Malaysian Constitution and the Government's use of trade barriers.

by stamford (student)

Question 1

According to Hickling(2001), the Malaysian Government follows the Constitution of the Federation of Malaya which was established on Merdeka day, August 31, 1957 in setting up its administrative and policy making decisions. Malaysia practices parliamentary democracy and is ruled as a constitutional Monarchy with Yang di Pertuan Agong as the head of the country. Under the constitution, Malaysia as a federation is ruled as a Constitutional Monarchy with the appointment of the Yang di-Pertuan Agong (King or Supreme Sovereign) as the head of the country.

The federal Constitution of Malaysia divides the authority of the federation into its Executive, Legislative, and Judiciary authority.

As stated in My Government, executive Authority refers to the power to govern the country. The Yang Di-Pertuan Agong is the head of the Executive Authority. However, he acts on the advice of the Prime Minister who heads the Cabinet. Hence, the Prime Minister is the Chief Executive and the head of the Government. The Prime Minister, Cabinet and the government administrative machinery are given the task of carrying out executive functions.

According to Wu(1975), legislative authority is in the hands of the Parliament, which comprises the Senate, House of Representatives and the Yang Di-Pertuan Agong who heads the Legislative Council. The Legislative Council functions as a law maker and has the authority to raise taxes and authorise expenditure.

As stated in the Federal Constitution by Chang(2006), the judiciary is given the authority to hear and determine criminal matters, interpret the legality of any legislative and executive acts and the Federal and State Constitutions. The Head of the Judiciary is the Lord President of the Federal Court, which is the highest court in Malaysia.

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The Malaysia society places a high value on business. One can always hear and see news about businesses and the market news everywhere on the media. The government of Malaysia endorses free market society where entrepreneurship is thoroughly encouraged alot. Another aspect of Malaysian government is that it follows Islamic rules as a main guidelines in any business.Any country that hopes to trade or do business in Malaysia must understand that Islam is not just a religion within the country, it is entrenched in all aspects of the country even those thought to be secular. A company may want to look into past research of other countries they have tackled with such a dominant religious counterpart in government or do an even more in-depth analysis in general on how to approach the governmental system of the country as a whole. Tackling the Malaysian government poses not only the regular difficulties associated with entering a country but presents an even more complicated issue in the sense that the company must also cooperate with a long Islamic tradition as well. For example, when McDonald’s first came to Malaysia in 1982, they are restricted to sell foods that are branded as “Halal’ by Islamic law. This means that they can’t sell their famous hamburgers which were made of pork meat. Besides that they also have to follow strict food preparation methods as implemented by de current government when preparing food for example, chicken n cows must be slay and killed through the means of cutting the throat only.

Question 2

According to Radcliffe(2011), trade barriers are regulations or policies that are established to both protect an economy and support an infant economy from international markets. Trade barriers are sometimes seen as a detriment to the economy because it limits trade. By doing this it forces people to buy locally which can encourage growth but may also drive up the cost of living. Trade barriers are divided into two sections.

The first is called tariffs which directly tax a good entering a country. They can be charged to individual goods or on all goods. According to Business Press(2009), in Malaysia the average tariff on all goods has dropped from 8.56% to 8.4% between 2005 and 2008. The second type of trade barrier is a nontariff barrier. These can include subsidies, Loans and aids, Customs Valuation, Quotas, Standards and Labels, Administrative Delays and many others.

Malaysia has used a great deal of these barriers to protect its automotive industry. Since free trade typically results in more profitable trade many of the trade association such as The World Trade Organization and the ASEAN have required a drop in automotive tariffs. According to Asian Trade(2009), they have dropped from 40% to 20% in 2005 and 5% in 2008.

Malaysia’s Ministry of International trade and Industry has developed a system of approved permits (AP). These permits allow foreign automobiles to be imported and then distributed. The system of AP acts as a quota by restricting the number of vehicles allowed into Malaysia. The current cap is 10 percent of the market. Malaysia also has strict traffic regulation and noise standards that act as a non-tariff trade barrier, by not allowing foreign vehicles that do not fit the requirements into the country.

Malaysia uses an industrial adjustment fund to provide for locally assembled vehicles. Components sourced from locally registered components manufacturing companies are eligible for tax reductions, raising concerns that this fund revives the local content program that had been abolished in 2004. Because of the small-scale operations of many foreign carmakers in Malaysia, they cannot source components locally, thus preventing them from benefiting from this fund.

References

Chang. (2006). Malaysia's Judiciary. Available: http://malaysianjudges.blogspot.com/. Last accessed: 12 February

Hickling,R.H (2001). Malaysian law: an introduction to the concept of law in Malaysia. Kuala Lumpur: Pelanduk Publications.

No Author. (2009). Asean Automotive Trade Rate. Available: http://trade.gov/static/ASEAN%20Automotive%20Market%20Final.pdf. Last accessed 12 February 2012.

No Author. (2006). Corporate Milestone. Available: http://www.mcdonalds.com.my/abtus/corpinfo/milestone.asp. Last accessed 12 February 2012.

No Author. (2007). Executive Authority. Available: . Last accessed: 13 February 2012

No Author. (2009). Online Tariff Finder Launched For Malaysia’s Trade Communities. Available: http://www.heritage-tech.net/628/online-tariff-finder-launched-for-malaysias-trade-communities/. Last accessed: 13 February 2012.

Radcliffe,B. (2011). The Basics Of Tariffs And Trade Barriers. Available: http://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp#axzz1mNXfDlcy. Last accessed 13 February 2012.

Wu,M.A (1975). An introduction to the Malaysian legal system. Kedah: Heinemann Educational Books.