Posted on 16 December 2013 - 06:32pm
Last updated on 16 December 2013 - 10:26pm
KUALA LUMPUR (Dec 16, 2013): The trade mispricing issue will be mitigated by the introduction of the Goods and Services Tax which requires reporting of value-added at the various stages of production, says Bank Negara Malaysia (BNM).
The central bank said the government has undertaken wide-ranging measures to combat illegal activities to reduce such financial flows.
"Recognising the importance of addressing financial flows associated with irregular activities, continued concrete and coordinated efforts between the enforcement agencies including across borders will continue to be pursued to ensure the integrity and stability of the Malaysian financial system," it said in a statement issued today.
BNM said a report by an external non-governmental organisation had raised the issue of substantial illicit financial outflows from developing economies. The central bank said the report acknowledged that the use of re-export hubs overstates the magnitude of trade mispricing.
"Nonetheless, the removal of re-exports via Hong Kong is not significant for Malaysia as Malaysia's trade with Singapore that is for re-export is more than thrice the size of Malaysia's trade with Hong Kong.
"If re-exports via Singapore to Malaysia's top 10 trading partners were included, this would reduce Malaysia's trade mispricing by about 70%," said BNM.
The report also estimated that 20% of illicit outflows were accounted for by unrecorded transfers of proceeds via informal channels.
"For a highly open economy such as Malaysia with total trade of goods and services amounting to 162% of Gross Domestic Product, statistical compilation errors and omissions (E&O) in the balance of payments (BoP) are bound to arise.
"Importantly, not the entire E&O figure is attributable to illicit activities and Malaysia's cross-border statistics have consistently met all the international standards set by the International Monetary Fund (IMF) and the World Bank.
"In particular, the E&O of the BoP has averaged at 2% of total trade, well below the 5% benchmark threshold prescribed by the IMF," the central bank said.
On March 1 this year, BNM issued a press release providing an update on the measures taken by the High-Level Multi-Agency Special Task Force.
"These have included strengthening the regulatory framework, intensifying enforcement efforts and enhancing the surveillance mechanism. The measures have yielded positive results and will continue to be intensified," BNM added. – Bernama