Category: Economics

Former U.S. presidential economic adviser: worst of financial crisis is over

Special Report: Boao Forum For Asia 2009
www.xinhuanet.com

BOAO, Hainan, April 19 (Xinhua) — The worst of the financial crisis is finished, and the world is entering the time when things will get gradually better, John Rutledge, a former U.S. presidential economic advisor, said here Sunday.

He made the remarks during an exclusive interview with Xinhua at the Boao Forum for Asia (BFA) in China’s southern province of Hainan.

The recession in China has already “passed the bottom”, while the recession in the United States is “at the bottom”, he said while describing the current global economic condition.

“The capital markets around the world are recovering very nicely,” he said, adding that the real economy and paycheck have not yet hit the bottom, but “very near bottom”, and will most certainly be improve by the end of the year.

He is more optimistic about the prospect of China’s economy, as he is likely to raise the forecast of China’s economic growth rate in 2009 between 6 percent and 8 percent. Continue reading “Worst of financial crisis is over?”

Open Letter to Prime Minister and Cabinet

YAB Datuk Seri Najib Razak and Cabinet Ministers, Putrajaya.

YAB/YB,

Firstly, let me start by congratulating Datuk Seri Najib Razak for his appointment as Prime Minister and all the Ministers of the first Najib Cabinet.

The Najib Cabinet saw the removal of seven Ministers in the old Abdullah Cabinet, namely Datuk Seri Syed Hamid Albar (Home); Datuk Seri Azalina Othman Said (Tourism), Senator Tan Sri Muhammad Muhammad Taib (Rural and Regional Development), Senator Datuk Amirsham Abdul Aziz (Prime Minister’s Department), Datuk Ong Ka Chuan (Housing and Local Government), Datuk Mohd Zin Mohamed (Works) and Datuk Seri Zulhasnan Rafique (Federal Territories).

No one shed any tears for the dropping of the seven Ministers in the Abdullah Cabinet.

However, Malaysians are outraged at the new set of Ministers in the Najib Cabinet, for they are not only another set of “old faces” but include 11 new Ministers or Deputy Ministers who entered Parliament from the backdoor of the Senate.

Worse still, they include “political rejects” like Tan Sri Dr. Koh Tsu Koon, Datuk Seri Shahrizat Abdul Jalil, Datin Paduka Chew Mei Fun and Datuk Dr. Awang Adek Hussin who were trounced by the electorate in last year’s political tsunami in the March 8 general elections, making the Najib Cabinet even more unrepresentative and unpopular than the second and last Abdullah Cabinet.

As a result, no new Cabinet in the nation’s 52-year history could have got off with a worse start than the present one.

Continue reading “8 tests for Najib Cabinet”

The Projects

Now on some specific programs outlined by Najib. Training and job placement programs of the type described by him are woefully inadequate. Those retrenched and displaced are in need of immediate assistance.

Malaysia lacks a safety net program of unemployment benefits as is the case in most industrial economies. Thus workers lack a cushion. The nation’s labor laws are skewed towards safeguarding employers as evidenced by the meager protections afforded to laid off workers.

It is also significant that both legal and illegal workers continue to flow into Malaysia – largely to permit employers to gain from cheap labor.

It is pertinent to question the Government as to why some of the resources being expended are not being set aside to launch a scheme that would provide income support to those laid off, or those who have seen a precipitous fall in income because of a fall in commodity prices. Equally, it can be asked why no program is being developed to aid those who are laid off with assistance in meeting their housing loan commitments.

These measures proposed under the various training schemes are palliatives and lack an imaginative attempt to address the key issue of assuring an income to those who fall victim to what has been termed the Great Recession. Displaced workers or those new entrants into the job market need to be assisted directly.

Training is and cannot be the first recourse. While such an effort may be appropriate in a time of cyclical upheaval, in a recession of the type now confronting Malaysia a vastly different approach is needed – one channeling resources to sustain incomes and support consumption. Continue reading “Najib’s roll of the dice – RM60 billion economic stimulus package (5)”

The Scope of the Package

The four so-called thrusts identified by Najib are generalities. Deeper analysis of these elements indicates that these are clichés and make for good sound bites.

It is rather salient that the DMP has made no effort to formulate and present an over-arching policy framework. There is a clear and urgent need to layout policy reforms to enhance competitiveness, correct the distortions, strengthen key agencies and identify areas of future potential growth.

There appears to be a mistaken view that Malaysia can find its way out from the hole it is in by spending billions. There does not appear to be a realization that fundamental reforms are needed particularly in the area of the regulatory framework.

There is no acknowledgement of the fact that the growth environment is deeply affected by rigidities of the NEP implemented mindlessly by the “Little Napoleons” of an inefficient and corrupt bureaucracy. Reform is imperative if Malaysia is to regain competitiveness.

In introducing the specifics of the Package, Najib makes no mention of the fact that there is a need to unite and jointly face the challenges; he fails to acknowledge that with almost 60% of the GDP generated in the Pakatan Rakyat governed states, the Federal Government needs to engage in efforts to work with these state Governments if it is to succeed in mounting the challenges confronting the country. Without the necessary collaboration, the efforts to achieve economic recovery will come to naught. Continue reading “Najib’s roll of the dice – RM60 billion economic stimulus package (4)”

How Did WE Get Here? An Alternative View

Najib in his speech to the House briefly reviewed recent economic developments. This review was selective and must be rebutted.

Contrary to his view, the danger signals were already there in mid 2008 when the budget for the current year was presented. However, the Government remained in a state of denial and continued to assert that Malaysia would not be affected by the global meltdown.

Ministers and the Governor of Bank Negara continued in parrot fashion to mouth the mantra of the economy attaining a growth rate of 3.5% in 2009 despite mounting evidence of declining industrial production, a fall in exports, lower commodity prices, sharp falls in FDI and growing evidence of capital flight.

On the global scene alarm was being expressed and country after country was taking measures. The two Finance Ministers remained sanguine and repeatedly provided the mainstream media with sound bites indicating that Malaysia was miraculously immune from global trends. They propounded the so-called theory of immunity via the notion of “decoupling”.

Despite these protestations, which rang hollow, the markets took due note and lowered the risk ratings. Yet, the euphoric expressions of growth continued to be mouthed relentlessly. Najib is thus stretching credibility by suggesting that it was only late in the 4th Quarter that there were “negative” developments. Continue reading “Najib’s roll of the dice – RM60 billion economic stimulus package (3)”

The Second Package: An Overview

Najib, Minister of Finance and Prime Minister in waiting and his officials have much to account for. They have continued to be in a state of denial and inaction even as the global economy was entering what the Managing Director of the IMF has termed the Great Recession.

It would appear that Najib has finally been jolted into action. The preparation of the Second Stimulus Package appears to have been done in a rather haphazard manner with little consultation or input from the various stakeholders.

Najib must take personal responsibility and will be held accountable for what is a flawed instrument to meet the challenges confronting the nation. He has put together a Stimulus package of RM 60 billion, a package of unprecedented size in Malaysian history.

The package of measures he has revealed has been largely met by a yawn; the markets are unconvinced by the scope of the package. The KL Bursa fell by O.6 percent on the first day of trading. That is a clear signal that the package is viewed with a large degree of disapproval.

There is considerable skepticism on several counts. First and foremost there is the question about the size of the package, considered unwieldy. Second there are concerns that the package of measures does not address the immediate impact of the recession on employment, income levels and the pain inflicted on vulnerable groups. The measures proposed are seen as having an impact only in the medium term. Continue reading “Najib’s roll of the dice – RM60 billion economic stimulus package (2)”

What is now being labeled the Great Recession began in mid 2007 as the sub-prime fiasco in the United States began to unfold. The economic slowdown gained momentum in 2008. As the gathering, storm clouds gathered over the horizon, Governments began to react and take counter recessionary measures.

The Barisan Government for its part remained in a state of denial. Ministers dismissed with some arrogance the notion that the Malaysian economy would succumb to the global slowdown. They argued rather smugly that Malaysia enjoyed a certain immunity as it had decoupled from the global economy. Despite the key economic indicators pointing to a weakening in terms of industrial output, declines in FDI flows, lower exports and indications of capital flight, they continued to forecast robust growth.

The markets for their part made their own assessments and lowered the ratings. The Budget for 2009 presented in August was based on unrealistic and rosy assumptions of growth and buoyant commodity prices, especially of petroleum, and the Government announced a humongous increase in spending both on the recurrent and development budgets. An increase of RM 20 billion was unprecedented. Continue reading “Najib’s roll of the dice – RM60 billion economic stimulus package”

Najib knows best
With the announcement of a huge stimulus package, Malaysia’s next leader shows that he’s no economic reformer..

Asian Wall Street Journal
11.3.09

The man slated to take over Malaysia’s government later this month hasn’t said much about his economic philosophy. But with the announcement of a 60 ringgit ($16 billion) stimulus package yesterday, one thing is clear: Najib Razak is no free-market reformer.

Mr. Najib, who is currently deputy prime minister, called yesterday’s package “unprecedented in the nation’s history.” For an expenditure of roughly 9% of 2008’s GDP over two years, that’s no exaggeration. Malaysia will raise debt to fund this largesse. The fiscal deficit is now projected to reach a whopping 7.6% of GDP, up from 4.8%.

Malaysia is following in the fiscal footsteps of the U.S., Australia and Japan, but that doesn’t make it smart. The “stimulus” from all this spending will likely be limited. Most of the money will be spent on loan guarantees, infrastructure and public-sector expansion, rather than on tax cuts that could stimulate productive growth. State-owned investment company Khazanah, for instance, will be handed 10 billion ringgit. Pet projects such as “green investments” and the state-run auto maker will also see cash handouts. The government itself will hire 63,000 workers.

This is effectively a restatement of Malaysia’s old, government-knows-best policies. It’s the opposite of what Malaysia really needs, which is to ditch this thinking and shift to a business climate that encourages private investment and entrepreneurship. The government predicts GDP could shrink 1% this year. Continue reading “Najib knows best”

by M. Bakri Musa

Millions of Chinese had a rude awakening when they returned last month from celebrating their Lunar New Year in their villages. They discovered that the jobs they had in the cities before they left only a few weeks earlier had now disappeared. Tragic though that may be to them individually, the aggregate loss pales in comparison to that suffered by their government through its massive investments in the stocks of American companies and other paper assets like bonds and Treasury Notes.

If only the Chinese government had invested in its people, imagine the good that would do to them, and to China. If their government had spent the funds to build better schools, Chinese schoolchildren would not have dangerous physical facilities that collapse with the slightest tremor. Had those funds been used to build affordable apartments, the Chinese people would have been better housed. That would at least help alleviate their miserable existence.

The Chinese people suffered twice. First, they worked incredibly hard under intolerable conditions and insufferably meager wages so the West could enjoy inexpensive consumer goods. Then the foreign currencies earned by their government from the exports created through their hard work vanished with the downward spiral of Western economies.

When Western consumers could no longer afford to spend, the Chinese were forced to work under even harsher conditions so the products they make could be sold cheaper still. This is just a modern twist to the old “coolie” concept. In the early part of the last century, millions of indentured Chinese were brought to America to work on the gold mines and railways. Today the coolies remain in China; America brings in only the products of their hard labor.

China is not alone in engaging in this folly of investing abroad instead of in their people, so is the rest of Asia. Singapore lost a hundred billion dollars on its American investments. On a per capita basis, Singapore’s loss is massive and readily dwarfs that suffered by China. Continue reading “Invest In Our People!”

By Tengku Razaleigh Hamzah

(Luncheon address at ASLI Strategic Outlook Forum January 15, 2009)

RESTORING CONFIDENCE

A problem of confidence

The present financial crisis started in a speculative housing bubble in the US, inflated on greed and irrational confidence. Shady practices went mainstream under the wing of weak financial governance. When the bubble burst, gold-plated names on Wall Street were implicated. A massive loss of confidence in the financial sector has crippled credit flow worldwide. Consumption has contracted as households put off expenditure out of uncertainty. Investment has retreated. There has been a massive loss of confidence.

2. Expectations are a central factor in macroeconomic booms and busts. If a sharp loss of confidence is an endogenous part of the problem, a restoration of confidence must be the beginning of the solution. However, if we have learned anything at all from the crisis, this cannot be hollow confidence, but confidence based on a clear appreciation of our prospects. The lesson of the global economy is that false confidence based on irrational hope leads to collapse, disillusionment and pessimism.

3. We need a sound appreciation of our reality before we can dream of changing it. We need to face harsh truths before we can believe in ourselves and inspire others to believe in us. In coming to that sound appreciation here in Malaysia we have run out of time for politically manipulated messaging and sugar coated evasions.

4. Let us just begin by acknowledging that we will not be spared the effects of the global economic crisis.

5. Our leaders only undermine the government’s credibility when they paint an alternative reality for us. I understand we don’t want to frighten markets and voters unnecessarily, but we do not live in an information bubble. Only the most resolutely ignorant can now pretend that all shall be fine while the rest of the world deals with what Jeffrey Sachs has called “a world economy teetering on the brink of unprecedented catastrophe.” Leaders who deny the seriousness of the crisis only raise the suspicion that they have no ideas for coping with it. They undermine the government’s credibility when that very credibility, that confidence, is a key issue.

6. We are a trading and exporting nation. While we were relatively shielded from the first wave of financial failures there is no escape from the sharp demand slump in the global economy. The Government and Bank Negara maintain that our growth rate this year will be 3.5%. I fear it could be well under that. The latest numbers show a plunge in industrial activity, with manufacturing output in November, down 9.4 percent from a year ago. December may well be worse. Exports are down. There has been a dramatic swing in the balance of payments to a RM31 billion deficit in the third quarter, from a surplus of RM26 billion in the second. Anyone looking at the size of the downturn and at its swiftness can only wonder if we will be sailing through. This crisis really “went global” only in the final quarter of last year, but within that single quarter manufacturing both here and in Singapore contracted by more than 10 percent on the previous year. Policymakers in Singapore appear far more alarmed than our own. After having declared a recession, they found that the effects of the crisis were far worse than they thought. We are just at the beginning, and the bottom is not yet in sight.

7. Three and a half percent growth, even if we achieve it, will not create enough jobs to employ the large number who enter the workforce each year from our young population. Given our demographic profile and the fact that we are an oil exporter, our baseline do-nothing growth figure is not 0% but closer to 4%. Continue reading “How Malaysia Can Cope With and Overcome the Effects of the Global Economic Crisis”

The Federal, Sabah and Sarawak state governments should immediately implement urgent and effective measures to help oil palm smallholders and industry hard hit by the two-thirds plunge in palm oil prices since March.

The price of crude palm oil (CPO) fell two-thirds from a March high of RM4,486 per tonne to current levels of about RM1,455 per tonne, creating a grave crisis for the oil palm industry.

On the one hand, oil palm fruits are being left to rot as mills are refusing to buy the fruits because of palm oil’s plunging price.

On the other hand, exporters are in a quandary as the global financial crisis and the plunge in CPO prices have led to many importers to default on their contracts as well as making it difficult for foreign importers to obtain letters of credit (LCs).

This is because prices of CPO quoted in contracts or LCs were much higher than the current market price of the commodity, making foreign banks in importing countries more cautious about extending credit facilities. Continue reading “Oil Palm industry crisis – urgent remedial measures needed”

I started my speech on the Finance Ministry during the 2009 Budget committee stage debate in Parliament today by referring to the latest bad news for Malaysia – international ratings agency Fitch today downgraded its outlook for Malaysia from “positive” to “stable”, saying the economy would be hit by lower oil and commodity prices.

In revising the outlook on Malaysia to stable, Fitch took into account the likely impact on the balance of payments of lower oil and other commodity prices.

It said that Malaysia would also suffer from “the deterioration in external demand conditions for electronics exports.”

I pointed out that the latest Fitch rating for Malaysia is further proof of the testing times the Malaysian economy is facing with the worst global economic crisis and the crucial importance of the confidence factor in tiding through the trying times.

I expressed regret that when the new Finance Minister, Datuk Seri Najib Razak presented the RM7 billion economic stimulus when winding-up the 2009 Budget policy debate last Tuesday, its “confidence” capability was seriously undermined when Najib committed the serious parliamentary faux pax of not presenting it in a regular and proper manner in Parliament by an amendment to the 2009 Budget.

I blamed this on the preoccupation of UMNO Ministers on Umno party elections resulting in serious neglect of their government and parliamentary duties. Continue reading “RM100 million Sabah money-laundering – why ICAC but not ACA investigating?”

Yesterday, the Speaker, Tan Sri Pandikar Amin Mulia made the ruling that Parliament was debating the Abdullah budget presented on August 29, 2008 and not the Najib Budget of an additional RM7 billion economic stimulus package announced during the 2009 Budget winding-up debate on Tuesday, as no changes to the Abdullah Budget had been tabled in the House.

The Speaker is right as MPs could not possibly be debating a revised 2009 Budget incorporating an additional RM7 billion economic stimulus package, when neither the details of the supplementary RM7 billion package have been tabled in the House nor an amendment to the 2009 Budget proposed in Parliament.

The trouble with such an interpretation is that MPs would have to live the fiction of pretending that the RM7 billion economic stimulus package announced by Deputy Prime Minister and the new Finance Minister, Datuk Seri Najib Razak, in his speech winding-up the2009 Budget policy debate had disappeared into thin air within 24 hours and does not exist!

In fact, the nation and Malaysians are being asked to join in his fiction, if Najib persists with this unprecedented solution to the parliamentary faux pax he had committed in failing to follow the correct parliamentary procedure of submitting a proper parliamentary amendment to the 2009 Budget incorporating the new RM7 billion economic stimulus package.

This was why I had likened Najib to the illusionist David Copperfield yesterday when the Deputy Finance Minister Datuk Ahmad Husni Hanadzlah, responded to my query in Parliament and explained that the RM7 billion economic stimulus package announced by Najib on Tuesday was a hypothetical one, as it depended on savings made from the downturn in global fuel prices, and what the government will do with RM7 billion when the situation arises. Continue reading “RM7 billion economic stimulus – Najib wants MPs and nation to live a fiction”

Speaker: No debate on Najib’s stimulus package
By Shannon Teoh
The Malaysian Insider

KUALA LUMPUR, Oct 5 – Speaker Tan Sri Pandikar Amin Mulia has ruled that economic stimulus plan announced in Finance Minister Datuk Seri Najib Razak’s address to Parliament yesterday are not amendments to the 2009 Budget but measures to tackle the economic crisis.

Pandikar Amin said the RM7 billion stimulus package was derived from savings in fuel subsidy and not an additional allocation and it was clear that the amount was not part of the Budget.

“It is not an additional Budget. There is no change to the Budget tabled at the policy level and no change to any figures to projections made in any documents. This is the response if necessary due to the economic downturn,” Pandikar Amin told Dewan Rakyat.

He said the members would be debating the Budget tabled by then Finance Minister Datuk Seri Abdullah Ahmad Badawi on Aug 29. Continue reading “Najib as David Copperfield”

I am still recovering from my shock in Parliament on Thursday night when the Minister in the Prime Minister’s Department, Datuk Amirsham Aziz former CEO of Maybank, pleaded ignorance when I asked him whether he agreed that the New Economic Policy (NEP) cannot be equated with Article 153 of the Constitution. Amirsham claimed that he was no expert on constitutional law!

It is outrageous that after more than half-a-century of nationhood, Barisan Nasional (BN) Ministers and leaders cannot or dare not answer a simple question – whether they agree that the NEP cannot be equated with Article 153 on special provision for Malays and the bumiputeras in Sabah and Sarawak.

As I argued in Parliament when I posed the question to Amirsham, if NEP is equated with Article 153, then Deputy Prime Minister-cum-Finance Minister, Datuk Seri Najib Razak would be guilty of challenging Article 153 and Malay special rights when he told Bloomberg recently that “all the elements of NEP” would be phased out in stages, adding “If we do not change, the people will change us”.

The NEP had been a divisive instrument in nation-building, even more so today, as it is being used to benefit rich and privileged Umnoputras rather than the poor bumiputras. Continue reading “New politics of “Beyond NEP””

Letters
by WYT

First and foremost, I’m just a one of those silient supporters of yours and this is my first time voice up on issue such as the above subject mentioned.

I am really bugged to hear the goverment is pump in additional RM5b into the equity market. I’m not complaint the intention but the general public does not know where the money come from and where the profit goes. I would assume the money is drawed from us, the tax payers and my next question is why in this 5 years since ValueCap setup, there is no news about how is the fund performance and where is the profit earned (from KLCI index 700+ to 1400+ before the US credit crisis kick in) gone? This is not fair to us if we do not know this ValueCap performance.

I do not see the point why injection of additional fund is necessary when there is profit when KLCI climb to 1400 point and it will even be ridiculous if the fund fails to profit during the period and certainly an excuse should they say the gain has been wiped out because of the crisis, then where is our iniatial injection when the fund is being setup up. Continue reading “Govt to pump extra RM5b into Valuecap”

It was only last week that the Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said that the price of petrol would revert to the old price of RM1.92 a litre which motorists had enjoyed before the 41% hike in June if the world crude oil price continued to dip to below US$72 a barrel.

At the time (October 10), the crude oil price was around US$88 a barrel.

Over the weekend, the world oil prices closed at a new 14-month low beneath US$70 a barrel, bringing its price to less than half its July record high – dipping to as low as US$68.57 a barrel.

Why hasn’t the petrol pump price reverted back to RM1.92?

Will this be announced tomorrow when Deputy Prime Minister and Finance Minister, Datuk Seri Najib Razak release his economic stabilisation plan to prepare Malaysia to face the world’s worst economic crisis since the Great Depression of the 1930s? Continue reading “When will petrol pump price revert to RM1.92?”

Junket to Taiwan, what have BN BBC learned?

Revise the obsolete 2009 Budget

(Post and Video)

HSBB – High Speed BroadBand, why subsidy to Tm Net? Why no open access?

(Post and video)

Eurocopter adding to the collection of defense purchase scandals; Scorpene Submarine, Sukhoi Jet

(post and video)

Police Helicopter Purchase and E-Police

(Post and Video)

Utusan again

(Post and Video)

Yesterday, the repetition by the Prime Minister, Datuk Seri Abdullah Ahmad Badawi that Malaysia will not be hit by the global financial meltdown is most disturbing as Malaysia has both strong and weak economic fundamentals.

Malaysia’s past economic performance was in part linked to high rates of domestic savings and FDI flows. Capital was readily available – it was directed by the state, not necessarily into the most productive sectors.

Paul Krugman, the much-acclaimed economist now awarded the 2008 Nobel Prize for Economics, in his analysis about the Malaysian economy had drawn attention to this issue and questioned the capacity of the country to remain competitive.

It is indeed remarkable that no heed was paid this feature in government policies. Both in the Mahathir and Abdullah eras the essential economic policies remained unchanged — directed investments into large projects with low returns; a less than transparent and accountable use of national resources thus contributing to the growing level of corruption and abuse. Continue reading “Our strong and weak economic fundamentals”