Posted on

Malaysia’s Old Economic Model

The government still offers handouts instead of reforms to woo voters.

Wall Street Journal
12th Oct 2011

Malaysian Prime Minister Najib Razak has unveiled a budget full of freebies designed to win over voters in the next general election, expected in the next six months. In the process, he is dashing expectations of economic reforms needed to promote growth.

This contrasts with the political reforms Mr. Najib announced last month. A promised overhaul of the country’s colonial-era legal code would guarantee political and civil freedoms long denied to Malaysians.

Mr. Najib seems to have thought of a handout for nearly everyone in 2012. The country’s 1.3 million civil servants will see salaries and pensions rise, in many cases by as much as 30%; households earning less than 3,000 ringgit ($960) a month will receive one-off payments of 500 ringgit; parents will find many school fees abolished or reduced. Then there are the taxi drivers who get fat tax exemptions. Continue reading “Malaysia’s Old Economic Model”

Posted on

Recession risk high and rising, says RHB

By Lee Wei Lian
The Malaysian Insider
Oct 12, 2011

KUALA LUMPUR, Oct 12 — Malaysia’s economic growth could slow to just 3.6 per cent next year from a projected 4.3 per cent this year due to the increasing risk of a double dip global recession, said the RHB Research Institute.

The RHB unit’s growth projection issued yesterday is significantly lower than Prime Minister Datuk Seri Najib Razak’s forecast of five to six per cent growth for 2012 in his proposed RM232 billion Budget 2012 tabled last Friday.

The research house said that the risk of a double-dip global recession is high and rising as both the US and Europe cannot withstand another shock although a recession could be averted if leaders in both continents act fast enough to contain the debt crises and avert a contagion that could lead to a complete meltdown in confidence.

It also expected businesses to cut spending in view of rising uncertainties although some growth will come from the implementation of the Economic Transformation Programme (ETP).

Private investment growth is projected to soften further to 4.6 per cent in 2012, after slowing to an estimated 5.7 per cent for 2011, the report added.

Exports, meanwhile, are expected to grow at just 1.1 per cent compared to 3.4 per cent this year due to dampened foreign demand for electronics and electrical items.

Domestic demand is projected to grow at a slower pace of 5.1 per cent in 2012, compared with an estimated 5.8 per cent for 2011.

RHB said, however, that consumer spending is expected to remain “reasonably resilient” and grow at around 5.3 per cent in 2012, compared with 6.0 per cent for 2011, given high savings, rising consumerism and an increase in salary.

Most research houses have lowered their 2012 growth projections for Malaysia despite Najib’s optimism in the Budget proposals, which critics have say is primed for the next general election that must be called by early 2013. Continue reading “Recession risk high and rising, says RHB”

Posted on

Goldman Sachs says Malaysia needs tougher reforms

By Shannon Teoh
The Malaysian Insider
Oct 11, 2011

KUALA LUMPUR, Oct 11 — Global banking giant Goldman Sachs believes Malaysia must push through tougher reforms such as a goods and services tax (GST) and slashing subsidies if it wants to transform into a high-income nation.

Its review of Budget 2012 proposals said the recovery in private investment since the 1997 Asian financial crisis has been held back “by scepticism over the government’s transformation efforts over the years.”

“Pushing through tougher reforms is ultimately what is needed to catalyse the economic transformation process. Continue reading “Goldman Sachs says Malaysia needs tougher reforms”

Posted on

Economists uneasy over sugary Budget

By Lee Wei Lian
The Malaysian Insider
Oct 10, 2011

KUALA LUMPUR, Oct 10 — Economists said today that the 2012 Budget risks committing Malaysia to the path of unsustainable spending at a time when the global economic outlook remains uncertain.

Bank of America director of global research Chua Hak Bin noted that both Malaysia’s public and household debt levels were at worrying levels, and said the government appeared to be kicking the debt can further down the road by not addressing it in the Budget.

“Will debt dynamics increase and will Malaysia face a year of reckoning?” he asked at the post-Budget dialogue organised by the Malaysian Economic Association and University of Malaya here.

Chua said there was a chance government revenues would be hit by a recession, which would make it harder to meet the commitment to trim the deficit to 4.7 per cent next year from 5.4 per cent now.

“The deficit is extremely sensitive to the state of the economy,” he pointed out. Continue reading “Economists uneasy over sugary Budget”

Posted on

2012 budget – cornucopia of goodies for votes

Prime Minister cum Finance Minister Datuk Seri Najib Razak’s 2012 Budget on Friday was a veritable cornucopia of goodies for votes in the 13th general elections – the most brazen and cynical budget exercise in the nation’s history to reach out for voter support from a whole swathe of targetted groups comprising important vote-banks.

But the inequitable and corrupt system which bred decades of injustice, inequality and exploitation remains completely untouched.

The 2012 Budget is designed to win the next general elections for Najib and not to reform and transform the country’s system, structures and institutions to end the rot which has seen Malaysia losing out in international competitiveness and being overtaken by more and more countries in national, economic and human resource development including in South East Asia. Continue reading “2012 budget – cornucopia of goodies for votes”

Posted on

Barisan Nasional’s Budget 2012 is like a sugar-coated placebo – makes you feel good after taking it, only to tax you more later

by Tony Pua
8 Oct 2011

It is difficult not to “feel good” after a record-breaking pre-election budget where goodies big and small, were liberally handed out to practically all segments of society. The question is, beneath the sweeteners, are there substantive reforms proposed in the Budget 2012 to make “transformative” changes to our economy to achieve the goal of becoming a “high-income nation” by 2020.

The answer, when compared side by side with Pakatan Rakyat (PR) Alternative Budget is obvious. There is little in the Barisan Nasional (BN) federal government’s budget that indicates a determination to slaughter sacred cows and take the Malaysian economy to the next level.

Both the PR and BN’s budgets had proposed cash grants to various deserving segments of society in order to help alleviate their increasingly heavy burdens. However, PR matched its welfare benefits with policies to rectify the distortions created by the current government to reduce inflationary pressures and the cost of living over the longer term.

PR has called for the abolition of artificial monopolies licensed by the Government such as Bernas which monopolises the sale and distribution of local and imported rice. In addition, predatory market strategies by Telekom Malaysia to stifle competition will be made illegal while the monopoly of satellite and cable television will be abolished. Continue reading “Barisan Nasional’s Budget 2012 is like a sugar-coated placebo – makes you feel good after taking it, only to tax you more later”

Posted on

Tax reliefs: Hidden subsidies that favour the rich

— Subramaniam Pillay
The Malaysian Insider
Oct 07, 2011

OCT 7 — In the past couple of years, there has been a lot of talk on subsidy rationalisation i.e. the removal of subsidies for basic items like cooking oil, sugar, flour and petrol. The argument is that it subsidises the poor as well as the rich; it is unfair to provide subsidies for the rich, so we must eliminate the subsidies and let market forces work.

Many of these subsidies help the poor and the rich equally. For example, if a family consumes 5kg of cooking oil per month, they get the same subsidy regardless of their wealth and income. Usually, consumption of basic food items does not increase with increasing wealth and income.

However, there is a large hidden subsidy which favours the rich over the poor that has been conveniently forgotten. And this comes in the form of the various tax reliefs offered to taxpayers. In this week, before the 2012 Budget is announced, there have been numerous calls to increase the tax relief for various items including premiums for medical insurance, educational insurance and life insurance.

Tax reliefs are is a very regressive form of government subsidies to the taxpayers. The richer the taxpayer, the more subsidy she gets from the government. Thus it is unfair and inequitable. Continue reading “Tax reliefs: Hidden subsidies that favour the rich”

Posted on

Foreign sell-off, economy top concerns despite reforms push

by Lee Wei Lian
The Malaysian Insider
Sep 19, 2011

KUALA LUMPUR, Sept 19 — Despite the Najib administration’s political reforms, a Bloomberg report today said foreign funds may continue paring down local share stakes in an indication that the world economy will remain the government’s biggest headache ahead of an expected general election.

Terence Wong, head of research at Kuala Lumpur-based CIMB, was reported as saying that worsening global economic turmoil may cause investors to keep unloading the nation’s equities.

Wong also said that promises made last week by Prime Minister Datuk Seri Najib Razak to burnish Malaysia’s democratic credentials and abolish the controversial security and media laws will not be enough to boost confidence.

The Bloomberg report said that KLSE data showed that foreign funds sold RM3.8 billion worth of Malaysian shares last month, the most since at least October 2009 after four consecutive months of inflows. Continue reading “Foreign sell-off, economy top concerns despite reforms push”

Posted on

Economists no longer able to predict economic crisis, says ISIS chief

By Lee Wei Lian
The Malaysian Insider
Sep 14, 2011

KUALA LUMPUR, September 14 — The global economy is now so unbalanced that economists are no longer able to predict crises, said Institute of Strategic and International Studies (ISIS) chief Datuk Mahani Zainal Abidin today.

This comes as the global markets continue to be plagued with uncertainty due to the lingering effects of the 2008 financial meltdown that hit the United States and Europe.

While Malaysia was spared from the financial crisis and has resumed economic expansion after the 2009 recession, its stock market has been rocked by global volatility, while inflation has soared due to pressure from high commodity prices. Property prices have also jumped dramatically owing to ample liquidity.

The think tank chief said that the problem was that the financial economy has become much larger than the real economy and admitted that assumptions used by economists no longer work. Continue reading “Economists no longer able to predict economic crisis, says ISIS chief”

Posted on

Pua: Telcos’ tax is illegal

K Pragalath | September 13, 2011
Free Malaysia Today

Decision to charge the 6% service tax is akin to price fixing and is against the soon to be implemented Competition Act 2010, says PJ Utara MP.

PETALING JAYA: Petaling Jaya Utara MP Tony Pua criticised the decision by telecommunication companies to charge the 6% service tax as illegal because the companies were trying to fix prices.

“There is no question that the joint statement (on the decision) and attempt by the four telecommunication companies to raise prices by the same percentage concurrently is illegal because they are colluding to form a cartel for the purposes of price-fixing.

“The real issue at hand is the blatant and coordinated attempt by the telecommunication companies to raise prices concurrently, contemptuous of the competitive spirit,” said Pua. Continue reading “Pua: Telcos’ tax is illegal”

Posted on

And the pretending goes on …

— The Malaysian Insider
Sep 13, 2011

SEPT 13 — Presumably, if you keep on message all the time, you must hope that fiction turns into fact. Let’s take the issue of the six per cent service tax on users of prepaid mobile services.

It was introduced by this government (included somewhere in the last budget by the Finance Minister) and yet Malaysians have had to go through this painful sandiwara by Prime Minister Datuk Seri Najib Razak (who urged the telcos to reconsider passing on the tax to consumers), Information Minister Datuk Seri Rais Yatim, who was keen to paint the telcos as the bad guys, and now DPM Tan Sri Muhyiddin Yassin.

The country’s number two, like his Cabinet and Umno colleagues, is keen to show that the government is compassionate and mindful of the pain felt by the rakyat. He, like his friends, speaks as if it was some third party who suddenly imposed this tax out of thin air and the BN fairy came along, waved a wand and took away the pain of the rakyat. Continue reading “And the pretending goes on …”

Posted on

Is the world facing fundamental changes?

Viewpoint by Chris Williamson
Chief economist at global financial information firm Markit
BBC News Business
18 August 2011

Recent events, including stock market falls, the escalating sovereign debt crises, US credit rating downgrade and a near-stalling of growth in the developed world is leading increasing numbers of experts to wonder if the world is facing some fundamental changes.

In reality, many of the ideas reflect trends that have been under way for many years, but the crisis had accelerated the process of change.

Four years after the financial crisis began and the world has certainly not returned to normal.

No major developed economy has yet fully regained the output lost during the recession and global share prices remain almost a third lower than their peak prior to the crisis.

Financial stocks have lost two-thirds of their value. Government debt has spiralled due to the bank bailouts, although it has become apparent that not all governments can finance this debt.

If stage one of the crisis involved the transfer of liabilities from the financial sector to governments via bank bailouts, stage two is witnessing transfers from weaker governments to stronger governments, as the latter seek to prevent the former from defaulting and causing more financial turmoil. Continue reading “Is the world facing fundamental changes?”

Posted on

Malaysia’s economy: resilient?

by Kevin Brown
Financial Times
August 17, 2011

Is Malaysia set for sustained economic growth this year, or exposed to serious potential problems if wobbles in the West turn into another slowdown? It depends who you ask.

The central bank is in no doubt that growth will continue, in spite of a fall in the annual pace of growth from 4.9 per cent in the first quarter to 4 per cent in the second.

In robustly positive comments issued with the numbers on Wednesday, Bank Negara acknowledged the impact of weakness in the advanced economies, but insisted that growth prospects remained underpinned by the expansion of private domestic demand and strong exports of commodities and resource-based products – for which read oil, gas and palm oil. Continue reading “Malaysia’s economy: resilient?”

Posted on

GDP growth slows to 4pc as global economy falters

By Lee Wei Lian
The Malaysian Insider
Aug 17, 2011

KUALA LUMPUR, Aug 17 — Malaysia’s economic growth decelerated to its slowest pace of four per cent since the 2009 recession as the country was hit by a slowdown in external demand and a moderation in government spending, Bank Negara said today.

This was the fifth consecutive decline in quarterly growth and down from the 4.6 per cent growth registered in the first quarter of this year.

Bank Negara governor Tan Sri Zeti Akhtar Aziz added, however, that stronger growth is expected in the second half of the year and that while there is no revision to the 5-6 per cent growth target for the year, it will “very likely be closer to 5 per cent.” Continue reading “GDP growth slows to 4pc as global economy falters”

Posted on

The evolution of crisis

By George Friedman
Aug 11, 2011 | Asia Times

Classical political economists like Adam Smith or David Ricardo never used the term ”economy” by itself. They always used the term ”political economy.” For classical economists, it was impossible to understand politics without economics or economics without politics. The two fields are certainly different but they are also intimately linked.

The use of the term ”economy” by itself did not begin until the late 19th century. Smith understood that while an efficient market would emerge from individual choices, those choices were framed by the political system in which they were made, just as the political system was shaped by economic realities. For classical economists, the political and economic systems were intertwined, each dependent on the other for its existence. Continue reading “The evolution of crisis”

Posted on

Bursa losses at RM91 billion since last Monday

By Yow Hong Chieh
The Malaysian Insider
Aug 09, 2011

KUALA LUMPUR, Aug 9 — Malaysia’s benchmark index regained some ground today but still fell 1.66 per cent as regional markets struggled to halt their slide on European and US debt crises fears.

The index recovered from its early morning low of 1,423.47 to end the day at 1,472.14, down 24.85 points from the start of trading. Losers continued to outpace gainers 828 to 159, with 179 counters unchanged.

The broad-based Emas index meanwhile rebounded to 10,048.74 at market close after losing as much as 490.12 points, or 1.75 per cent, earlier.

The Kuala Lumpur share market is down an estimated RM91 billion from last Monday following last week’s rout on Wall Street, the worst since Lehman Brothers collapsed in 2008. Continue reading “Bursa losses at RM91 billion since last Monday”

Posted on

Will Idris Jala please return the millions?

— Gomen man
The Malaysian Insider
Aug 08, 2011

AUG 8 — So the turnaround specialist, or best thing to happen to Malaysia Airlines, did not do such a good job after all.

But Datuk Seri Idris Jala pocketed a few million short of RM20 million when he left Malaysia Airlines to become the Najib administration’s transformation czar.

This money was either a bonus or compensation for his glorious achievement of “turning things around” at MAS. I am sure major shareholders at MAS — Khazanah Nasional and EPF — will be happy to enlighten Malaysians on this reward scheme.

That is the problem with us Malaysians; we are so quick to praise people and put them on a pedestal. We called Abdullah Ahmad Badawi a reformer early on and look how that turned out. We still didn’t learn. Continue reading “Will Idris Jala please return the millions?”

Posted on

Bursa bleeds another RM31b in global carnage

By Yow Hong Chieh
The Malaysian Insider
Aug 08, 2011

KUALA LUMPUR, Aug 8 — Malaysian stocks continued tumbling today with an estimated RM31 billion in value shed from Bursa Malaysia, as jittery investors spooked by concerns about the global economic outlook continued to dump shares.

After the sustained sell-off today, sparked by concerns over Standard & Poor’s downgrading of the United States’ credit rating and Europe’s persistent debt woes, the KL share market is down an estimated RM65 billion in value from last Monday.

Losers overwhelmed gainers 1,051 to 67 today while the broad-based Emas index shed 2.39 per cent to settle at 10,227.95 — a five-month low.

The benchmark FBMKLCI slipped 1.8 per cent to 1496.99, also a five-month low. Continue reading “Bursa bleeds another RM31b in global carnage”

Posted on

The wrong worries

— Paul Krugman
The Malaysian Insider
Aug 06, 2011

AUGUST 6 — In case you had any doubts, Thursday’s more than 500-point plunge in the Dow Jones Industrial Average and the drop in interest rates to near-record lows confirmed it: The economy is not recovering, and Washington has been worrying about the wrong things.

It is not just that the threat of a double-dip recession has become very real. It is now impossible to deny the obvious, which is that we are currently not and have never been on the road to recovery.

For two years, officials at the Federal Reserve, international organisations and, sad to say, within the Obama administration have insisted that the economy was on the mend. Continue reading “The wrong worries”

Posted on

Bursa firms shed RM26b amid global markets bloodbath

By Lee Wei Lian
The Malaysian Insider
Aug 05, 2011

KUALA LUMPUR, Aug 5 — Today’s global market sell-off wiped an estimated RM26 billion from the KL stock exchange as investors took the cue from the regional meltdown following the rout on Wall Street yesterday.

Trader terminals were a sea of red today as losers vastly outnumbered gainers 934 to 60 while the broad-based Emas index shed 1.89 per cent to hit 10,478, a level not seen since May.

The benchmark FBMKLCI slipped 1.45 per cent to 1524, also its lowest level since May.

“If the Dow has another down day, things won’t look too good,” said Chris Eng, head of research at OSK Research. Continue reading “Bursa firms shed RM26b amid global markets bloodbath”