Archive for category Economics
A Critique of the ETP: Part 3 (iii) – Execution (iii)- Doubtful EPPs; doubtful achievements and due diligence
Some PEMANDU ‘achievements’ are doubtful. The Karambunai Integrated Resort and Tanjong Agas Oil and Gas Park do not appear viable and their private sector developers are financially weak. These two EPPs alone account for 7% of the total investments trumpeted by PEMANDU during the first year of the ETP. Their inclusion weakens the credibility of the headline investments, national income and job accretion that PEMANDU claims to have achieved.
Karambunai IR – expensive and crowded? The investment cost for this project in rural Sabah soared from RM3 billion to nearly RM10 billion in the six short months from its first mention before the ETP was launched to its final incarnation as an EPP. At this price, we estimate it needs 2.8 million visitors per year to break-even – more than all the passengers arriving at Kota Kinabalu airport!
Aghast at Tanjong Agas. The massive investment and construction work in this fishing village will result in infrastructure that duplicates the thriving towns of Kertih and Gebeng, which are the stated focus areas for oil and gas activities in the Eastern Corridor Economic Region. PEMANDU will no doubt deny that the infrastructure is redundant, and maintain that the transformation of this village is unrelated to its location in Pekan, the parliamentary constituency of Prime Minister Datuk Seri Najib.
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A tale of two classes: Inequalities in Malaysia
— S.M. Mohamed Idris
The Malaysian Insider
Feb 10, 2012
FEB 10 — The government’s aim is to achieve a high-income economy by 2020 must equally benefit all Malaysians. We cannot have a society where one small elite group is living in luxury, while one big part of the society is struggling to survive.
The income inequality gap
According to Dr Muhammed Abdul Khalid, a research fellow with University Kebangsaan Malaysia, although Malaysia has made great strides in reducing poverty and inequality (especially between ethnic groups) from 1970 to 1990, the inequality remains high post-1990.
It has remained almost at the same level for the past 20 years; in fact, the inequality in Malaysia is among the highest in the region. Read the rest of this entry »
A Critique of the ETP: Part 3 (ii) – Execution (ii) – The hothouse labs probably killed innovation
The ETP resulted from 12 ‘labs’. Each lab comprised 30-50 experts who had 8 weeks to research best practices and innovations, distill them in intense brainstorming sessions and support them with detailed analysis. The result was 131 Entry Point Projects (EPPs) across 12 National Key Economic Areas (NKEAs) that would maximise gross national income with minimal public-funding support. Such is the PEMANDU narration.
Truly transformative ideas may have had no chance. Much was made of the private sector participation. But large companies would naturally dominate. Start-up companies, even if invited, cannot afford to release staff for 8 weeks. Consider this example: Ten years ago, Microsoft, IBM and HP would have dominated any lab to transform the IT industry. Google was a cash-strapped start-up, Apple was in disarray and Facebook did not even exist. The incumbents would have been free to promote pet projects and stifle their competition.
Hothouse environment favoured incumbents with existing business plans. The tight time frame incentivised lab participants to select EPPs for which research was ready, rather than pursue alternatives. In addition, private sector participants would be expected to lobby heavily for their pet projects. Their duty is to maximise profits, not embark on public service ventures. Unless properly steered, the labs would be inclined to select heavily-promoted projects rather than the most transformative.
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A Critique of the ETP: Part 3 (i) – Execution (i) – PEMANDU strengthens the ‘know-who’ cancer
Very swift progress, but is it due to PEMANDU? In its 8 ETP updates so far, PEMANDU has announced multiple new EPPs (Entry Point Projects) worth billions of ringgit of investment and creating thousands of jobs. One EPP – Johor Premium Outlets (JP Outlets) – is already open. But how much of this rapid execution is due to PEMANDU instead of normal private sector efficiency?
Opportunistic naming of existing projects as EPPs. For example, the JP Outlets and St Regis Hotel projects pre-dated the ETP. Their completion dates were unchanged by their subsequent EPP status – suggesting minimal input by PEMANDU. Naming them as EPPs gives the illusion of quick wins and overstates PEMANDU’s success.
PEMANDU might have indeed helped. PEMANDU might respond that these projects would have been delayed without its help in cutting red tape. Note that the developers Genting-Simon Property and Chua Ma Yu-MRCB are global multinationals, a prominent local businessman and a GLC.
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A Critique of the ETP (Part 2) – We won’t really be twice as rich in 2020
By Dr. Ong Kian Ming BSc (LSE), MPhil (Cantab), PhD (Duke)
Teh Chi--Chang, CFA, BSc (Warwick), MBA (Cantab)
Refsa | 25 January 2012
RM48,000 in 2020 is not real income. The ETP promises to double gross national income (GNI) per capita to RM48,000 by 2020 from RM23,700 in 2009. However, RM48,000 in 2020 will be worth a lot less than RM48,000 today, just like RM100 today buys a lot less than RM100 eight years ago, thanks to ever-rising prices. If Malaysians are really to be twice better off, nominal income must be RM64,000 by then, to compensate for the 2.8% per year inflation that PEMANDU expects.
Nothing transformational in the RM48,000 target. This target is for nominal income, which includes inflation, and not real income, which strips out inflation. Because of inflation, nominal GNI per capita growth averaged 8.2% from 2001-2010, whereas real GNI grew only 3.2%. At the historical average 8.2% per year growth rate, nominal incomes will exceed RM48,000 by 2018 anyway, with or without the ETP or PEMANDU.
PEMANDU and its expensive consultants cannot even get basic mathematics correct. If the income target is RM48,000, PEMANDU’s 6% real GNI growth rate and 2.8% inflation forecasts are wrong. If its growth and inflation forecasts are right, then the RM48,000 target is wrong – it should be RM54,145 in 2020, not RM48,000. Furthermore, key metrics of some EPPs – the investment value, GNI contribution and jobs created – are unavailable.
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Khazanah sold Proton for no profits?
Mohd Ariff Sabri Aziz | January 25, 2012
Free Malaysia Today
The ‘Che Det Consensus’ is an economy built around problem solving that is ‘practical’ only for the Malaysia’s business and Umno political elite.
COMMENT
I found it odd the statement from Khazanah Nasional Bhd that it didn’t make profit from its sale of Proton Holdings Bhd’s shares to DRB-Hicom Bhd. If no profits were made, why sell the shares?
Secondly, Khazanah’s statement can be construed as an admission that it was given a fait accompli – take this price and don’t ask any questions. In Malaysia, only one person can do that – the man who can walk on water – Dr Mahathir Mohamad.
I hope I can throw more light on the sale of Proton shares to DRB-Hicom. Were there any other bids besides DRB-Hicom presented to Khazanah?
Is Khazanah brave enough to publish the identity of all the bidders?
If it has the courage to do so, we shall not be surprised if the bidders were the Tengku Mahalil-Arumugam group, DRB-Hicom and Nazmi and company. And they all have only one master – Mahathir. Read the rest of this entry »
For its own sake, Greece needs to declare default
by Costas Lapavitsas
Sydney Morning Herald
January 25, 2012
The dreadful debt saga will only come to a close when Athens takes charge of its predicament, writes Costas Lapavitsas.
Negotiations to reduce Greek debt have been suspended after no agreement could be reached last week. At some point in the near future, Greece seems certain to default on its obligations. But the drama surrounding the talks in Athens, Berlin and Paris shows that there will be nothing co-operative about a Greek default. It is a ruthless contest dominated by the so-called troika: the European Union, the European Central Bank, and the International Monetary Fund.
At every turn, the interests and rights of people across Europe have been disregarded. Negotiations have proceeded in secrecy. Greece, whose government is led by an unelected central banker, is represented by a team of politicians and technocrats who have performed lamentably during the crisis. Those who are owed money by Greece have been represented by the Institute of International Finance, a self-styled mouthpiece for bankers.
The troika has accepted that Greek debt must be reduced to sustainable levels. However, it also wants the reduction to appear voluntary because, if the lenders were coerced, Greece would be declared in formal default, and banks and financial markets would be thrown into crisis. Read the rest of this entry »
Let Malaysian Chinese unite as one Dragon and together with other Malaysians, effect a change of power in Putrajaya in 13GE
With the closer approach of the 13th General Elections, whatever the date decided by the Prime Minister to dissolve Parliament, one common aspiration uniting Malaysians is gathering momentum – the possibility and potential for change of power at the federal level for the first time in the nation’s 54 year history.
Let Malaysian Chinese unite as one Dragon in the Year of the Dragon and, together with other Malaysians, effect a change of power in Putrajaya in the 13th General Elections to fulfill Malaysia’s potential as an united, harmonious, democratic, just, prosperous and competitive nation.
In his pre-Chinese New Year walk-about in the Federal Territory on Friday, Datuk Seri Najib Razak claimed that Malaysia is the best place in the world to live in as it provided the “best value for money”.
This is the strongest reason why Malaysia needs a change of federal power because the powers-of-the-day in UMNO and Barisan Nasional suffer from an incorrigible disease of denial complex in refusing the admit the failures of government and nation-building in the past few decades which have driven some two million of the best and brightest Malaysians to foreign lands for they could not get respect and recognition or able to hold their heads high as Malaysian citizens in their own homeland.
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A totalitarian/absolutist economy
— Art Harun
The Malaysian Insider
Jan 20, 2012
JAN 20 — The establishment, nourishment, protection and subsequent embellishment by any government of entities (corporate or otherwise) with monopolistic businesses and/or preferential treatment signal the rise of what I would term as totalitarian economy.
A totalitarian economy operates and behaves in manners not unlike a totalitarian or absolutist state. By its very nature, it feeds off compulsion and force, disallows and even destroys competition and gives no option nor choice to the consumers. It is beyond scrutiny as it is not answerable to any entity, let alone the very consumers which it aims to supply.
As a result of the totalitarian and absolutist approach, this economy owes little, if at all, affinity to the concepts of fairness and justness.
It is like a black hole. It swallows everything which is in its way. It then grows bigger. And bigger.
The only difference is that, unlike the real black holes, a totalitarian economy only grows bigger within the confines of the parameters defined by its own creators. Throw this economy into unchartered territory, the real capitalist would just laugh its head off. With a mere snap of the capitalist’s finger, this totalitarian economy would be history.
That is not surprising. As a result of the constant nourishment, protection and forced embellishment of this economics absolutism/totalitarianism, such economy knows not how to compete. Its supernova-like explosive birth and subsequent growth deprives it of the ability to learn and to grow organically. This totally underdeveloped creature — underdeveloped in the sense that it is bereft of the elements which would ensure its vibrancy and survival in unchartered territories — has no defence mechanism nor the ability to adapt to changes within its surrounding, preferring to coil within the comfort of its mother’s lap. Read the rest of this entry »
A Critique of the ETP (Part 1) – Let’s evaluate PEMANDU on its DEEDS
By Dr. Ong Kian Ming BSc (LSE), MPhil (Cantab), PhD (Duke)
Teh Chi-Chang, CFA, BSc (Warwick), MBA (Cantab)
Refsa | 19 January 2012
The Economic Transformation Programme is ambitious indeed. The ETP promises to double gross national income (GNI) per capita to RM48,000 by 2020 from RM23,700 in 2009. An average 6% per year real income growth over 10 years and 12.8% per year private investment growth over 5 years is required to achieve this. Ultimately, RM1.4 trillion of investments in 131 Entry Point Projects (EPPs) within 12 National Key Economic Areas (NKEAs) will create 3.3 million new jobs.
Predictably, there are critics. Any plan as bold as this is bound to attract critics. But the attacks so far have mainly been against specific projects, such as the MRT and 1 Malaysia email; carping about the slick façade and expensive costs at PEMANDU – the Performance Management and Delivery Unit, prime minister’s department – the government agency that created and is now steering the ETP; or questioning the viability of its lofty targets.
We will evaluate PEMANDU on its DEEDS. In this series, we shall evaluate PEMANDU and the ETP on its own terms by looking at the goals and plans outlined in the ETP Roadmap document. So, for example, rather than questioning its ambitious targets, we shall analyse how well it is measuring up to those aspirations. Doing so facilitates constructive debate as it uses the same framework which PEMANDU has chosen to work within.
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Early polls better for economy, says MIER
By Yow Hong Chieh
The Malaysian Insider
Jan 19, 2012
KUALA LUMPUR, Jan 19 — It would be better for the government to hold the general election as soon as possible since lingering uncertainty over the nation’s political future will hurt the economy, the Malaysian Institute of Economic Research (MIER) said today.
MIER executive director Dr Zakariah Abdul Rashid said private investors were currently holding back investments on concerns that government policies will change should the incumbent Barisan Nasional (BN) fail to hold on to power.
He said private investment was the key component to propping up the economy this year as external demand slows, and urged the government to call for early polls to dispel investors’ wait-and-see attitude.
“If you ask me as an economist, I would rather see the problem solved once and for all. The earlier they settle the political problem, the better, so we can focus on the economy.
“Right now everything is still hanging. People are postponing because of the election so if they settle it once and for all and immediately, it would be better,” he told reporters here after presenting MIER’s economic outlook for 2011 and 2012. Read the rest of this entry »
Malaysia 2012 Growth to Miss Official Target, Institute Says
Bloomberg
By Chong Pooi Koon
January 19, 2012
Jan. 19 (Bloomberg) — Malaysia’s growth will probably miss the government’s forecast this year amid the faltering global economy, according to the Malaysian Institute of Economic Research.
Southeast Asia’s third-largest economy will expand 3.7 percent in 2012, the partly-government funded institute said in a statement in Kuala Lumpur today, cutting its earlier estimate of 5 percent gross domestic product expansion. This is below the 5 percent to 6 percent government forecast in its Oct. 7 budget statement.
“Economic growth will likely get bumpier in the months ahead,” the institute said in the report. “Growth in the last quarter of 2011 is expected to be much lower on account of external developments. Latest monthly economic indicators are already suggesting that.”
The World Bank said yesterday developing growth in Asia- Pacific economies will slow for a second straight year on Europe’s debt crisis and weaker global trade. Malaysia likely expanded 4.9 percent in 2011, the institute said, missing the government’s growth forecast of as much as 5.5 percent. Read the rest of this entry »
The last days of Umno are beginning
Posted by Kit in 1Malaysia, Anwar Ibrahim, Dr. Chen Man Hin, Economics, Najib Razak, NEP on Thursday, 19 January 2012
By Dr Chen Man Hin, DAP life advisor
UMNO shows no signs of genuine reforms despite claims by PM Najib that UMNO is on the reform road as shown by the verdict of freedom for Anwar over the Sodomy 2 conspiracy. If there are no signs of reforms than UMNO will collapse in time, similar to what happened to the Soviet Union which collapsed in 1990.
Like Najib, Mikail Gorbachev tried to save Russia with his policies of ‘glasnost and perestroika’ but these failed to save Soviet Russia, because he could not introduce democracy and economic restructuring as there was no policies or infrastructure to modernise Russia.
Najib is also claiming that he has great plans to reform the country, ever since he introduced his 1 Malaysia program. However, all he had to deliver are just promises. Nothing concrete he promised to cut down corruption, but every day corruption is the rule in government departments, judiciary and the police. Events have overtaken Najib and there is no way he could reverse the corruption cancer pervading the country.
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Guan Eng says national debt ‘dangerous’, potentially disastrous
Posted by Kit in Economics, Finance, Lim Guan Eng on Wednesday, 11 January 2012
By Shazwan Mustafa Kamal
The Malaysian Insider
Jan 11, 2012
KUALA LUMPUR, Jan 11 — Massive borrowing and irresponsible spending by the Barisan Nasional (BN) government will result in Malaysia becoming a fully indebted nation before the end of the decade, Lim Guan Eng said today.
The Penang chief minister said that Putrajaya’s debt to Gross Domestic Product (GDP) ratio has increased yearly from 53.1 per cent in 2010 to 53.8 per cent last year and is expected to hit 54.8 per cent this year.
“This is extremely dangerous, and even more disastrous when coupled with statistics from Bank Negara’s Annual Report 2010, which revealed that Malaysia’s household debt at the end of 2010 was RM581 billion, or 76 per cent of GDP, thus giving us the dubious honour of having the second-highest level of household debt in Asia, after South Korea.
“In absolute terms, federal government debt rose by 71 per cent in four years to RM456 billion at (the) end (of) 2011 from RM266 billion at end (of) 2007,” said Lim in a statement today.
The DAP secretary-general said by following the same expansion rate, national debt would be a projected RM780 million by 2016 and RM1.3 trillion by 2020. Read the rest of this entry »
Time to Pull ‘CSI: Malaysia’ Off the Air
Posted by Kit in Anwar Ibrahim, Economics, Najib Razak, NEP on Wednesday, 11 January 2012
By William Pesek
Jan 11, 2012
Bloomberg: The Ticker
If there’s any economy in Asia that needs a change in narrative, it’s Malaysia.
When the resource-rich nation of 28 million people has made headlines globally in recent years, they have been about sodomy charges against opposition leader Anwar Ibrahim, tension between Muslims and Christians, Beyonce’s bellybutton offending local sensibilities or murder investigations involving high-ranking officials. Malaysia really could have its own CSI crime drama.
Far from finding all this entertaining, many foreign investors eye Malaysia with skepticism. That’s a shame given the huge potential of an economy growing 5.8 percent. When you consider Asian economies that deserved far more attention in 2011 than they received, Malaysia is Exhibit A. It’s high time for Prime Minister Najib Razak to change the story, to shift the focus toward reforms, not tabloid scandals. Announcing the end of affirmative-action policies that hurt Malaysia’s competitiveness might be just the thing. Read the rest of this entry »
National debt to equal GDP by 2019 if Putrajaya remains spendthrift, say economists
By Yow Hong Chieh
The Malaysian Insider
Jan 10, 2012
KUALA LUMPUR, Jan 10 — Malaysia’s national debt will hit 100 per cent of the Gross Domestic Product (GDP) by 2019 should Putrajaya continue to borrow more than it earns, economists say.
Malaysian Institute of Economic Research (MIER) distinguished fellow Mohd Ariff Abdul Kareem warned that the federal government revenue was growing too slowly to keep up with its borrowings, which hit 53.1 per cent of GDP in 2010.
He said while the current size of government debt relative to GDP was not troubling, the pace of its growth in recent years was cause for concern.
Debt-to-GDP ratio jumped from 41.4 per cent in 2008 to 53.1 per cent in 2010 while government debt grew 14.6 per cent in 2008 and 18.3 per cent in 2009, far outpacing the country’s GDP growth, Ariff noted.
“If nothing is done to reverse the current trends in government expenditures and revenues, extrapolation suggests that Malaysia’s national debt will explode to 100 per cent of GDP by 2019.
“Should the debt growth gather speed, this can happen sooner,” he told The Malaysian Insider via e-mail. Read the rest of this entry »
The Shah Alam Declaration
Posted by Kit in DAP, Economics, nation building on Monday, 9 January 2012
WE, the national delegates of the Democratic Action Party, assembled here at the National Conference in Shah Alam, Selangor, on 8th January 2012, hereby reaffirm the principles of the DAP and so duly commit to lead the way in effecting much-needed change in the form of democratisation and economic well being in order to achieve the Malaysian Dream of a more prosperous, democratic and dignified Malaysia.
We convey our highest salutations and heartiest congratulations to the Duli Yang Maha Mulia Seri Paduka Baginda Yang di-Pertuan Agong Tuanku Abdul Halim Mu’adzam Shah on his proclamation as the 14th Yang di-Pertuan Agong of the Malaysian Federation. May his sovereign reign encourage and foster the spirit of democracy and human rights amongst his loyal subjects. Daulat Tuanku!
On the cusp of change
All around the world, change is happening with a ferocity unseen since the end of the Cold War. People in every corner of the globe, from Tahrir Square to Wall Street, are rising in unprecedented numbers. Formerly passive societies have suddenly discovered newfound courage to stand up and reclaim their dignity.
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Malaysia rises in illegal money chart, RM150b lost in 2009
By Shannon Teoh
The Malaysian Insider
Dec 15, 2011
KUALA LUMPUR, Dec 15 — Malaysia lost RM150 billion in illicit outflows in 2009, the fourth highest in the developing world, says US-based watchdog Global Financial Integrity (GFI).
According to its report on illicit financial flows from developing countries released today, Malaysia lost a total of US$338 billion (RM1.08 trillion) over the first decade of the century.
“This report should be a wake-up call to world leaders that more must be done to address these harmful outflows,” GFI director Raymond Baker said in a press release.
GFI had reported in January that RM930 billion flowed out of Malaysia from 2000 to 2008, growing to RM218 billion per year from an initial RM71 billion in that period.
It said the increase was “at a scale seen in few Asian countries.” Read the rest of this entry »
Glum economic outlook nudges Najib closer to polls
Posted by Kit in Economics, Elections, Najib Razak on Wednesday, 14 December 2011
By Clara Chooi | December 14, 2011
The Malaysian Insider
KUALA LUMPUR, Dec 14 — Datuk Seri Najib Razak may have to rush into elections within three months, analysts have predicted, due to a bleak economic outlook and a world backdrop that is more hostile towards “strongmen and corrupt establishments”.
“The economic dynamics will be most crucial in determining the election (timing), and the window is narrowing,” one analyst, Singapore Management University associate professor Bridget Welsh, told Singapore’s Straits Times newspaper in a report published today.
The article noted that Malaysia’s economy is expected to expand by just three per cent next year, according to Nomura International, well below this year’s targeted 4.7 per cent growth rate and the government’s five per cent forecast.
Others have also noted that Malaysia’s rising federal debt load and over-reliance on commodity exports could see the country’s economy hit the hardest among its Southeast Asian neighbours.
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Malaysia among most vulnerable to euro crisis, says Nomura
Posted by Kit in Economics, Finance, international economic crisis on Wednesday, 7 December 2011
By Lee Wei Lian
The Malaysian Insider
Dec 07, 2011
KUALA LUMPUR, Dec 7 — Malaysia will be hit harder than its Asian peers by the economic crisis in Europe due to its relatively weak public finances and dependence on commodities, said Nomura International today.
Its chief economist for Asia ex-Japan, Robert Subbaraman, said that unlike most countries in Asia, Malaysia will be negatively affected by an expected drop off in commodity prices while the government will also find it difficult to keep up stimulus policies.
“Malaysia is one of the economies that will weaken the most; it is in the weaker group of economies,” said Subbaraman at a media briefing here today.
Nomura economist for Southeast Asia Euben Paracuelles said Malaysia’s growth in the first three quarters of this year was largely led by government spending, but as public finances were relatively weak, he doubted that it would be sustainable.
Subbaraman also noted that Malaysia ranked third in Asia ex-Japan in terms of exposure to European bank claims, after Hong Kong and Singapore, which could mean a drying up of liquidity should European banks start to cut their exposure to the region. Read the rest of this entry »
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