’ attitude, which shouldn’t be happening,” said Shamsuddin.

Human resource consultant Dr Asma Abdullah said Malaysian culture generally regarded the workplace as a social unit where work and social interaction mixed.

Meca Employers Consulting Agency executive director Dharmen Sivalingam said some employers had difficulties addressing their under-performing staff.

“Malaysian employers generally find it hard to converse with their employees on the matter of their productivity. It may be because they don’t want to be put in positions where they have to confront their subordinates,” he said.

Sivalingam also said workers in foreign countries were constantly under probation which keeps them performing at their best.

He said managers need to develop a proper key performance index system and see to it that employees understand how they are being assessed.

By NICHOLAS CHENG The Star/Asia News Network

Related posts:

Malaysians lag in productivity

Malaysia world's No.1 highest civil servants-to-population ratio! Its tenure of service legally vulnerable but notoriously difficult to dismiss!