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The Economic Reality of Malaysia Today

A speech by Y.B.M. Tengku Razaleigh Hamzah
The Perak Academy, Perak Lectures in Ipoh: 15th Series 2nd Talk
Saturday, 23rd November, 2013, at 8.00 p.m.

Chairman,

Ladies and Gentlemen.

I would like to thank the Academy for inviting me a second time to give a talk on the current state of the economy. After the presentation of Budget 2014 in Parliament last month and the ongoing debate in the august house, the state of the economy is indeed a relevant question to ask. Economic reality however may not be what it is made out to be when one engages in political debate in respect of the Budget: often it is the unstated issues in the Budget and its underlying strategies and proposals that should be of great concern to thinking Malaysians.

Ladies and Gentlemen,

2. The Budget 2014 projects that GDP growth rate next year will likely be around 4.5 to 5% and 5.5% in 2015. These figures had remained in that range for the past budgets since 2000, reflecting some kind of paralysis of policy given the global economic situation and our own model of growth that depends so much on our external markets and the optimism of foreign interests in our economy. But, these figures conceal some forewarnings that are not highlighted.

3. Take for instance, the budget deficits, which had remained in negative territory for over twenty years; now the Najib government has promised to bring the budget into balance by 2020. The federal deficit has been sustained by borrowings that are now reaching close to the statutory debt ceiling of 55% of GDP. In fact the federal debt levels in absolute terms doubled since Dato’ Seri Najib took over as Prime Minister. Coupled with private debt currently at 83% of GDP (an issue I will come back to later), the total debt exposure which will have to be carried over into the next generation will now approach 140% of GDP at current prices by the end of the year. Continue reading “The Economic Reality of Malaysia Today”

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Moody’s has given us a good mood… but is it sustainable?

– Ramon Navaratnam
The Malaysian Insider
November 21, 2013

After the earlier cautious Fitch Rating Report on Malaysia’s sovereign credit outlook, the Moody’s Investors Service’s upgrading of our credit outlook from “stable to positive”, uplifts our mood on our country’s economic prospects.

Yes Moody’s has given us a good mood on our economic prospects. But unfortunately the question lingers as to whether this feel good mood, about our sovereign credit and economic outlook, can be sustained and for how long?

The upgrading had been due to the positive and bold promises made in Budget 2014 Speech by Dato Seri Najib Tun Razak. His speech has obviously made an impact on Moody’s. Continue reading “Moody’s has given us a good mood… but is it sustainable?”

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Racism and inequality

Sakmongkol AK47 | NOVEMBER 17, 2013
The Malaysian Insider

Government leaders preach inclusiveness and togetherness. At the very least they pretend to want that. The idea of togetherness and inclusiveness can be summed up in the powerful idea of unity.

Something of that nature cannot be sold like an advertising product and commoditised- it must be secured by living out that experience. It must be practised as an everyday life experience.

Something of that nature too must be formed on the basis of earning and giving trust. The government has neither earned our trust and they have never trusted the people.

PM Najib paid a lot of money to consulting firms to come up with slogans to reflect the idea. He has actually paid RM7.2 billion to a number of consultants since 2009. Over a 5 year period, the fee is like RM3.945 million a day.

We won’t know how much PM Najib paid consultants who came out with slogans and follow through plans of 1Malaysia and now Endless Possibilities. What seems truly endless is the rapacious appetite to gobble up taxpayers’ money.
Continue reading “Racism and inequality”

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Business confidence in local economy dropping, survey shows

The Malaysian Insider
November 07, 2013

Business confidence in Malaysia plummeted in the third quarter of this year as the post-election boost has vanished, according to the Global Economic Condition Survey.

In a statement issued today, the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA) said the survey revealed that 65% of the respondents believed conditions in the Malaysian economy were stagnating in the third quarter of this year.

This is an increase from the 55% of respondents who felt business conditions in Malaysia were deteriorating or stagnating in the second quarter of the year. Only 13% of businesses reported confidence gains in the third quarter, down from 28% in the second quarter. Continue reading “Business confidence in local economy dropping, survey shows”

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A critique of the 2014 Budget Speech

by Budget analyst

A careful analysis of the 2014 Budget Speech by the Prime Minister-cum-Finance Minister, Datuk Seri Najib Razak is most revealing and disappointing as there is little by way of an exposition of the challenges the economy faces.

The customary presentation of data on the performance, in the current year and prospects in the year ahead, are matters that are dismissed in a few perfunctory sentences.

The speech gives little information on basic macro-economic assumptions used in basing the revenue and expenditure forecasts that make up the Budget.

The speech gives no hint of how the Government proposes to deal with the less than robust external environment in which the key Malaysian export markets – China, US, the EURO zone – will continue to record sluggish demand.

The price for Malaysian oil and gas are likely to be weaker because of increasing supply from US shale oil and the re-entry of Iranian oil into global markets. With greater supply and lower demand, prices are likely to be lower. Malaysian oil and gas exports will undoubtedly feel the impact. Continue reading “A critique of the 2014 Budget Speech”

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GST: killing the golden goose

– Liew Chin Tong
MP for Kluang
The Malaysian Insider
October 25, 2013

The proposed goods and services tax (GST) will tax those who can’t afford to be taxed, i.e. 60% of Malaysians who are eligible for BR1M. These are the people who will soon be taxed by the regressive tax, together with the rest of us who live and stay in this country.

I would like to drop the Orwellian double speak so prevalently employed by many GST apologists who are trying to mask the real issue. I will share my views plainly here.

Flawed arguments

Some argue that the government has to be cruel to be kind. Hence, BN would have us believe that the fuel hike subsidy rationalisation is needed to balance the government’s expenditure and ensure its good financial standing.

In theory, this sounds legit. However, look closer and you will find many flaws in the argument. For one, this argument does not take into account the adverse effects on the man on the street. It also demonstrates an incomplete understanding of how the economy grows or declines.

What is the real reason for the Barisan Nasional government to implement the GST? This tax has hung like a sword of Damocles over our heads since Tun Abdullah Ahmad Badawi’s era in 2005. Continue reading “GST: killing the golden goose”

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Berapakan jumlah nilai ekuiti yang diperuntukkan untuk Bumiputera, nilai yang masih dalam pegangan dan bagaimana boleh membantu rakyat Bumiputera biasa?

PERTANYAAN DEWAN RAKYAT

TUAN LIM KIT SIANG minta PERDANA MENTERI menyatakan berapakah jumlah nilai ekuiti yang diperuntukkan untuk Bumiputera setakat hari ini, nilai yang masih tinggal dalam tangan Bumiputera, dan bagaimana program sedemikian boleh membantu rakyat Bumiputera biasa.

JAWAPAN: YB SENATOR DATO’ SRI ABDUL WAHID OMAR. MENTERI DI JABATAN PERDANA MENTERI

Tuan Yang di-Pertua,

Untuk makluman Ahli Yang Berhormat, Kerajaan telah menggunakan beberapa pendekatan untuk meningkatkan pemilikan ekuiti Bumiputera. Antara lain, termasuk peruntukan saham khas kepada Bumiputera bagi syarikat yang akan disenaraikan di Bursa Malaysia, lanya dilaksanakan oleh Kementerian Perdagangan Antarabangsa dan Industri (MITI). Ringkasan penyertaan Bumiputera dalam pasaran saham melalui peruntukan saham khas ini adalah seperti dalam jadual di bawah:

TAHUN JUMLAH TAWARAN SAHAM KHAS (UNIT) NILAI (RM) TAWARAN KESELURUHAN IPO (UNIT) PERATUSAN TAWARAN SAHAM KHAS BUMIPUTERA (%)
2013* 1,204,717,700 2,324,592,915 17,146,814,329 7.0
2012 1,552,878,400 5,127,533,410 7,537,722,900 20.6
2011 826,612,300 1,913,479,398 5,640,376,813 14.7
2010 1,505,157,900 5,918,993,850 7,892,390,280 19.1

*sehingga September 2013

Di samping itu, terdapat juga Skim Amanah Saham yang dilaksanakan oleh Permodalan Nasional Berhad (PNB) yang telah berjaya meningkatkan pegangan ekuiti Bumiputera dalam pasaran modal. Sehingga 31 Disember 2012, pegangan pelaburan Bumiputera di bawah Skim Amanah Bumiputera bernilai RM110.3 bilion. PNB turut menawarkan unit pelaburan kepada rakyat Malaysia melalui beberapa skim seperti Amanah Saham Wawasan 2020 (ASW2020), Amanah Saham Malaysia (ASM) dan Iain-lain.
Continue reading “Berapakan jumlah nilai ekuiti yang diperuntukkan untuk Bumiputera, nilai yang masih dalam pegangan dan bagaimana boleh membantu rakyat Bumiputera biasa?”

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Malaysia: High Income Nation, but Low Income Rakyat

By Anas Alam Faizli
Oct. 22, 2013

Malaysia’s current socio economic structure can be summed up in four words, “Rich Malaysia, Poor Malaysians.” Malaysia is blessed with abundant natural resources with petroleum being the most precious. Add the land, other commodity resources, large youthful population and the country has all the essential ingredients to flourish. How then did this small nation of 30 million manage to end up with the unsolicited title of among the region’s most unequal nation between the rich and poor. What happened? Continue reading “Malaysia: High Income Nation, but Low Income Rakyat”

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Services not shortcut out of middle-income trap, ADB tells Malaysia

By Zurairi AR
The Malay Mail Online
August 27, 2013

KUALA LUMPUR, Aug 27 — Industrialisation remains a vital step countries like Malaysia can ill afford to skip if they hope to beat the middle-income trap, the Asian Development Bank (ADB) cautioned as more emerging nations gave in to the siren call of the services sector.

In its flagship annual statistical publication Key Indicators for Asia and the Pacific 2013, ADB noted that Malaysia was among nations whose economies were transforming more slowly compared to heavily industrialised economies such as Hong Kong, Japan, South Korea, Singapore, and Taipei.

This warning comes as Malaysia continues to move away from manufacturing towards knowledge-based economy and the services sector, having started down the route with the Third Outline Perspective Plan (OPP3) between 2001 and 2010.

“Our analysis indicates that manufacturing is a developmental stage that generally cannot be bypassed on the road to becoming a high-income economy,” said a special chapter in the report titled “Asia’s Economic Transformation: Where to, How, and How Fast?”

“Virtually all countries that are rich today industrialised in the past — for a sustained period, their shares of both manufacturing output and manufacturing employment reached at least 18 per cent in gross domestic product (GDP) and total employment.” Continue reading “Services not shortcut out of middle-income trap, ADB tells Malaysia”

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Malaysia next in crosshairs as Asian contagion risks grow

By Stuart Grudgings
Reuters | Wed Aug 21, 2013 3:08am IST

Aug 21 (Reuters) – Indebted, commodity-dependent Malaysia will be in investors’ crosshairs on Wednesday as heavy selling of Indonesia and India’s currencies threatens to spread to other Asian economies seen as most vulnerable to a withdrawal of U.S. monetary stimulus.

After Indonesia, where concerns over a gaping current account deficit sparked a stock market and currency rout this week, Malaysia and neighbouring Thailand are seen as the most vulnerable Southeast Asian markets to contagion effects.

“There is a lot of resemblance to prior crises like 1997-98. We have had two countries going down, India and Indonesia, and now you have got to start thinking about the third and fourth countries,” said Pradeep Mohinani, a Nomura credit analyst in Hong Kong.

“The likely candidates would be those with high fiscal deficits, slowing economies and high foreign ownership of government bonds. Thailand and Malaysia tick most of the boxes in that regard.”

Economists say that both those countries, as well as the fast-growing Philippines, are to some extent protected from major turmoil by their much stronger external balances compared with Indonesia and India.
Continue reading “Malaysia next in crosshairs as Asian contagion risks grow”

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Fitch pushes Malaysia’s credit rating outlook to negative

The Malaysian Insider
July 31, 2013

Global ratings agency Fitch Ratings has revised Malaysia’s sovereign credit rating outlook from stable to negative as the possibility of addressing public finance weaknesses has deteriorated after Election 2013.

The news comes as the Malaysian ringgit slid to three-year lows against the US dollar and 15-year lows against the Singapore dollar, making imports more expensive while exports would be cheaper although exports have slipped.

But it affirmed the country’s long-term foreign and local currency issuer default ratings at A- and A, respectively.

“Malaysia’s public finances are its key rating weakness. Federal government debt rose to 53.3% of gross domestic product (GDP) at end-2012, up from 51.6 percent at end-2011 and 39.8 percent at end-2008.

“The general government budget deficit (Fitch basis) widened to 4.7 percent of GDP in 2012 from 3.8 percent in 2011, led by a 19 percent rise in spending on public wages in a pre-election year,” it said.

But Fitch believed that it would be difficult for Putrajaya to achieve its interim 3 percent federal government deficit target for 2015 without additional consolidation measures. Continue reading “Fitch pushes Malaysia’s credit rating outlook to negative”

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Fight the Smear Campaign against the Oil Palm Industry

Koon Yew Yin

A few weeks ago the sky was covered with smoke from the burning of forests in Sumatra to clear land for agriculture. Many in Malaysia and Singapore were affected by the haze. Some observers in the west used it as an occasion to bad-mouth the oil palm oil further. In this article, I will try to share some facts of life in the oil palm industry so that Malaysians will not join the western world in their smear campaign.

Firstly, we must remember that the west had cut down their forests and trees centuries ago to develop their countries. Malaysia and Indonesia are both new comers in the development scene and have been felling our forests for only a few decades now. Of our tropical agricultural crops, oil palm is the most recent cash crop commodity.

Although there has been a rapid rate of exploitation, it still occupies a small proportion of our total land area. The oil palm industry in Malaysia accounts for 15.5 per cent of total land area and only 4.5 per cent of total land area of Indonesia. A large proportion of the oil palm plantations are also not newly felled forest but are old rubber plantations that have been converted to this more lucrative crop.

Many in the public know of my views which are critical of many developments in the country. However, praise needs to be given when it is deserved; and our home grown oil palm industry is one which deserves all our support. This support is important in view of the sustained criticism made against the oil palm industry by lobby groups that have their origin in the west.
Continue reading “Fight the Smear Campaign against the Oil Palm Industry”

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Malaysian government-linked corporations crowd out private investment

by Jayant Menon, ADB and ANU, and Thiam Hee Ng, ADB
East Asia Forum
April 25th, 2013

Private investment in Malaysia never fully recovered from the impact of the Asian financial crisis.

Foreigners have continued to shun Malaysia, but it now seems that even domestic investors are fleeing, with Malaysia becoming a net exporter of capital since 2005. One explanation for the sluggish performance of domestic private investment relates to the crowding-out effect of the growing dominance of government-linked corporations (GLCs) in many sectors. The influence of GLCs, however measured, is both widespread and pervasive.

The GLC share of operating revenue is approximately one-third in the aggregate, and they control more than half the industry share in utilities, transportation, warehousing, agriculture, banking, information communications and retail trade. GLCs employ around 5 per cent of the national workforce and account for approximately 36 per cent and 54 per cent, respectively, of the market capitalisation of Bursa Malaysia and the benchmark Kuala Lumpur Composite Index. Continue reading “Malaysian government-linked corporations crowd out private investment”

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On Malaysia’s debts and ‘growth at all cost’

by Pak Sako
Centre for Policy Initiatives

I refer to the article in The Malaysian Insider/New Mandala on reducing Malaysia’s debt burden by Nurhisham Hussein, an economist with Malaysian Rating Corporation Berhad and former employee of Permodalan Nasional Berhad.

It is encouraging to have him participate in this national conversation on Malaysian debt.

Close to 20 prominent Malaysian academics, comprising economists and political scientists, had earlier urged the Barisan Nasional and Pakatan Rakyat to state the steps for remedying the worrying situation of Malaysia’s finances (see ‘Academics call upon Barisan and Pakatan to declare policy positions on national finance and debt‘, Centre for Policy Initiatives, 8 April 2013). Continue reading “On Malaysia’s debts and ‘growth at all cost’”

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The NEP and Corruption: Why Malaysia is Lagging Behind

By Koon Yew Yin | 13th April 2013

My object in writing this is to support Professor Dato Dr. Woo Wing Thye’s lecture on 12th April in Syuen Hotel, Ipoh. In his lecture he listed 5 root causes for our poor performance in comparison with South Korea and Taiwan.

Prof. Woo, possibly because of the election fever, tried to be politically correct and made little mention of the New Economic Policy role in our failure to keep up with our neighbours. In fact it is not only Prof. Woo who is silent on the NEP – most analysts appear to have sidelined this policy in the election debate to date.

This is a mistake as the real policy culprit explaining our failure to devlop as quickly as our neighbours (see table attached) is the New Economic Policy (NEP) and the abuse of power in the B.N. Government’s implimentation. As a result, our neighbours are doing much better than us in spite of the fact that they all did not have the natural resources such as oil and gas.


Continue reading “The NEP and Corruption: Why Malaysia is Lagging Behind”

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A rejoinder to Pemandu’s “We didn’t lower the GNI figure”

In an unsigned article entitled “Pemandu: We didn’t lower 2009 GNI figure”,(Malaysiakini Apr 8, 2013) Pemandu has made a feeble attempt to defend itself from the allegations that it had manipulated the GNI estimates contained in its Annual Report.

The article contains 11 points; the article is contentious and the claims and assertions being made are open to challenge.

This Rejoinder exposes the many fallacies and untenable statements offered by Pemandu in its own defense. The 11 points are taken up sequentially.

The article begins by a flat denial that the GNI per capita figure for 2009 was deliberately and that it had an intention to mislead the public. The primary attempt at defending the number is that the unrevised GNI figure for 2009 was used in the preparation of the Annual Report issued last month because that was the number used originally at the starting point of Pemandu’ s launch as a bench mark.

This is rather simplistic.

Pemandu appears to be in a state of denial and is offering a rather lame defense. It ignores the fact that professionally, all assessments are normally based on the latest available data.

What Pemandu did in its Report was either unprofessional or an act of incompetence or a deliberate attempt to hoodwink. The effect was to present “feel good” results.
Continue reading “A rejoinder to Pemandu’s “We didn’t lower the GNI figure””

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3-Day Countdown to 13GE: BN’s Manifesto shows that it is fundamentally incapable of transforming, much less reforming, Malaysia

Despite having more than a month to thoroughly scrutinize the Pakatan Rakyat Manifesto – Pakatan Harap Rakyat – the Barisan Nasional (BN)’s Manifesto, which was launched to great fanfare on the 6th of April, shows that it is a coalition that is fundamentally opposed to and incapable of introducing significant and much needed reforms in the country.

They say that imitation is the sincerest form of flattery.

While we have no problems with the BN trying to incorporate our ideas into their own manifesto, it is laughable to see that even this copying is half-hearted, like many of the so-called transformation initiatives of Prime Minister Datuk Seri Najib Razak.

The BN promises to reduce car prices by 20%-30% but stays absolutely silent on the unfair and opaque system of Approved Permits (AP) allocations that have been given to many BN cronies.

The BN promises to expand the Rapid Bus System to every state but does not allow the state governments or the local authorities to provide their own bus services.
Continue reading “3-Day Countdown to 13GE: BN’s Manifesto shows that it is fundamentally incapable of transforming, much less reforming, Malaysia”

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Academics call upon Barisan and Pakatan to declare policy positions on national finance and debt

CPIASIA

Recent financial crises have visited economic calamity upon ordinary citizens in the countries of the East and West alike. Experience tells us that there can be no complacency about a nation’s financial state.

Concerns voiced in various reports and the media call for special attention to Malaysia’s finances and their management. These concerns are:

  • A record-breaking capital flight out of Malaysia. Financial watchdog Global Financial Integrity (GFI) reported that a total of RM880 billion of funds were illegally transferred out of the country between 2001 and 2010.

  • A sharply rising trend in government debt. This debt almost doubled from RM274 billion at the beginning of 2008 to RM502 billion at the end of 2012. International Monetary Fund (IMF) statistics expect it to grow by RM277 billion to RM779 billion in 2017.

  • Incomplete information about the Malaysian government’s full exposure to debt. The official figures for government debt exclude debts that are called contingent liabilities. These include off-balance-sheet borrowings and the debts of banks, government-linked companies and other private-sector enterprises that the government has guaranteed to pay off in the event that these entities default. One estimate of these hidden debts in 2011 placed it at RM117 billion.

    • Continue reading “Academics call upon Barisan and Pakatan to declare policy positions on national finance and debt”

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6-Days to 13GE – Idris Jala’s 12 clear signs of success – April Fool’s Day Message of Illusions

Datuk Seri Idris Jala in his article entitled 12 Clear Signs of Success has the chutzpah to make the claim that he believes in numbers and that their proper use and measurement does not result in lies.

It is rather laughable that having staked out this position, he proceeds to use fabricated numerical data in a brazen manner to make claims that do not have a basis and the assertions being made deviate from the truth.

However, he is not alone in spewing false and spurious numbers to befuddle the public. This has indeed been the season in which the nation has been treated to a recitation of false numbers to telltales of success and to make promises and paint mirages.

Pemandu has led the way and carved a niche for itself as the propaganda arm of the Government; and Datuk Idris is now a purveyor of twisted facts to cover up the failings of the Government.

The BN effort started with the Prime Minister claiming in the course of his March 23rd televised interview that per Capita GNI had grown by 49 percentage – and according to him the fastest ever in global terms – between 2009 and 2012.

This audacious claim, despite being challenged, was repeated by Pemandu in its Annual Report.

When further challenged, Datuk Idris was forced into issuing a “correction” citing a figure of 41 percent, further repeated in his article.
Continue reading “6-Days to 13GE – Idris Jala’s 12 clear signs of success – April Fool’s Day Message of Illusions”

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Malaysia’s debt: the misleading debt-to-GDP ratio

by Pak Sako
CPI Asia

This is the third part of a three-part CPI series on Malaysian debt. The first part, entitled, ‘Investigate Malaysia’s debts now‘ , surveyed the overall debt situation. The second part, entitled, ‘Malaysian government debt to approach RM1 trillion by 2020‘, looked at the trend in government debt.

This part critiques the debt-to-GDP ratio and questions Malaysia’s official debt figures.

An over-optimistic and misleading impression of debt results when the government puts its faith in one number, the debt-to-GDP ratio.

The current government-debt-to-GDP ratio for Malaysia of 53% is assumed as being within safe limits, below the 55% ceiling set by Malaysian policy.

Here it is argued that judging the nation’s debt condition primarily on account of this one indicator is wrong. A critical look at debt is required to understand the real situation and health of the economy. Continue reading “Malaysia’s debt: the misleading debt-to-GDP ratio”