Archive for category Finance
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 »
Breaking up wealth concentration in Malaysia
Posted by Kit in Finance, Lim Teck Ghee on Wednesday, 1 February 2012
— Dr Lim Teck Ghee
The Malaysian Insider
FEB 1 — The past year has seen the government and the opposition unveil their respective economic reform policies. Even if these reform policies and their attendant programmes are implemented they will not be able to resolve the country’s economic problems. This is because the policies advocated by both sides of the political divide are merely palliative. They do not address the root or fundamental cause of the problem of structural deformation of the country’s economy.
How has this deformation come about? What are its characteristics? And what can be done to bring about a reversal or correction of the deformation so that we have a really transformed economic system that can live up to its full potential?
First we need to recognise that wealth in any country — and Malaysia is no exception — is created by economic activity engaged in by individuals or enterprises that bring profits or gains to the entrepreneur. Much of this wealth creation and subsequent accumulation is legitimate. It is based on material reward arising from work (or gift) and is socially and ethically acceptable. It comes from risk-taking and from the social utility and superiority of the products and services generated by the individual or enterprise.
Wealth generated and accumulated by individuals through legitimate means and conforming to the norms of justice and fairness is not only desirable but beneficial to society and the economy.
But what about wealth that is created or amassed by less than legitimate or illegitimate or illegal means? Is it a minor or non-issue and do we just ignore it as is the case with the Barisan Nasional government? Read the rest of this entry »
Saudi: no cash from emerging economies until given more clout
Posted by Kit in Finance, international economic crisis on Tuesday, 24 January 2012
By Andrew Torchia
Reuters
Mon, Jan 23 2012
RIYADH (Reuters) – Big emerging economies such as China, India and Saudi Arabia will not aid the West in its financial crisis unless they are given more influence in running the global economy, a senior figure from Saudi Arabia’s ruling establishment said on Monday.
“The financial crisis and great recession were born in the West, developed in the West yet hit hard throughout the world,” former Saudi intelligence chief Prince Turki al-Faisal said in a speech to a business conference in Riyadh.
He said this showed the need to give emerging economies more representation and more authority in global bodies such as the Group of 20 nations, a forum of the world’s major industrialized countries, and the Financial Stability Board (FSB), which discusses regulation of banks and financial markets.
So far, however, organizations such as the FSB “have yet to take these new realities into consideration,” while the G20 is making little headway in coordinating economic policymaking around the world, he said.
Big emerging economies’ lack of influence in international bodies reduces their willingness to contribute money to fight the global crisis, the prince warned.
The International Monetary Fund is seeking to more than double its war chest by raising $600 billion in new resources to help countries deal with the fallout of the euro zone’s sovereign debt crisis. 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 »
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 »
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 »
Umno’s missed opportunity
Posted by Kit in Corruption, Finance, Najib Razak, UMNO on Saturday, 17 December 2011
Awang Abdillah | December 17, 2011
Free Malaysia Today
Issues of national concern were not discussed at the recent Umno general assembly. Delegates also failed to call on Najib to step down for Umno to rise again.
COMMENT
Frankly, the recent Umno general assembly was the best venue and probably the last chance for Umno leaders to show their sincerity in addressing party and national concerns.
Instead of adopting the Mahathir doctrine or rather its despotic policy, Umno president and Prime Minister Najib Tun Razak should have discussed with the party leaders on how best to tackle the party and national problems.
Disgruntled members should have urged Najib to step down as one of the solutions for Umno to rise again. Personal leadership, party strength and national issues and problems are all inter-related.
Glaringly missing at the Umno general assembly were discussions on issues of national concerns. Read the rest of this entry »
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 »
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 »
Sinking deeper and deeper
Posted by Kit in Budget Debate, Economics, Finance, Financial Scandals on Wednesday, 2 November 2011
By S JAYASANKARAN, KL CORRESPONDENT | 31 Oct 2011
Business Times
MALAYSIA should take heed of the problems – the public anger, the social unrest – posed by the solutions offered to tackle rising sovereign debt in Europe. God forbid that we head that way!
The Auditor-General’s recent report pointed out that Malaysia’s national debt rose 12.3 per cent to over RM407 billion (S$165 billion) in 2010. The amount is equivalent to 53.1 per cent of gross domestic product. It’s the second straight year that the national debt has exceeded 50 per cent.
The figure is a reflection of the spending spree the country went on to mitigate the effects of the 2009 global financial crisis. At its peak that year, the budget deficit rose to 7.6 per cent of GDP, the highest in two decades.
It has since come down to 5.4 per cent of GDP and the government projects that it will decline further to 4.7 per cent of GDP next year. But that may be overly optimistic.
Read the rest of this entry »
Four Nations, Four Lessons
By N. GREGORY MANKIW
The New York Times
October 22, 2011
AS the economy languishes, politicians and pundits are debating what to do next. When we look around the world, it’s hard to find positive role models. But as we search for answers, it is useful to keep in mind those fates that we would like to avoid.
The recent economic histories of four nations are noteworthy: France, Greece, Japan and Zimbabwe. Each illustrates a kind of policy mistake that could, if we are not careful, presage the future of the United States economy. Think of them as the four horsemen of the economic apocalypse.
Let’s start with Zimbabwe. If there were an award for the world’s worst economic policy, it might well have won it several times over the past decade. In particular, in 2008 and 2009, it experienced truly spectacular hyperinflation. Prices rose so fast that the central bank eventually printed 100 trillion-dollar notes for people to carry. The nation has since abandoned using its own currency, but you can still buy one of those notes as a novelty item for about $5 (American, that is).
Some may find it hard to imagine that the United States would ever go down this route. Read the rest of this entry »
Malaysian confidence dives as global recovery ends, says survey
Posted by Kit in Budget Debate, Economics, Finance on Monday, 17 October 2011
By Lee Wei Lian
The Malaysian Insider
Oct 17, 2011
KUALA LUMPUR, Oct 17 — The largest-ever global survey of finance professionals by the Association of Chartered Certified Accountants (ACCA) shows that all signs of the global economic recovery have disappeared.
The confidence level in Malaysia also deteriorated markedly in the survey as out of 222 finance professionals who responded in Malaysia, only eight per cent reported confidence gains, down from 20 per cent in the last quarter, and 77 per cent believe the global economy is either stagnating or deteriorating compared with 54 per cent.
In terms of the global outlook, three-quarters of the 2,873 professionals who took part in the Global Economic Conditions Survey between August 19 and September 7, 2011 thought global economic conditions were deteriorating or stagnating.
The ACCA’s global business confidence index returned a reading of -34 for the third quarter of 2011, down from -8 in the previous quarter.
It said that based on past observations, a reading lower than -14 should indicate that the developed world is slipping into negative growth. Read the rest of this entry »
Rich world economic malaise to endure into 2012: Reuters poll
Posted by Kit in Budget Debate, Economics, Finance on Friday, 14 October 2011
By Andy Bruce
Reuters
LONDON (Reuters) – Stagnation is probably the best many of the world’s biggest developed economies can hope for over the next year, with several facing a significant chance of recession, Reuters polls of around 350 economists showed on Thursday.
After a promising start, 2011 has turned into an enormous disappointment for major rich world economies, which have been hobbled by a noxious combination of austerity, debt crises, natural disaster and political impasse.
Backed up by Thursday’s weak trade figures from China, which pointed to profound global economic weakness, the October quarterly survey suggested a bout of weak growth in many G7 economies could extend deep into next year and beyond.
The world economy will grow 3.8 percent in 2011, the poll showed, and just 3.6 percent next year — a stark contrast to the 4.1 percent and 4.3 percent forecasts from the last quarterly survey in July.
But even these tepid growth rates could depend on progress in clearing some of the world’s biggest economic hurdles, like the euro zone sovereign debt crisis and finding ways to boost growth in the United States. Read the rest of this entry »
IMF trims Asian growth forecasts as risks grow
Posted by Kit in Budget Debate, Economics, Finance on Thursday, 13 October 2011
By KELVIN CHAN
AP Business Writer – 3 hours ago
HONG KONG (AP) — The International Monetary Fund trimmed its economic growth forecasts for Asia on Thursday because of financial turbulence in Europe and a possible slowdown in the U.S.
The risks to Asia’s growth are “decidedly tilted to the downside” reflecting the negative outlooks for Europe and the U.S., which are the major markets for the region’s exports, the IMF said in a twice-yearly report.
Asia’s economic growth is forecast to average 6.3 percent in 2011, rising to 6.7 percent in 2012. That’s lower than the IMF’s April forecast of nearly 7 percent in both years.
The report covers 20 economies in a vast region stretching from India to Japan to New Zealand. Read the rest of this entry »
MIER trims GDP estimates as global economic slump bites
Posted by Kit in Budget Debate, Finance, Najib Razak on Thursday, 13 October 2011
By Lee Wei Lian
The Malaysian Insider
Oct 13, 2011
KUALA LUMPUR, Oct 13 — The Malaysian Institute of Economic Research (MIER) cut to 4.6 per cent, from 5.2 per cent, its projection for the country’s economic growth this year, citing a sliding global economy that it said could hurt exports.
The government-funded MIER also downgraded its estimates for 2012 to 5.5 per cent, which is within the Najib administration’s projected growth range of between five and six per cent.
Some market and bank analysts have described next year’s projections as too rosy, with RHB Research Institute saying this week that 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.
MIER executive director Zakariah Abdul Rashid said today that while the 2012 Budget unveiled last Friday will help boost private consumption, it will not be able to offset a slump in external demand.
“The 2012 Budget is insufficient to overcome external weakness,” he said in a briefing today. Read the rest of this entry »
Malaysia’s Old Economic Model
Posted by Kit in Budget Debate, Finance, Najib Razak on Wednesday, 12 October 2011
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. Read the rest of this entry »
Recession risk high and rising, says RHB
Posted by Kit in Budget Debate, Finance, Najib Razak on Wednesday, 12 October 2011
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. Read the rest of this entry »
Goldman Sachs says Malaysia needs tougher reforms
Posted by Kit in Budget Debate, Finance, Najib Razak on Tuesday, 11 October 2011
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. Read the rest of this entry »
Economists uneasy over sugary Budget
Posted by Kit in Budget Debate, Finance, Najib Razak on Monday, 10 October 2011
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. Read the rest of this entry »
2012 budget – cornucopia of goodies for votes
Posted by Kit in Budget Debate, Corruption, Finance, Najib Razak on Sunday, 9 October 2011
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. Read the rest of this entry »
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