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How will the US shutdown affect Malaysia and Asean?

by Dr Arno Maierbrugger, investvine.com. Posted on October 6, 2013, Sunday

The cancellation of US president Barack Obama’s trip to Malaysia, announced on October 1 to an understanding Prime Minister Datuk Seri Najib Tun Razak, is highly likely not the only result of the bizarre US government shutdown for Malaysia in particular and Asean in general.

No one knows how long the shutdown will last, but travel and trade will definitely take a hit.

As per October 2, the US government said that passport inspectors, security officers, air-traffic controllers and customs officers will continue working. Also, US embassies will remain open and process visa requests, according to the State Department. Mail in the US will continue to be delivered, as the US Postal Service is an independent agency.

However, passport offices in the US, in case they are located in a government building, may close down. Likewise, government contractors may be impacted if they work in a federal building or need federal worker assistance, or if they need additional funding to continue.

The Department of Homeland Security will no longer operate its E-Verify programme, which means that businesses will not be able to check on the legal immigration status of prospective employees during the shutdown. For expats waiting in Asean for a new US passport, how long they wait will depend on where the passport agency in the US is located that is supposed to issue the document.

Trade impacts are not clear yet. Most employees of the Transportation and Security Administration and Customs and Border Protection remain on duty, but countries that export goods to the US are bracing for possible delays at the border and a drop in demand from US customers. Countries that sell to US government agencies could face delays in payments or a halt in new orders.

A shutdown that lasts at least a month could cause one to two percentage points being knocked off of fourth-quarter gross domestic product (GDP) growth in the US, which would impact demand from Asia in particular. East and Southeast Asian economies that are most export-intensive and have the biggest share of exports going directly to the US such as Singapore, Malaysia, Taiwan and South Korea, would be most affected.

For example, both the US Department of Agriculture (USDA) and the Food and Drug Administration (FDA) have shut their websites and ceased online services, which could eventually cause problems for food exporters. Most USDA food inspectors, who inspect meat, poultry and red meat, are still working, though the number of workers could decrease if the shutdown lasts longer than a few days.

FDA food inspectors, who inspect seafood, dairy and other agricultural products, are not working. The department has ceased, among others, its routine inspections and import monitoring.

This means, that apart from electronics and machinery that are the main export goods from Malaysia to the US, there could be troubles in trade with agricultural products such as rubber, palm oil, as well as seafood.

Malaysia’s trade with the US has already been in decline, with July’s exports lower by 11.3 per cent to RM4.86 billion compared to the same period in 2012, according to Malaysia’s Department of Statistics. The US is currently Malaysia’s fourth biggest export nation, after Singapore, China and Japan, but this could change rapidly if the US doesn’t get their house in order.

 

Dr Arno Maierbrugger is the editor-in-chief of www.investvine.com, a news portal focusing on Southeast Asian economic topics as well as trade and investment relations between Asean and the Gulf Cooperation Council. Investvine.com updates its clients on current business news and financial market data and publishes interviews with prominent business people as well as government officials. The related website www.insideinvestor.com is currently being developed as an online platform connecting investors with investment opportunities.

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