Showing posts with label malaysia economy. Show all posts
Showing posts with label malaysia economy. Show all posts

Wednesday 16 December 2020

Demystifying world and local economy.

Today's news is peppered with economic terms, but rarely is any attempt made to help us cut through the complex jargon we are being bombarded with.

Essentially, the world economy is no more complicated than the domestic economy that we navigate daily.  Sound economic judgement is one of the most needed skills in the world today.   We need to have the tools to be able to make sense of future economic events - good or bad.

Many of us are bewildered by a fast changing global economy that seems too big and too complicated for us to understand.  So we let the politicians make our decisions for us.  Unfortunately, the politicians are not always going to do what is best for us.  They are going to do what is best for them and their re-election chances.

Politicians care about what voters think, especially voters in blocks, and not a shred about what economists think.  Talking to politicians about economics is therefore a waste of time.  The only way to make governments behave as if they were economically literate is to confront them with electorates that are.


Thursday 12 July 2012

Malaysia National debt at RM257.2b in 2011


May 08, 2012

KUALA LUMPUR, May 8 — The country’s national debt at the end of last year stood at RM257.2 billion or 30.2 per cent of Gross Domestic Product (GDP), the Dewan Negara was told today.
Deputy Finance Minister Senator Datuk Donald Lim Siang Chai said the country’s national debt or external debt was debt borne by the country following loans obtained by the government and the private sector from overseas sources.
“It comprises the external debt of the federal government, non-financial public enterprises and private sector,” he said in reply to Senator Datuk Paul Kong Sing Chu and Senator Datuk Abdul Rahman Bakar.
Lim said the federal government’s total debt was RM456.1 billion or 53.5 per cent of GDP.
“Of the total, RM438 billion or 96 per cent was domestic debt while the balance RM18.1 billion or four per cent was external debt.
“The low external debt was in tandem with the government’s policy to give priority to domestic borrowing as the market had high liquidity, the cost of  borrowing was lower, and to minimise foreign exchange risk,” he said.
Lim said the federal government’s domestic debt sources were treasury bills, investment certificates, government securities, the Housing Loans Fund, issuance of Sukuk Simpanan Rakyat and Sukuk 1 Malaysia.
He said the holders of such instruments comprised financial institutions, insurance companies and institutions like Employees Provident Fund and Social Security Organisations.
He said sources of external debt were the international capital market through issuance of global sukuk, draw down of project loans from multilateral institutions like the World Bank, Asia Development Bank and Islamic Development Bank, and also bilateral borrowing in foreign currencies such as the US dollar, yen, euro, Canadian dollar and dinar.
“The government is committed to ensuring the debts are repaid according to schedule and so far, repayments are in order.
“This is the result of a prudent debt management approach. Last year, total debt service was RM17.7 billion or 9.7 per cent of the management expenditure,” said Lim.
In reply to Datuk Syed Ibrahim Kader, he said specifications for the new coins were in line with the finding of research conducted by Bank Negara Malaysia.
“The research was done between January and April 2009 covering discussions with the public, traders and other parties such as banking institutions and cash machine operators.
“The study’s crucial finding is that people prefer smaller and lighter coins compared with the previous ones,” he said.
He said the trend to reduce the size and weight of coins was among major strategies adopted by central banks in enhancing technical specifications when introducing new coins. — Bernama


Sunday 29 April 2012

Credit ratings cut on cards for Malaysia


Credit ratings cut on cards for Malaysia
Malaysia Sun
Saturday 28th April, 2012  
Malaysia faces a credit ratings cut over concerns about its high national debt.
Malaysia faces a credit ratings cut over concerns about its high national debt.

Standard Poor's and Moody's have said there is a possibility that the credit rating could be downgraded if the debt is not lowered.

While Malaysia's central bank has said the national debt is manageable given Malaysia's improved economic credentials, there have been suggestions the debt has been created by current government politicians who have spent large amounts of government money to gain support ahead of the nearing general election.

The Malaysian national debt currently stands at 54 per cent of its gross domestic product.

Sunday 19 September 2010

Buffettologism and Malaysia


Save yourself from BN economic failure - embrace Buffettologism


The Minister Mentor may be dictatorial, but he uses it for the good of his citizens and transformed the country into a modern state and he will be loved more. You can always use your horse sense like what the Minister Mentor does but you didn't.  

By 2partysystem 
If you're poor and you think it is because of BN economic policy, you should consider Buffettologism seriously. I've had enough of living from hand to mouth since I started working 20 years ago. Then I embraced Buffettologism and it changed my life for good - richer, happier, and healthier. It works for me and I'm sad I came to know about it a bit late but I'm glad I can still share it with my fellow Malaysians. 
I've never made any profit in the stock market in Malaysia even during a bull run; I only see my money grow in overseas stocks after embracing Buffettologism. When Bill Gates met Warren Buffett for the first time, the meeting lasted for ten hours and Bill Gates became his devotee. That's right, even Bill Gates became a devotee! Now that the price of essential items and cost of living have gone up, let's see this Sage of Omaha's philosophy and what we should do to save ourselves. 
His advice to young people: Stay away from credit cards (bank loan) and invest in yourself and remember:
1) Money doesn't create man but it is the man who created money.
2) Live your life as simple as possible.
3) Don't do what others say, just listen to them, but do what you feel good.
4) Don't go on brand name; just wear those things in which you feel comfortable.
5) Don't waste your money on unnecessary things; just spend on them who really in need rather.
6) After all it's your life then why give chance to others to rule your life. 
Warren Buffett has never borrowed a significant amount to invest or for a mortgage because living on credit cards and loans won't make you rich. To prevent yourself from servicing a bank loan, be careful when buying cars and houses. There are always arguments for and against owning a house in terms of investment. Unless you have lots of money to spare, buying an expensive home is not worthwhile for a wage earner because you will be overwelmed by debt. I started asking why should I give a chance to others to rule my life. Just see who gets richer and it is definitely not you.  
From my experience of owning a low cost flat applied (I'm qualified) through the Penang State Government under BN and all the way to the High Court which I won due to a delay in completion, I'll never again buy any house or new cars even if I'm a millionaire. Winning is nothing because the developer knows how to go about the system to make you lose even more. There was hanky-panky going on and I've nothing good to say about our judicial system. You also need to deal with liquidators and the Insolvency Department. The poor Malay and Indian buyers have to suffer too and no thanks to the Penang State Government under BN for doing a lousy job - not supervising the project properly. You never hear this type of nonsense in Singapore. My self nature is quite similar to what he advices but because of listening too much to other people, I suffered financial loss. 
Have you ever wondered why Warren Buffett didn't make quick bucks through property speculations? This is because he lives his life as simple as possible, avoiding endless migraines. One late tycoon in Penang who became famous for his motorbike business lived a life of unceasing litigations, according to one of his lawyers. Instead of enjoying his rich lifestyle, he was engaged with his lawyers going through legal matters and madness. Your land can be taken away by the Government at a low price on the pretext of building a school or hospital but later sold to commercial property developers at a high price to pocket the money. These bastards make a profit out of your land and all these freehold and leasehold tags are all bullshit. You can sue but you lose not only your money but also the case itself. Of course some can still argue that real property is a good investment because property appreciates but against the huge mortgage to pay off, house that cracks, legal fees and tenants who don't pay up, consider yourself lucky if they didn't pour cement into your toilet bowl.  
Warren Buffett has gotten many heart-rending letters from people who thought their borrowing was manageable but became overwhelmed by debt. His advice is, negotiate with creditors to pay what you can, then when you're debt-free, work on saving some money that you can use to invest. Poor people frying goreng pisang or char koay teow can stop these corrupt politicians from spending on expensive goods from rich countries by embracing Buffettologism and investing rightly on the pittance they make and don't give chances to others to rule your life. The best defense in a tough economy is to add the most you can to society because your money can be inflated away but your knowledge and talent cannot. No matter the external circumstances, you are always in control of your talent, learning and passion for life and there will always be opportunities for talent. 
His stand on integrity: Lose money and I will forgive you, but lose even a shred of reputation and I will be ruthless.
1) We will not trade reputation for money.
2) It takes 20 years to build a reputation and five minuted to ruin it. If you think about that you'll do things differently.
3) The most important thing to do if you find yourself in a hole is to stop digging.
4) In looking for people to hire, look for three qualities: integrity, intelligence, and energy. If you don't have the first, the other two will kill you. If you hire somebody without integrity, you really want them to be dumb and lazy.
5) Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
6) We celebrate wealth only when it's been fairly won and wisely used. 
Wealth can always be recreated but reputation takes a lifetime to build and often only a moment to destroy. One Defence Minister said something nonsensical like if you damage the country's image, then you are a traitor. What kind of image and whose image was he talking about and why don't Pakistan's or India's nuclear warhead get stolen by a low ranking officer? In Altantuya's case, if it's true she died because of the USD500k commission, then who's going to trust Malaysia in business dealings involving bigger sums of money? The Government should honour its agreements with Chin Peng to allow him to return home and with the company that was not being paid for printing election posters. If you do think about your reputation, you would have done everything differently.  
MACC was not aware that some people will not be easily turned around even when they are threatened. Teoh Beng Hock's martyrdom proved that he won't trade reputation and principle for money or threat. His death signifies that he is a man of honour and would never stoop to any form of deceit. If those who helm these institutions don't have integrity, according to Warren Buffett, you can expect them to be dumb and lazy. Just see what kind of stupid things they have done at the coroner's inquest and they still talk about "image" not to mention how many deaths in custody, the Perak putsch, etc. 
In Anwar's sodomy II case, the powers that be is treating all Malaysians like stupid fools, not knowing what anal sex is all about. The powers that be is sending this message to whole world, "Look, we can treat our citizens as idiots". If you have the passion to learn, you can actually educate yourself about anal sex (see "Guide to Anal Sex by Marilyn Chambers" etc) and make a fair and logical judgment whether Anwar really committed the act. I strongly oppose censorship of the internet because it helps me obtain vital information and statistics to the case, like age and libido, sex process, tools and lube used, penetrating evidence, the anatomy etc to develop my belief systems.  
Singapore placed integrity as an important criteria that eventually allow one of our casino companies to operate there. This company had been observed by Singapore for a very long time in terms of integrity, management, performance etc, otherwise they won't have to even dream of opening one there. And if this company finds Singapore a better environment to do business, decides to move their HQ there and pay their group corporate taxes to the island republic, with its tax incentives and effective tax rates as one of the lowest in the world, who is going to gain and who is going to lose from the DTA? Why didn't Singapore allow the opening of casinos in 70's and 80's to compete with us and why now? You know the answers. 
Warren Buffett: Chains of habit are too light to be felt until they are too heavy to be broken.  
Besides smoking, drinking, gambling and womanising, the worst of them all is the clinging to NEP, "Ketuanan" and "Hak Istimewa" addiction even when it is already empty and essenceless. Some people will still be shouting while grasping for air to soothe their souls. Of course it is a lucrative business for the kingpins, selling these drugs to the Malays and so they get hooked. Take away the drugs and there will be riots. The truth is the non Malays have nothing to lose if the addiction continues but will put the country in peril of bankruptcy. Why don't you just ask the rich non Malays to hide away their wealth so that it won't create so much jealousy and problems here? Rich people like Warren Buffett don't need status symbols, they would like to keep a low profile and enjoy their private life. So, instead of expensive fancy cars that most of us would like to pursue, rich people should have normal cars to prevent anyone knowing that a billionaire is inside. Our lives would be more peaceful if we follow Warren Buffett. 
You can become a billionaire by saving RM5000 every month, invest your savings that give 15% or more return annually and compounded and do that for 55-60 years. In fact, everybody can become a millionare, just by reducing your savings to RM50 every month. By considering inflation, increases in amount saved and percentage return fluctuations and luck, there is nothing to be jealous about the non Malays having more money, because the Malays already have a good investment vehicle, the ASN to do that for them. When you first make money, you may be tempted to spend it. Don't. Instead, reinvest the profits. There is a legend that Albert Einstein once said that compounding interest is the the most powerful force in the universe.    
Recently I saw some billings/demand for payment letters thrown in the rubbish area belonging to a few Malay civil servants in their early 20's and I was totally shocked. Their debts come to about RM50-60k and cellphone to the tune of RM500. These are cash loans, a product with an Arabic name from a local bank and they are not housing, car, study loan or credit card debts. I began to wonder how they are going to manage it and whether they need to repay the bank. Don't get me wrong, the non Malays too have debts but the impression is, what did the Government do to educate the Malays to be more prudent and thrifty? The Government is making the Malays poorer by employing them as civil servants unless there are hidden opportunities for rent seeking. Courage does not grow on its own if you did not learn how to deal with hardship in business by yourself. I've seen with my own eyes people around me who started as a rubber tapper, waiter, labourer, pump attendant, washer etc and are today multi-millionaires (some overseas based) and those who started as a civil servant retired with accumulated debts.  
For every RM50k lost without collateral, the bank needs to have about 15 - 20 good RM50k loan to cover that one lost because of interests the bank needs to pay to these 15 - 20 depositors. Unless money drops from heaven, you would like to think a thousand times before giving out loans to these borrowers. 
Warren Buffett: If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don't do that though.  
He says the GDP would go up if he hires 10,000 people to do unproductive activities and these GDP, GNP, GNI, FDI data sometimes capture our interest without knowing that they can be manipulated. You don't get paid for activities, you only get your rewards for being right. The annual report of listed companies can be deceiving too for example their RM20mil inventory may be worth only RM3mil due to depreciation, overseas operational profits may not be accurate because we can't see their operation and fixed assets plus different system of accounting, forcing or bribing reporters to write good news about the company - to name a few. The worst I heard from a horse's mouth is that "many didn't have secretive information exchange from the top thus the poor are always the suckers". How are we going to challenge or compete with the rich particularly in this country? Buffettologism is a good way out for us, the poor.   
Warren Buffett believes that in 20 years' time, all the cars on the road will be electric. He's already invested in a Chinese company working on the technology to make it happen. Buffett thought of the peak oil theory, that oil production has peaked and will only decline in the future and what he believed would replace carbon fuel. Actually, this Chinese company copied competitors' designs piece by piece. I wonder why he didn't invest in our local auto company because we also copy competitor designs car by car for some models. Seehttp://www.businessinsider.com/here-is-exactly-how-warren-buffetts-chinese-auto-company-byd-copied-competitor-designs-piece-by-piece-2010-2
Because of greed and arrogance, we damaged our reputation first then we tried to rebuilt it again.
Warren Buffett on US, China and other countries: Do not see the global economy as an "us against them" struggle: if China does well, or Russia, it won't make America any less prosperous.
1) The truth is, the Chinese will do better, because they're starting from a lower base, but they have learned a tremendous amount about business in the last 20 years, and about how to unleash the human potential, and that's something that the US learned earlier. And but they're picking it up very, very, very fast.
2) I know that 10 years from now, 20 years from now, China and India are going to be a long way ahead of where they are now. So I don't worry too much about whether there's going to be a sudden interruption or something.
3) He really believes the U.S. economy will recover and be strong for decades to come.
4) He said America has a great system and it has always worked, and it will keep working in the future. 
We used to think that the Indonesians are poor and dirty, didn't we? They may be dirty because of their work but they're not poor anymore. Just go to their villages in Java and see what kind of houses they are living in and compare to ours in slump areaa. I knew one maid who was able to sent back RM25k just to build a house on her land plus buying a new motorbike and cash for emergency uses. Their investment comes in the forms of property and agricultural products like cows, seeds or fertilizers that could generate future income. They won't buy luxury goods like cars just to show off but they will buy cars that carry goods. They would rather travel by public transportation. Their President is working very hard to eradicate corruption although it is still rampant. We are still dreaming and think that we can hire them for RM500 per month. 
Recently, I met and talked to one Indian manager attached to a US MNC based in Dubai about Indian workers. He said many penniless Indians went to Dubai to search for work door to door with the help of their fellow countrymen. Many became successful and managed to saved a lot of money. Besides money, they also gained experience and exposure, learn new things, see other parts of the world etc. When I was abroad, many Chinese nationals tried to get acquainted with me thinking that I'm their countrymen and this makes me feel that we lack acquaintedness (hopefully I had erred) which stemed from entrenched "us against them" struggle and distrust where people's views are polarized and narrowed down to racially-based perspectives.  
People throughout the world migrated to the US is because they have a great system such as total freedom to unleash the human potential unmatched by any other countries in the world. Enhancing the human potential should not be controlled or managed by anybody, it should be left to one's liberty to choose what they want to do. Here we have a very lousy system such as having difficulty in choosing the courses we like to study even with good results and those assembling peacefully to celebrate an event will get arrested. Some choose to ship out and some only stick to "special privileged" civil service jobs that one could get rich only by rent seeking. 
Today, China is developing the fifth generation stealth fighter jet the J-XX, moving and transforming away from a Third World country status of 20 years ago. What about us here? 20 years ago our engineers' starting salary is still the same as today's, with our maquiladora-like mentality and having foreigners as our cheap laborers. What have we done to improve our human potential? The whole fucking problem is I can't simply walk into our local universities to study or take courses of my choice and interest and the government failed to make high quality university education in abundance. In the words of John F. Kennedy, "A child miseducated is a child lost. Our progress as a nation can be no swifter than our progress in education. The human mind is our fundamental resource."  
Know What Success Really Means: Despite his wealth, Warren Buffett does not measure success by dollars. In 2006, he pledged to give away almost his entire fortune to charities, primarily the Bill and Melinda Gates Foundation. He's adamant about not funding monuments to himself -- no Warren Buffett buildings or halls. "I know people who have a lot of money," he says, "and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age, you'll measure your success in life by how many of the people you want to have love you actually do love you. That's the ultimate test of how you've lived your life." 
I want to ask Tun Dr. Mahathir, do you love us all equally as your Malaysian children or you only love some of your "selected" Malay and non Malay children? Remember Warren Buffett said "love trumps wealth" and if we children have to struggle through each day with 34% earning less than RM700 per month while you can live and spend like kings for yourself and for your "selected children" then we are going to be very suspicious of our father.
You said "Most of the wealth of the country belongs to the Chinese. It can also be said that the Chinese control the economy of the country, the NEP is about giving the Malays a fair stake .....bla bla bla ....bla bla...." and I ask why all these jealousy? You break up your children into classes, make them quarrel among themselves, those who did well in exams did not get the proper rewards prompting them to get out of the house. Is there anything wrong if your children go to different schools, learn different languages, have different friends and get different examination results but come home to you as the unifying father and speak the same language with you? In fact there are so many ways to help everyone fairly and enough wealth to be distributed among all your children who can theoretically enjoy better life, better education and better medical facility; the most important is that we don't quarrel among ourselves.  
Or was it because you need to make all these money to overcome your inferiority complex to stand equally tall with Marcos, Suharto, Thaksin or the most "unbearable" the Minister Mentor down south when dealing with them in this region? Or was it because there might be a military intervention by the US or Chinese government in Malaysia because we have a lot of oil?
Your "selected" children will appreciate what you have given them and they can give good lip services but they actually don't love you. How can they love a leader who destroyed good governance, law and order, quality education, religious brotherhood, peace and harmony unless they themselves don't have good conscience?
If Hitler gave me tons of money or gold, I may appreciate what he had done for me but it is impossible for me to love him. I love Warren Buffett and many do so because he is willing to share his legitimate success secrets with all and get us out of financial mess. The Minister Mentor may be dictatorial, but he uses it for the good of his citizens and transformed the country into a modern state and he will be loved more. You can always use your horse sense like what the Minister Mentor does but you didn't.
We need to save ourselves from financial "doom".

http://malaysia-today.net/mtcolumns/letterssurat/34589-save-yourself-from-bn-economic-failure-embrace-buffettologism

Friday 3 September 2010

Malaysia Refrains From Raising Interest Rate as Rebound Cools

September 02, 2010, 12:01 PM EDT

By Shamim Adam

Sept. 3 (Bloomberg) -- Malaysia’s central bank left interest rates unchanged after three consecutive increases, choosing to support growth as the global recovery slows.

Malaysia started raising interest rates before any other Asian central bank this year to reduce what officials say is the risk of financial imbalances caused by keeping borrowing costs too low for too long. The region’s efforts to withdraw monetary stimulus introduced to counter last year’s global recession may slow as policy makers from the U.S. to Japan take steps to shore up growth amid signs their economies are cooling.

“The second-half outlook is gloomier globally and the strength in the Malaysian economy will be unlike what we saw in the first half,” said Wellian Wiranto, a Singapore-based economist at HSBC Holdings Plc. “It looks like they are done for the year and the question now is whether they are going to keep it unchanged for much of 2011. With Malaysia being one of the first ones to move, 2.75 percent may be what they deem as normal.”

Exports by Malaysian companies such as Sime Darby Bhd. and Unisem (M) Bhd. rose at the slowest pace in eight months in July, a report from the trade ministry showed yesterday.

Exports Cool

Malaysia’s export growth has slowed in recent months along with shipments from other countries in the region, the central bank said. “These conditions are expected to continue with the slowing of global growth,” it said.

Still, Malaysia’s growth will be supported by “robust domestic economic activity” even as the external developments may moderate the pace of expansion, Bank Negara said.

The ringgit is the best performer in Asia excluding Japan in 2010 as the economy strengthened and the central bank raised rates. The currency, which has gained 9.5 percent this year, traded at 3.1275 per dollar at 6:31 p.m. yesterday.

Malaysia’s economy, the largest in Southeast Asia after Indonesia and Thailand, grew near the fastest pace in a decade last quarter, with gross domestic product climbing 8.9 percent from a year earlier. Governor Zeti Akhtar Aziz said last month growth may exceed 6 percent in 2010 even as the expansion in advanced economies may ease in the second half.

Ahead of Curve

“Bank Negara is slightly ahead of the curve compared to its regional peers in normalizing rates,” Lee Heng Guie, chief economist at CIMB Investment Bank in Kuala Lumpur, said before the decision. “More signs of global weakness, in particular growing concerns over a double-dip recession in the U.S., a moderate pace of domestic growth and the fading effects of fiscal stimulus” may prompt Malaysia to pause the rest of the year, he said.

The U.S. economy grew at a 1.6 percent annual pace in the second quarter, less than previously estimated. Japan expanded at the slowest pace in three quarters in the period ended June 30 as global demand cooled and stimulus effects wore off.

Thailand’s Move

Other Asian central banks are still raising rates to curb inflationary pressures as their economies expand. The Bank of Thailand raised its benchmark on Aug. 25 and signaled further increases after the economy overcame political unrest to grow faster than estimated last quarter.

The Reserve Bank of India has boosted its key rate more times than any other Asian counterpart this year to cool consumer prices that are rising at more than 11 percent. The Bank of Korea is alert to inflation and may need to raise interest rates again even with a slower-than-expected global recovery, central bank Governor Kim Choong Soo said last week.

“The Monetary Policy Committee considers the current monetary policy as appropriate and consistent with the latest assessment of the economic growth and inflation prospects,” Malaysia’s central bank said. At the current level of the benchmark rate, “the stance of monetary policy continues to remain accommodative and supportive of economic growth.”

Malaysia’s rate increase in March was the first in almost four years. The overnight policy rate was kept at 3.5 percent from late April 2006 until late November 2008, when the central bank started to cut the benchmark, bringing it to a record-low 2 percent in February 2009.

The central bank’s final policy review of 2010 will be in November.

--With assistance from Michael Munoz in Hong Kong. Editors: Stephanie Phang, Lily Nonomiya

%MYR

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

To contact the editor responsible for this story: Chris Anstey in Tokyo at canstey@bloomberg.net

http://www.businessweek.com/news/2010-09-02/malaysia-refrains-from-raising-interest-rate-as-rebound-cools.html

Thursday 19 August 2010

To achieve its growth and income targets, Malaysia will require 2.2 trillion ringgit in new investments.

Malaysia Growth Probably Slowed as Exports Face Risks
August 17, 2010, 6:42 AM EDT

By Shamim Adam and Michael Munoz


Aug. 17 (Bloomberg) -- Malaysia’s economic expansion probably slowed last quarter from the fastest pace in a decade, as signs of cooling global growth cloud the outlook for exports.

Malaysia’s central bank has raised interest rates three times since the start of March, a cycle that may be halted as policy makers take stock of the world economy. Weaker-than- expected economic growth in Japan and slower expansion in the U.S. and China have added to signs that the global recovery may falter, threatening demand for Asia’s goods.

Malaysia’s “industrial activity maintained its double- digit growth in the second quarter, while services output has also been strong,” said Ashira Perera, an economist at Capital Economics Ltd. in London. “Looking ahead, final demand conditions in the U.S. and in Europe, as well as the easing in China’s economic expansion, will weigh on Malaysia’s exports and industrial output. Domestic demand is likely to stay healthy.”

The economy’s expansion has boosted the Malaysian ringgit, spurring the currency to a gain of 8.3 percent against the dollar and 21 percent against the euro this year, the best performance in Asia excluding Japan. The FTSE Bursa Malaysia KLCI Index gained for a third day today and has added 8.3 percent this year.

Inflation Rate

The inflation rate probably climbed to 2 percent in July, the highest level in 14 months after the government cut fuel and food subsidies, according to a separate Bloomberg survey of 15 economists. The Department of Statistics will release the price data tomorrow.

“Inflation remains moderate, and should allow Bank Negara to hold steady through year-end,” said David Cohen, an economist at Action Economics in Singapore.

The International Monetary Fund last week said the $192 billion economy may grow 6.7 percent this year, higher than the government’s forecast for a 6 percent expansion. Southeast Asia’s third-largest economy has “appropriately” shifted its monetary policy to support growth and keep inflation in check, the IMF said.

Growth Targets

Malaysia will target annual gross domestic product growth of 5 percent to 6 percent between 2011 and 2020 to meet its goal of becoming a high-income nation, according to a statement from Prime Minister Najib Razak today. To achieve its growth and income targets, the country will require 2.2 trillion ringgit in new investments, he said.

The government “is working to implement additional measures designed to open markets, improve human capital and reform affirmative action laws to be more market friendly and transparent,” according to the statement.

Recent Malaysian data have signaled a cooling in the economy. Exports increased at the slowest pace in seven months in June, while gains in industrial production were the smallest in four. The economic rebound may slow in the second half after the central bank boosted borrowing costs, the Malaysian Institute of Economic Research has said.

--With assistance from Barry Porter in Kuala Lumpur. Editors: Sunil Jagtiani, Stephanie Phang

%MYR

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

To contact the editor responsible for this story: Chris Anstey in Tokyo at canstey@bloomberg.net


http://www.businessweek.com/news/2010-08-17/malaysia-growth-probably-slowed-as-exports-face-risks.html

Monday 16 August 2010

Malaysia's new economic model: Making choices

Malaysia's new economic model: Making choices
By Professor Dr Danny Quah Published: 2010/04/14

In June 2009, Malaysia's Prime Minister Datuk Seri Najib Razak asked if I would serve on his council of economic advisers, the National Economic Advisory Council (NEAC). This council was to come up with a New Economic Model for the country.


It would not be a group that got together every month to fine-tune the economy. This council was not to sift through the entrails of inventory reports, and propose economic policies to lean against the wind.

No, the task assigned by the NEAC was to put Malaysia back on a high-growth path, reinstating Vision 2020 that Malaysia would within these next 10 years achieve the status of a developed nation.

The council was to do this against a post-1997 background of annual economic growth having nearly halved; investment as a fraction of GDP having plummeted to 50 per cent of what it used to be (private investment, to one third); with the economy relying on a workforce of which four-fifths were educated only up to high-school level while over one quarter of the local public university graduates remained unemployed six months after graduation, and with the human capital brain-drain becoming freshly re-energised (350,000 Malaysians in 2008 lived and worked abroad, half of them with university education).

By 2007, Malaysia seemed as far from the World Bank's notion of a high-income economy as a decade earlier, in contrast to economies such as Slovakia, the Czech Republic, and Poland, all of whom had by 2008 broken through that high-income boundary but had earlier been roughly at level with Malaysia.

Yet, Malaysia had been previously identified by the Spence Commission on Growth and Development as one of only 13 countries in the world that had for more than 25 years grown at rates exceeding 7 per cent annually.

At different times since the 1960s, despite having a population not even one-third of the UK's, Malaysia had been the world's largest producer of tin, rubber, and palm oil.

Today, 40 per cent of Malaysia's households earn less than US$15 a day (RM1500 a month), two thirds the World Bank's low-income threshold.

With Malaysia's domestic income distribution what it is, only one million people pay income tax at the highest rate of 26 per cent; there is no goods and services tax.

Oil and gas revenues have, on occasion, provided up to nearly half the government's total revenues; although by 2014 Malaysia is expected to become a net importer of oil. As much as 20 per cent of the nation's public expenditures routinely get spent on subsidies that keep prices of basic goods low but distort reality for Malaysia's citizens.

Certain policy questions - for instance, monetary control and inflation; financial markets oversight, regulation, and development - are outside the NEAC's remit, and rightly so.

In Malaysia, all those issues were taken care of by others, and already attain world-class standards of performance.

The large facts I have just described seemed to me (and many other observers) precisely the ones raising the critical, first-order challenges for economic policy in Malaysia. The problem was how to organise them coherently and understand their resolution.

But there is, further, the other critical, first-order challenge unmentioned so far: namely, Malaysia's 40-year-old programme of affirmative action.

I say unmentioned but of course that is not how the outside world viewed this. The international press emphasised most of all this dimension to Malaysia's policy framework; I will bring this out further in the discussion that follows.

For now, however, I just note that some foreign financial houses I spoke to about NEAC work downplayed the significance of all the other problems I have mentioned. They said to me, "Malaysia needs to fix its affirmative-action programme; everything else follows."

That proposition, by itself, is almost surely demonstrably false. On the other hand, the perception is obviously one that colours the views of many market participants who actually shift significant financial resources.

Article 153 of Malaysia's Constitution, ratified in 1957, requires that the king protect the special position in Malaysia of the Bumiputeras (ethnic Malays and a small number of other indigenous groups). The Article allows the federal government to protect Bumiputera interests by establishing quotas for public scholarships, public education, and the civil service.

In 1971, following racial riots, declaration of a state of national emergency, and suspension of the parliament, the then-Prime Minister Tun Abdul Razak - father of the current Prime Minister - introduced the New Economic Policy (NEP). This policy sought to eradicate poverty regardless of race and to eliminate the identification of ethnicity with economic function.

The enabler for both these goals would be rapid economic growth, the speedy expansion of the economic pie to divide across all Malaysians, so that no subgroup would feel absolutely disadvantaged.

A key feature of the NEP was its effort to raise Bumiputera equity ownership from 2.4 per cent in 1971 up to 30 per cent within two decades.

What has the NEP's progress been? At a fixed absolute income threshold (its exact value holding no significance as long as it's fixed and applies across the board), poverty rates for Bumiputeras declined from 65 per cent in 1970 to 5 per cent in 2007, while that for Malaysians overall, from 49 per cent to 4 per cent; Chinese, 26 per cent to 1 per cent; Indians, 39 per cent to 2 per cent.

Wealth figures are widely disputed but most sources give Bumiputera equity ownership of 2-4 per cent in 1971; official KL Stock Exchange statistics suggest Bumiputera shares of 29 per cent by 1990 and 37 per cent by 1996.

That was the background when in August 2009 Najib delivered his keynote speech at the NEAC's inaugural meeting, asking the council for ideas and direction to transform Malaysia into a developed nation by 2020.

Malaysia, having successfully drawn foreign investment as a low-cost producer was populated with businesses that, at the margin, had neither incentive nor vision to climb the quality ladder.

Infrastructure and expertise in key areas remained under-developed. For Malaysia as a small open economy, the global trading environment has already shown time and again how it could change suddenly, as it had just done during the 2008 global financial crisis, and further looked set to change even more dramatically but less suddenly from longer-term global carbon considerations.

Reforms started in Malaysia by the Central Bank, the Securities Commission, and others were already liberalising capital markets and taking forward expertise and comparative advantage in Islamic Finance. Government transformation work had already begun to introduce meritocracy and performance measurement in the public sector itself.

What could the council do to help Malaysia relocate its strategic position in the global economy?

The New Economic Model

In the ensuing six months, the council met four times in Kuala Lumpur. At these meetings, council members listened to presentations, mapped strategic visions, and debated subtle differences in emphases. Now and then, we would as a group takes such a big-picture perspective that we would form a collective blind spot over the single largest difficulty in whatever we were discussing, completely missing the key concern.

Now and then, we would micro-drill down and heatedly argue over whether the appropriate punctuation should be a comma or a semi-colon. But all of us remained energetic and enthusiastic and committed, and sometime during the 15 hours of meeting each day, or in seemingly interminable rounds of emails 24/7, we would correct course and converge on the right balance.

We agreed our report had to be in two steps: First, to identify, propose, and persuade on the over-arching framework and strategic vision; Second, to steer from that vision, its delivery to be led by the executive branch and implemented by the civil service.

Without successfully convincing on the first, the second would never be executed. Without successfully executing the second, the first would have been in vain.

The single big-picture vision was that Malaysia had to become an advanced economy by 2020. Sure that included the Malaysian economy generating sufficiently high income. But that vision also included a subtext of inclusiveness - so that the poorest and most vulnerable in society would be taken care of and one of sustainability, so that higher economic growth would continue into the future, not at the expense of degrading the environment for generations to follow.

The council concluded many of Malaysia's malperforming situations were inter-linked. Underperformance in one setting was the rational response to underperformance in the next: Why work hard in school if you're convinced it doesn't benefit you afterwards? Why work hard in your job if your productivity is held back by so many unskilled people around you? In these circumstances, what is needed is a big push to break out of that vicious circle of under-performance.

But disruption would be needed not just in your own circle of school-mates and colleagues, but everywhere in the economy. Hence, we emphasised the big push of economic transformation needed to break the logjam of entrenched, special interests. We sought to build momentum and confidence in the mindset of citizens that more positive changes would continue to emerge but all of us needed to keep pushing.

This economic transformation would come with reform along eight strategic initiatives - slightly more concrete but only slightly:

* Re-energise the private sector so it could lead the process of economic growth;

* Re-energise the private sector so it could lead the process of economic growth;* Develop a high-quality workforce;

* Develop a high-quality workforce;* Create a competitive domestic economy;

* Create a competitive domestic economy;* Streamline and make efficient the public sector as facilitator for private enterprise, when in the past large government-linked corporations (GLCs) had been viewed as competitors instead;

* Streamline and make efficient the public sector as facilitator for private enterprise, when in the past large government-linked corporations (GLCs) had been viewed as competitors instead;* Move to affirmative action that is (a) transparent, (b) market-friendly, (c) merit-based, and (d) conditioned on need ;

* Move to affirmative action that is (a) transparent, (b) market-friendly, (c) merit-based, and (d) conditioned on need ;* Build infrastructure for a knowledge base;

* Build infrastructure for a knowledge base;* Enhance the sources of growth; and

* Enhance the sources of growth; and * Ensure the sustainability of growth.

* Ensure the sustainability of growth. Early on, the council decided it couldn't be swayed by arguments about whether it was doing something truly novel or new or different. The only thing that mattered should be whether a proposal for implementation was likely to succeed and whether it would bring the highest benefits to the greatest number. Good ideas are hard enough to come by generally; why straitjacket oneself to not look at certain of them? This isn't an exam: why not copy good ideas however and wherever you find them?

Nonetheless, having come to the end of putting in place the over-arching vision, we nonetheless could see several ways where our approach differed from earlier ones.

First, we focused on growth through enhancements in productivity, not the sheer brute force of capital accumulation. It's not that we ignored the latter - if we had, we wouldn't have expressed concern about the sharp fall off in Malaysia's investment.

Instead, it is that we figured it would be innovative processes and cutting-edge technologies that would provide the surest platform for Malaysia's producing high value-added goods and services in the future.

Second, we envisioned economic growth being private sector-led and market-driven, no longer dominated by large public investment through GLCs in selected economic sectors.

Third, we described the benefits of the government moving towards local autonomy in decision-making. State and local authorities needed to be empowered to develop and support more of their own growth initiatives - without unnecessarily duplicating function or project. While flat-out competition to produce identical public goods, over and over, would be obviously wasteful, a little competition between local authorities is healthy.

Fourth, we wanted to encourage local geographies to emerge - whether in clusters or corridors - as long as they exploited economies of scale and concentration, and thus raised productivity over the long term.

Fifth, we saw the need for continuing government support of private industry, as long as that support was geared towards innovation, entrepreneurial risk-taking, and high value-added goods and services. It would be those general principles that guided support, not past principles of picking winners.

Sixth, we welcomed talent and skills from everywhere: as long as anyone, local or foreign, is able to contribute to Malaysia's transformation to an innovative, high-value added economy, they would be accepted and welcomed.

Finally, we emphasised how the global economy was changing, and we figured Malaysia's strategic position within it needed to re-orient as well. For the entire 20th century, the world's strongest economic powers have been the US, Western Europe, and Japan.

Malaysia, like many others, tuned production and supply networks to service those markets. While we weren't arguing that policy should be based on the economic centre of the world suddenly shifting tens of thousands of kilometers east, we felt that it was reasonable to acknowledge the change in that global landscape, and to develop further new regional networks centred on the fast-growing, Asia-focused emerging economies.

In a nutshell, that's it. That's the New Economic Model (NEM).

After, for now

For a relatively technocratic problem and solution, the NEM announcement on March 30 by Najib attracted unexpectedly heavy attention from the international press. All the major world press worked in discussion of Malaysia's affirmative action programme, both historical and prospective.

The New York Times (March 30 2010) described the revision of Malaysia's policy to focus on need, not race.

The Wall Street Journal ran articles on two successive days (March 30 and April 1 2010), talking about the recalibration of Malaysia's decades-old affirmative action and asserting how "the New Economic Policy has hindered Malaysia's competitiveness in recent years. The US and European Union have singled out Malaysia's insistence on maintaining preferences for ethnic Malay-owned businesses in government procurement contracts for stalling the development of free-trade pacts".

The Journal's Opinion Asia column (April 1 2010) contextualised Najib's speech by observing how "A few years ago it was inconceivable that a Malaysian premier would express dissatisfaction with the 'rent-seeking and patronage' inherent in the country's four-decade-old affirmative action policies and call for a more 'transparent' system based on merit and need. Former Prime Minister Tun Mahathir Mohamad used to label people with such ideas 'extremists'."

Great cynicism continues to be expressed by some of my friends, Malaysian and otherwise, who say they have seen over the years many politician promises made only to be broken subsequently.

Personally, however, I see great optimism instead. Why? I contrast Najib's March 30 speech with what I imagine someone wanting an easy ride through life might have said, in light of both the general scepticism and fervent fear-mongering in the run-up to the event.

Two days before the NEM announcement, Kevin Brown wrote in the Financial Times (March 28 2010) how there was "widespread doubt" that Najib would take any political risk at all of dismantling Bumiputera special privileges, not least in a new economic model that might greatly dilute that historical affirmative action.

James Hookway's Wall Street Journal article of March 22 2010 gave considerable space to Datuk Ibrahim Ali, a right-wing Malay MP, and to Perkasa, the NGO that he founded devoted to defending Malay rights, reporting how "Ibrahim reckons Najib is misreading the depth of anger many Malays feel towards any change in a policy that has given many a leg up and helped to build a large middle class."

The Economist (March 11 2010) extrapolated from their interview with Najib and with others to sub-lead their article, "Najib wavers over undoing affirmative-action policies".

Not least, of course, there is the now-infamous interview Ibrahim Ali granted Al-Jazeera on March 29 2010, the eve of the launch of the NEM, where he gets bleeped three times speaking, with some vitriol, on the position of other races in Malaysia.

Domestic reporting too emphasised the emerging political tensions.

Now, contrast what Najib actually said with what all these observers predicted he would say. Think of the political onslaught, the wavering, the self-protection going on around him.

If Najib had wanted an easy way out, he could have taken it and no one would have been surprised. He didn't. He continues along that difficult but worthwhile path.

One final comment. In this international reporting, by far the greatest attention has gone towards Malaysia's New Economic Policy and its possible adjustment. In the council's work, we knew this was important, but so too were all other seven strategic initiatives.

Affirmative action matters. No significant advanced country in the world gets by without affirmative action programmes of some kind - it is in human nature to take care of the weakest and most vulnerable in our society.

So too for the members of council, where that bottom 40 per cent of the Malaysian population is targeted to receive significant help and attention. But fixing all the other problems matters too: it's one big push for all of them.

The council has now finished Step 1. Step 2 starts. Everyone likes to say, Now the hard work begins - as if I've never heard that one before. But I am energised. I continue to do this work (and, for the record, for practically no pay compared to outside options) because I think things actually are looking up in Malaysia.

The writer is an NEAC council member & professor of Economics at Department Of Economics, London School Of Economics & Political Science.


Read more: Malaysia's new economic model: Making choices http://www.btimes.com.my/Current_News/BTIMES/articles/quah/Article/index_html#ixzz0wiV5vMIT

Friday 16 July 2010

IMF Upgrades Malaysia’s Growth Forecast

The International Monetary Fund (IMF) has raised its growth projection for Malaysia this year to 6.7% from 4.7% before, and also expects the growth to be 5.3% in 2011, beating Malaysia’s own official forecasts. Malaysia posted a vibrant 10.1% growth in the first quarter from January to March, and the economic activity has been sustained by continued buoyancy in exports and strong private domestic demand. On its outlook for the second half of 2010, IMF said that a stall in the European recovery that spills over to global growth would affect Asia through both trade and financial channels. However, in the event of external demand shocks, the large domestic demand bases in some of the Asian economies that contribute substantially to the region’s growth, such as China, Indonesia and India, could provide a cushion to growth.

Malaysia Daily Bulletin – 12/07/10

Wednesday 30 June 2010

The impact of demographic trends on investment opportunities: Malaysia forecast to be ‘young and poor’ by 2030


Malaysia forecast to be ‘young and poor’ by 2030

June 29, 2010
KUALA LUMPUR, June 29 — Malaysia’s relatively high population growth rate will see the country remain comparatively young over the nexttwo decades but economic growth is not expected to keep pace with population expansion, according to a report by Bank of America Merril Lynch.


Most developed countries experience lower population growth than developing countries and thus become older as they grow richer but China and Thailand however, are forecast to grow old before they can become rich with more than 15 per cent of the population aged above 65 years in the next 15-20 years.
The forecasts are part of an analysis by Bank of America Merrill Lynch on the impact of demographic trends on investment opportunities.
It also found that the population in Hong Kong, Korea, Singapore, Taiwan and Australia are growing old fast but they are expected to remain among the wealthiest in the world.
By 2015, Malaysia is forecast to have an elderly dependency ratio (EDR) — population aged above 64 divided by population aged between 15 and 64 — of 10 with a GDP per capita calculated on purchasing power parity (PPP) basis of US$20,000 (RM64,950). Current young and rich countries such as Australia, Singapore and the US have EDR’s of between 15 and 25 with a GDP per capita of between US$50,000 to US$70,000.
By 2030, Malaysia’s EDR is expected to be about 15 with a GDP per capita of about US$50,000 while Australia, Singapore and the US are expected to have an EDR of between 30 and 40 and per capita GDPs of US$110,000 and US$160,000.
The report also suggested however that based solely on the ratio of prime savers — defined as population aged between 40 and 64 — to the rest of the population, the stock markets of China, India, Indonesia, Malaysia and Philippines are expected to outperform those of Australia, Hong Kong, Korea, Singapore, Taiwan and Thailand in the next 20 years.
It added that in advanced economies such as the US and the UK, the stock market “can rationally factor in the demographic trend, usually a few years ahead”. It said that there is a risk of that relationship becoming “self-fulfilling” leading to decades of bear markets in those countries.
“The stock markets and financial assets are arguably most influenced by the mid-aged people,” said the report. “Hence, it is not surprising that the correlation between Mid-Young ratio and the aggregate value of stocks traded is quite high for most Asian countries.”
The report said that there were investment opportunities in the education sector in China, India and the Philippines unlike Australia and Korea which have the most highly education labour force.
It also said that Australia and Thailand have room for development in the private healthcare sector and that India, Philippines and Singapore lag in terms of public spending on healthcare.