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Global economic slowdown and political uncertainty in Malaysia

Shankaran Nambiar, Kuala Lumpur | August 15th, 2012
East Asia Forum

The world is on the brink of an economic crisis and the consequences are likely to be dire.

The current state of the global economy presents multiple challenges to Malaysia. While the effects will first be felt within the economic sphere, they will also have a significant impact on domestic politics. This will add to the prevailing state of political uncertainty.

Some of Malaysia’s key trading partners are already struggling economically. The crisis rocking the euro zone has received a considerable amount of analysis, but the economic situation in other countries also merits attention.

The performance of the US economy is a concern for Malaysia. US GDP, which saw growth of 3 per cent in the fourth quarter of 2011, decreased to 1.9 per cent growth in the first quarter of 2012. Growth in the US hardly recovered, but whatever recovery it had achieved now appears shaky. Analysts put the forecast for US growth at 1–1.5 per cent for 2012. Some have raised the probability of a recession to 50 per cent. The unemployment rate has not budged from 8.2 per cent, as the increase in employment opportunities has not kept pace with population growth.
Continue reading “Global economic slowdown and political uncertainty in Malaysia”

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Fatal flaw in the RM180 million allocation to Indians

By Jeyaseelan Anthony | Saturday, 11 August 2012 01:55
CPI

Recently our Prime Minister had announced an allocation of RM180 million to uplift the economic standing of the Indian community. It was indeed a major announcement and a big step forward on the part of the government to help the Indian community. However in practice whether this allocation will help Indians in the long run is doubtful.

Malaysia is still plagued by discriminatory policies which favour the majority Bumiputra races. Announcing an allocation is rather easy but making the money usable for business or social purposes is another.

Take for example a real incident highlighted by Senator Dr. S. Ramakrishnan recently and I quote it here.

“One of my cousins wanted to import goats from Myanmar sometime in 2006. When he went to the Customs and Agriculture department for permits to import, he was told that he can only import under a Bumiputera name. My cousin then went looking for a trusted Bumiputra partner to import goat or at least lend his name for that purpose and he managed to find one. He imported goat and sold it in Malaysia. After the first import the Bumiputera partner went to Myanmar and started importing himself. My cousin lost a reliable source of supply and income.
Continue reading “Fatal flaw in the RM180 million allocation to Indians”

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Dissecting the ETP Annual Report (Part 7): Perception Manipulation and Deception Unit

— Ong Kian Ming and Teh Chi-Chang | August 09, 2012
REFSA (Research for Social Advancement)

At PEMANDU, perception trumps reality. This very powerful government agency values perception and spin above genuine transformation. Starting with the headlines, its rosy communiqués trumpeted strong economic numbers in 2011 rather than admit that real gross national income (GNI) growth was below target, let alone explain the causes or articulate measures to close the gap.

PEMANDU lied in its annual report. It took “100 per cent” credit for the construction of a RM1.9 billion wafer fab plant that was never built. Malaysian official statistics have, until now, been accepted as reliable. This is crucial for investor and public confidence. We hope PEMANDU is not pressuring other government agencies and EPP owners to also dress up their numbers, which will ultimately lead to a catastrophic collapse in confidence in Malaysia.

Agreed-upon-Procedures (AUP) are not worth much. Contrary to general public perception, PricewaterhouseCoopers (PwC) did not conduct a full audit. It conducted AUP, the ambit of which was so loose that PwC failed to detect a huge RM1.9 billion wafer fab plant that was never built. How many other less audacious lies slipped through the net?

PEMANDU is driving a delusion. The very foundations of the ETP are doubtful now that PEMANDU has confessed to errors that slashed 45 per cent off the incremental GNI claimed. Also, some so-called transformative EPPs were chosen based on exaggerated numbers. However, PEMANDU’s biggest “success” is manipulating Malaysians into believing that the ETP is transformational, when in fact, workers will take a mere 21 per cent of the incremental income the ETP promises to create, down from their 28 per cent share currently. Continue reading “Dissecting the ETP Annual Report (Part 7): Perception Manipulation and Deception Unit”

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Dissecting the ETP Annual Report (Part 6): Recommendations for Pemandu

— Ong Kian Ming and Teh Chi-Chang | August 02, 2012
The Malaysian Insider

AUG 2 — Is asking for a few more facts and some additional background too much? Pemandu has accused us of “nit-picking” and not providing alternatives. That conveniently shifts the focus to other issues while Pemandu ignores our very pertinent questions and suggestions. We summarise here three recommendations, and remind Pemandu of the positive outcomes of our nit-picking.

Recommendation #1: Be clear about targets, data and methodology.

Pemandu now has three different targets for national income by 2020. Please be clear, so we can all work towards the same ultimate target. Also, Pemandu should declare now its GNI, investment and job creation targets for 2012 and 2013. This is to prevent a repeat of the discrepancies surrounding 2011, when its `targets’ were declared only after the actual numbers were out.

Recommendation #2: Remove doubtful EPPs.
Continue reading “Dissecting the ETP Annual Report (Part 6): Recommendations for Pemandu”

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Race to the bottom in Malaysia

By William Barnes | Aug 2, 2012
Asia Times Online

BANGKOK – As Malaysia approaches a general election season, opposition politicians claim Prime Minister Najib Razak’s ruling party and government are stoking racial politics to gain a popular edge with the ethnic Malay majority.

A year after the World Bank warned Malaysia over its acutely debilitating race-based brain drain, veteran opposition leader Lim Kit Siang has said the government is compounding the damage by blatantly playing the “race card” in the run up to the next election, which must be called by next April.

The ruling Barisan Nasional (BN) coalition’s ambitions to lift the economy out of its disappointing holding pattern can go hang when it fears losing for the first time since independence in 1957, he has argued. “They talk all the time about being world beating and wanting to get all Malaysians behind the economy … but it all goes overboard when the focus is on the Malay identity.”
Continue reading “Race to the bottom in Malaysia”

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Malaysia and the Perfect Storm

By Thomas B. Pepinsky | July 27, 2012
blogs.cornell.edu/indolaysia

Let’s say that you’re a pessimist about global growth prospects. If so, you’re not alone: Q2 GDP growth in the U.S. is weak, the U.K. is in a double-dip recession, and there’s no end to the Eurozone crisis in sight. Growth in China is softening too, and the rest of the BRICs aren’t registering the growth that we have come to expect over the past five years. If you also think that global financial markets remain fragile, then you’d be right to worry about a perfect storm in the global economy.

This is bad news all around for the big economies. But we should also pay attention to how global economic conditions will affect small open economies. By definition, these are economies that are dependent on trade and investment, and which therefore have harnessed themselves to the global economy as a basic engine for growth and development. This gives them access to markets for their exports and to investment, but by the same token, it makes them vulnerable to whatever ups and downs the global economy experiences.

Malaysia is a classic example of a small open economy. And a new report (unfortunately behind a paywall) from Roubini Global Economics argues that Malaysia is not only the Asian country whose economy is most vulnerable to a perfect storm, but also the country which is perhaps least able to do anything about it. Take note of the following: Continue reading “Malaysia and the Perfect Storm”

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The bitterness of a financial conservative

by Hafiz Noor Shams
The Malaysiann Insider
Jul 26, 2012

JULY 26 — I handle my finances conservatively. I spend very little for someone my age and my profile. In fact, I impose a sort of limit on my spending. I am conscious of it and get mildly nervous if my total spending grows too fast even when I can more than afford it.

I probably do buy too much insurance and I do save or invest a large part of my earnings. My credit card service provider probably hates me for having to finance me without getting the chance to charge me interest too often too much.

I can afford to save a lot partly because I do not have too many financial responsibilities.

The other factor behind my saving habit has a lot to do with my upbringing and education. Continue reading “The bitterness of a financial conservative”

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Dissecting the ETP Annual Report (Part 3): It was only RM12.9 billion of actual investments

By Ong Kian Ming and Teh Chi-Chang | June 21, 2012

JUNE 21 — It’s a long way from “committed” to “actual”. PEMANDU trumpets in its Annual Report that the ETP has brought in RM179 billion of investments. What is downplayed is that the RM179 billion is for committed investments. Actual investments under the ETP were just RM12.9 billion — a mere 7 per cent of the RM179 billion committed.

The committed investments figure is also doubtful. We found at least five projects worth RM17 billion where the ultimate investments may be less than promised. For example, PEMANDU took “110 per cent” credit for villa pre-bookings at the RM9.6 billion Karambunai Integrated Resort. But the project developer is being sued for defaulting on RM18 million of rental payments. Does it have the financial capability to deliver the new villas?

PEMANDU is stealing credit again. It said that the RM94 billion worth of private investments in Malaysia last year was “some 113 per cent above our target”. That seriously overstates PEMANDU’s performance given that PEMANDU brought in only RM12.9 billion, and that RM12.9 billion includes both private and government investments.
Continue reading “Dissecting the ETP Annual Report (Part 3): It was only RM12.9 billion of actual investments”

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WSJ: Malaysia needs China’s help to weather euro storm

The Malaysian Insider
Jun 20, 2012

KUALA LUMPUR, June 20 — Trade-dependent Asian countries including Malaysia will take a major hit if the euro zone economy collapses and will require China’s aid to hobble along, according to the Wall Street Journal (WSJ).

The newspaper highlighted the point that Malaysia has bank loans from Europe equal to 20 per cent of its gross domestic product (GDP), which it said was high for the region, and would be more troubled compared to financial hubs Hong Kong and Singapore, both of which have huge “rainy-day funds” to keep homes and businesses above water.

While China, the world’s biggest economy after the US, would be able to withstand the global slump due to its closed financial system, WSJ said Malaysia’s growth would be lessened.

“If China doesn’t open the stimulus floodgates, that would mean less of a boost for its neighbours, including commodity exporters such as Australia and Malaysia,” the paper said. Continue reading “WSJ: Malaysia needs China’s help to weather euro storm”

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Funds boost for BN MPs an act of desperation which says that Najib has lost out in the political argument

By Dr Chen Man Hin, DAP Life advisor

Anwar claims that Najib is scraping the bottom of the barrel in his desperation to give money to BN MPs to get support from the people. Actually the government coffers are already empty. The money he is now splashing round to the low income groups and to BN MPs who badgered for money are sourced from Petronas and EPF funds.

Predictions of the economy are bad. The GDP growth for first quarter is about 4% which is 2% lower than the expected 6%.

World economy is bad. The Eurozone countries are mired in debt. The China economy is slowing down. So Najib’s dreams of achieving a high income economy are dashed.

The World Bank has no praises for Najib’s economic reforms because he has not made structural reform. The Time magazine echoes the views of the World Bank.

Najib now has his back against the wall. His cronies can’t work up an ideology to boost party morale. The only way for Najib to win votes is to use government funds to hand out money to the people.
Continue reading “Funds boost for BN MPs an act of desperation which says that Najib has lost out in the political argument”

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“Malaysia has fallen off the investment map”

Extract from book review of Ruchi Sharma’s “Breakout Nations: In pursuit of the next economic miracles” by John Loh published in StarBizWeek today

In his chapter on Malaysia, Sharma has a more stark prognosis.

“Malaysia’s economy slowed dramatically after the Asian crisis,” he writes, adding, “There is a widespread sense in Kuala Lumpur that the economy has been growing because of extensive government spending and fortunate circumstances rising global commodity prices have been a huge boost to its rubber and palm oil exports not from smart choices.”

The dramatic reforms taking place in Indonesia, Sharma argues, have “no parallel” in Malaysia, putting it at risk of sliding backward.

Malaysia, he points out, is the only Asian country where FDI is declining as at the last quarter of 2011, it was flowing out at a rate of 2.5% of GDP.

Sharma also tells SBW that the country is obsessed with central planning and grand schemes, but has often fallen short on execution. Continue reading ““Malaysia has fallen off the investment map””

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World Bank warns there will be no high income economy for Malaysia without implementing structural reforms

By Dr Chen Man Hin, DAP life advisor

The World Bank in its bi-annual report on East Asia and the the Pacific said that in view of the slow down in the economy in the years ahead, due to a massive world debit problem, the GDP of Malaysia would slow down to 4.6% this year and 5.1% in 2013.

He advised that Najib should stop fiddling with the economy with his multiple reforms which have not brought encouraging progress. He advised Najib strongly to implement structural reforms to bring about a strong recovery in the economy.

Structural reforms means that the New Economic Policy must be stopped and in its place, implement free market policies like those in Singapore, Hong Kong, S. Korea and Taiwan. A free market policy propelled the growth of the economies of these four ASIAN TIGERS, each of which have a per capita income of over US $20,000.

For Malaysia to have a high economy, the GDP must grow by at least 6% a year, which would make Malaysia a high economy nation by 2020.

Two months ago, Najib gave a glowing report and boasted that Malaysia had a per capita income of US$9,500, and would attain high economy status by year 2020. These predictions of Najib have been brushed aside by the World Bank.
Continue reading “World Bank warns there will be no high income economy for Malaysia without implementing structural reforms”

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Verify, verify, verify

— Ong Kian Ming
The Malaysian Insider
May 24, 2012

MAY 24 — I love this quote from one of the basic rules of journalism — “If your mother says she loves you, check it out”. It’s a warning to journalists to develop a healthy dose of scepticism and to always verify facts even though it’s from a supposedly trustworthy source. I’m not a journalist but I’ve developed my own sense of scepticism after being exposed to academics in the United States, most of whom will jump at every opportunity to dismantle the supposed “proof” or “evidence” behind any new theory. It is perhaps not surprising that we in Malaysia have not developed the same healthy dose of scepticism when presented with a piece of information since we are taught from very young not to question authority figures. But when we are bothered enough to be healthily sceptical and make the extra effort to verify certain facts and figures, the results can be quite enlightening.

Take, for example, the Economic Transformation Programme’s (ETP) Annual Report, which was released in April 2012. According to Exhibit C of this report (pg.8), the nominal Gross National Income in 2011 of RM830 billion surpassed its target of RM797 billion by RM33 billion or 4.1 per cent. In the same exhibit, nominal private investment in 2011 of RM94 billion was shown to have surpassed its target of RM83 billion by RM11 billion or 13.3 per cent. These figures together with other impressive results from the 12 NKEAs led many analysts to praise the ability of the ETP to over-deliver on its targets.

But surprisingly, no one bothered to find out how the GNI and private investment targets were calculated in the first place, especially since the methodology of calculating these projected targets were not revealed in the ETP Annual Report (nor were they revealed in the ETP Roadmap Report which was released in October 2010). If one had bothered to do a bit of research, one would have realised that the RM797 billion nominal GNI target for 2011 seemed a bit low. After all, according to the Ministry of Finance’s Economic Report 2010/2011, which was published together with the 2011 Budget, the projected GNI in 2011 was RM811 billion. This was updated to RM820 billion in the Economic Report 2011/2012, published together with the 2012 Budget. Continue reading “Verify, verify, verify”

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Malaysia after regime change

— Hal Hill
The Malaysian Insider
May 14, 2012

MAY 14 — There is much to admire about Malaysia, in addition to it being arguably the world’s best place to eat. Its development record is admirable. Since independence in 1957, its per capita income has risen eight-fold. It has long since left behind its two earlier comparators, Ghana and Sri Lanka. It features prominently and positively in all major international economic comparisons, from the World Bank’s 1993 East Asian Miracle to the 2008 Growth Commission report. The 2.5 million to three million migrant workers are there for a good reason — even if they are sometimes subject to abuse, life is a lot better than in their homelands.

As a result of the country’s adept macroeconomic management, it has suffered just one serious economic setback, in 1997-98. That event had its origins at least partly in external factors, and it was promptly overcome, without the “assistance” of the IMF. The country has managed to avoid the “resource curse”, which has bedevilled the majority of resource-rich developing countries. It features well on most comparative rankings, such as the Bank’s Doing Business, and the Global Competitiveness Report.

Along with Singapore, it has enjoyed an early mover advantage from its adoption in the early 1970s of export-oriented industrialisation through foreign direct investment, before it was fashionable to do so. As a consequence, it is a major player in the global electronics industry. And although inequality remains high, there is no doubt that the bottom 40 per cent of Malaysian citizens have benefitted materially from the country’s economic growth.

What’s the economic problem, then? Principally, that the economy has yet to regain the dynamism evident before the 1997-98 Asian financial crisis. Even before the more recent global financial crisis, which Malaysia navigated quite successfully, economic growth in the new millennium was at least two percentage points below that of the decade 1986-96. Continue reading “Malaysia after regime change”

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Election spending risks credit downgrade, say S&P and Moody’s

By Shannon Teoh
The Malaysian Insider
Apr 26, 2012

KUALA LUMPUR, April 26 — The federal government’s record spending binge ahead of elections expected within months may result in Malaysia’s first credit-rating downgrade in 15 years.

Bloomberg reported today that several top rating companies say Putrajaya must bring down its debt, the second highest in Asia at 53.8 per cent of GDP or face a ratings cut.

The international business wire cited Standard & Poor’s (S&P) analyst Takahira Ogawa as saying it “might have to think about” a potential cut in a few years unless the next government boosts revenue and reduce subsidies after polls.

It also reported that Moody’s Investors Service and Fitch Ratings also said Malaysia must cut its debt, which the International Monetary Fund (IMF) projects may climb to a 20-year high of 55.9 per cent this year, above the statutory 55 per cent ceiling.

A downgrade to Malaysia’s credit, rated as A- by S&P, would be its first since the 1997 Asian financial crisis.

The rating is the same as Botswana, which has a debt ratio of 16 per cent, while Indonesia, Southeast Asia’s largest economy, is rated BB+ by S&P and has seen its debt fall to 25 per cent in 2011 from 95 per cent just after the crisis. Continue reading “Election spending risks credit downgrade, say S&P and Moody’s”

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Guan Eng holds forth on Economics 101

Terence Netto | Apr 14, 2012
Malaysiakini

Chief Minister Lim Guan Eng gave a little homily on institutional economics on the occasion of state government awards to top students and schools in the 2011 STPM examination.

Lim told his audience of proud parents and top-scoring students at the award ceremony in Komtar today that the Pakatan Rakyat government’s clean and effective administration conduced to higher rewards for its citizens.

As example, he cited the RM500 rewards to the 50 top-finishing students in the state in the STMP examination of last year, up from RM400 given to top scorers in 2010.

The monetary awards were inaugurated in 2009, a year after the DAP-led Pakatan government came to power in Penang.

“The reason we can give more this year is simple: we run a government that is not corrupt,” he said.

“Because our governance is competent, accountable and transparent, we can show a surplus of income over expenditure enabling us to plough back progressively higher benefits to the people,” he explained. Continue reading “Guan Eng holds forth on Economics 101”

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Allah sentiasa bersama dengan orang zuhud

— Aspan Alias
The Malaysian Insider
Apr 11, 2012

11 APRIL — Saya sedang melalui pengalaman baru dan pengalaman ini sangat berharga bagi saya. Pengalaman yang saya maksudkan ialah mengenali lebih dekat lagi sikap Melayu Umno.

Rupa-rupanya masih banyak yang saya kurang faham tentang ahli-ahli Umno walaupun saya berada didalam parti itu selama 40 tahun. Agaknya saya tidak memahami pemikiran diluar kotak kerana saya terlalu taksub kepada Umno itu semasa saya berada didalamnya.

Saya hanya memahami dengan lebih dekat lagi sikap dan pemikiran mereka sejak saya mengambil keputusan menyertai Parti Tindakan Demokratik, parti momokan Umno sejak 46 tahun yang lalu. DAP itu komunis, DAP itu chauvinistik, DAP itu anti Melayu dan anti Islam dan DAP itu segala-galanya yang buruk. Segala “superlatives” buruk diberikan kepada DAP.

Yang menjaga Islam itu hanya Umno. Yang berjuang untuk Melayu itu hanyalah Umno, yang mempertahankan agama itu Umno , yang anti komunis itu Umno dan semua yang baik dan syumul itu Umno.

Mereka seolah-olah mengaku mereka sahaja yang akan masuk syurga dan saya yang masuk DAP ini akan menjadi ahli neraka. Tetapi kumpulan ini tidaklah ramai. Sebagaimana yang saya telah tulis dahulu penyertaan saya dalam DAP mandapat sokongan ramai orang Melayu juga. Continue reading “Allah sentiasa bersama dengan orang zuhud”

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Before being known as “Bapa Transformasi”, Najib must show he is not “Bapa U-Turn” first

Less than 3 years into his term as the 6th Prime Minister of Malaysia, Najib Tun Razak has already been showered with the accolade of “Bapa Transformasi” courtesy of his many transformation programs. The litany of acronyms associated with Najib is like a never-ending alphabet soup – GTP, ETP, PTP, NEM, NKEA, NKRA, NEAC, EPP, SRIs.

One almost needs a reference dictionary to keep track of them. But despite his many programs, he is still very, very far from being a transformative Prime Minister. And his many programs are still very, very far from being transformative.

On the eve of what will be the most tightly contested general election in our history, Najib has shown a greater willingness to make U-Turns when faced with tough decisions that would have made Malaysia into a more progressive, liberal and vibrant country.

His various transformation programs are nothing more than expensive tax funded PR exercises that masks the business and politics as usual way of doing things that is taking place behind the scenes within the corridors of Putrajaya and within UMNO’s headquarters at PWTC.

Before Najib can earn the title of ‘Bapa Transformasi’, he needs to show that he is not ‘Bapa U-Turn’ first. Continue reading “Before being known as “Bapa Transformasi”, Najib must show he is not “Bapa U-Turn” first”

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Get real Mr Prime Minister!

By Sakmongkol AK47 | March 22, 2012
The Malaysian Insider

MARCH 22 — Like many others, I read somewhat amused at PM Najib’s war cry that he is confident of getting back the states now under the opposition. I say war cry because here we have a PM seized by an extreme bout of paranoia declaring that we are at war. With who?

He has to stop the charade. It’s not like Umno and BN people are gifted with extraordinary talent that reserves them the right to govern the country. Who can argue against facts? The top three states which drew the highest FDI are Pakatan-led states. Just under one term, Pakatan governments can achieve these good things which no other BN lead states have ever achieved is an incontestable testimony that Pakatan people are more talented.

This is what Umno and BN and the Umno president fear most. That people are slowly but surely realising that there is life without Umno and what’s better, there is a better life without Umno. Let’s repeat this once more there’s life without Umno and there’s a better life without Umno indeed. Tell your friends, neighbours about this; let us kick out the kleptocratic maniacs out of Putrajaya and forge a new future. Let’s square off with Najib as the opposition leader. We will see he is a paper tiger who, without a scripted text, cannot respond to out-of-pre-approved questions.
Continue reading “Get real Mr Prime Minister!”

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Putrajaya says ‘recycled’ projects part of ETP ‘ecosystem’

By Shannon Teoh | March 13, 2012
The Malaysian Insider

KUALA LUMPUR, March 13 — Putrajaya today defended its move to “recycle” two projects to be included into its Economic Transformation Programme (ETP), insisting were part of the “whole ecosystem” to push Malaysia into a high-income economy.

Deputy Minister in the Prime Minister’s Department Datuk S. K. Devamany told Parliament that it was unfair to single out projects like the Karambunai Integrated Resort and the Tanjong Agas Industrial Park as they formed part of a cohesive plan along with other megaprojects.

“It is part of a whole ecosystem where incentives such as infrastructure is given to encourage both local and foreign private sectors to invest. It’s a damn good programme.

“In principle, an EPP must fulfil two conditions, which is to have a significant impact on gross national income between 2010 to 2020 and to go through several rounds of consultation with stakeholders,” he said in reply to Ipoh Timor MP Lim Kit Siang.
Continue reading “Putrajaya says ‘recycled’ projects part of ETP ‘ecosystem’”