It was during the final prepatory meeting on the MAPEN Report that I received one day a call from Zainol Mahmud, director-general of the Implementation Coordination Unit (ICU) in the Prime Minister’s Department informing me that Dr. Mahathir wanted to see me. I assumed that it was about the MAPEN Report, or the fact that I had submitted to him previously a proposal to set up a Science City in the Ulu Langat area. It turned out to be neither. It was about another letter I sent him regarding an investment opportunity in Langkawi that was brought to my attention by Mark Heng and a scion of the Kuok family, Kuok Hoon Ping. This was about the government’s proposed divestment of the Langkawi Resort Hotel, the first 5-star hotel before the island got its duty-free status. Mahathir immediately put me at ease upon my entering his office, and as he is wont to do, immediately came to the point saying that he could not accede to my proposal to buy over the Langkawi resort, since he had already promised that to a Negri Sembilan royalty and their Japanese partners. There was still 19% he said I could participate in, to which I said I would only be in the minority and could not control it. He suggested to take it anyway, and perhaps later unload it for a higher price. He wanted me to learn the ropes, I guessed, but I declined and said I’d wait for another opportunity.
Friday, 18 September 2015
Sunday, 6 September 2015
Kamal on Bloomberg: Moving Malaysia, Malaysia to Face Fiscal Problems If Oil Below $40: Economist
September 4, 2015 (Kuala Lumpur) — Kamal Salih, economics professor at Universiti Malaya, says that Malaysia will face fiscal problems if oil prices dip below 40 dollars a barrel. He also discusses key themes shaping the local economy with Bloomberg TV Malaysia’s Sophie Kamaruddin.
Friday, 4 September 2015
Experts Point the Way Forward for Singapore Economic Growth
Kamal Salih Comment:
E.F. Pang and Linda Lim's comments on Singapore economic growth may well be relevant for Malaysia's own economic prospects for the medium term. Our immediate concerns, however, are markedly distinct respectively, namely the fiscal capacity of the government to promote aggregate demand in order to sustain growth above 5% in the face of declining oil and other commodity prices and the declining Ringgit. Singapore's immediate concern is over slowing growth (below 4%) and stagnant productivity under conditions of budget surplus. I wonder if there is anything useful from this following article for the Special Economic Committee to consider in delivering better news for the Malaysian economy.
Here is Pang and Lim's article:
Economists, government leaders and opposition politicians all agree Singapore must jettison its development model of “extensive growth” based on factor accumulation - the addition of more labour, talent and capital to the singularly scarce resource, land, that defines our territorial space.
We must, like other developed countries whose ranks we supposedly lead on many metrics, rely on productivity increases to deliver output growth at a much lower but more sustainable rate of 1-3% per year.
From our own experience and that of other rich countries, we know this is a difficult and long-term task requiring considerable behavioral adjustments at the individual and household as well as business and government policy levels.
Our recent survey of numerous labor market studies* shows low labor productivity has characterized Singapore’s economic growth as long ago as the early 1970s and as recently as the last several years. The heavy reliance on imports of foreign labor has depressed wages for low-wage citizen workers, contributing to our higher income inequality (income-only Gini of 0.46, not including wealth inequality which is typically higher) and poverty rates (20 to 22%) compared with other rich countries.
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| Singapore GDP ChartFrom Focus Economics |
Cutting back on labor imports can deliver productivity increases in sectors such as construction, retail and F&B where our productivity greatly lags that in other rich countries. But the cutback will be painful for businesses and households whose profits and consumption have been subsidized for too long by cheap labor imports. Our capacity for imitation, flexibility and innovation should help us adjust at least as well as other developed countries.
Tuesday, 25 August 2015
It Starts: Broad Retaliation Against China in Currency War
The biggest global “tail risk” is China’s deteriorating economy and an emerging market debt crisis, according to BofA Merrill Lynch’s monthly poll of fund managers. And 48% of them were expecting the Fed to raise rates, despite languid growth and low inflation expectations.
Hot money is already fleeing emerging markets. Higher rates in the US will drain more capital out of countries that need it the most. It will pressure emerging market currencies and further increase the likelihood of a debt crisis in countries whose governments, banks, and corporations borrow in a currency other than their own.
This scenario would be bad enough for the emerging economies. But now China has devalued the yuan to stimulate its exports and thus its economy at the expense of others. And one thing has become clear on Wednesday: these struggling economies that compete with China are going to protect their exports against Chinese encroachment.
Hence a currency war.
It didn’t help that oil plunged nearly 5% to a new 6-year low, with WTI at $40.55 a barrel, after the EIA’s report of an “unexpected” crude oil inventory buildup in the US, now, during driving season when inventories are supposed to decline!
And copper dropped to $5,000 per ton for the first time since the Financial Crisis, down 20% so far this year. Copper is the ultimate industrial metal. China, which accounts for 45% of global copper consumption, is the bull’s eye of all the fretting about demand. 5,000 is the line in the sand. A big scary number. Other metals fared similarly.
Copper powerhouse Glencore, whose shares plunged nearly 10% on Wednesday, blamed “aggressive and synchronized large-scale short selling” for the copper debacle, instead of fundamentals. But fundamentals have been whacking copper for years, and shorts have simply been joyriding the trend.
CIA insider: This is the Key to Understanding the Yuan-Dollar Relationship
No one disputes the fact that Janet Yellen and her colleagues at the Federal Reserve are one of the most powerful influences on the world’s largest economy. Yet few analysts realize that she is the most powerful influence on the world’s two largest economies — to include China’s.
Understanding how U.S. and Chinese monetary policies are now joined at the hip, and what this means for the entire world, is the key to understanding the global slowdown affecting stocks, currencies, commodities and even the real value of cash.
This chain of relationships has numerous links. Let’s explore them one by one…
Yellen makes no secret of her desire to raise U.S. interest rates. She talks about this every chance she gets in speeches, press conferences and interviews. Rates have been zero for almost seven years, and it has been nine years since the last time the Fed raised rates.
This has led to endless speculation about the timing of the Fed rate increase. In late 2014, Wall Street said March. Then June. Now September. So far, Wall Street got it wrong every time.
We don’t engage in strung-out speculation on the Fed’s next move. We use specific indications and warnings and proven analytic methods used by the intelligence community including the CIA to solve problems of this type.
What the Heck is Going on in the Global Markets?
Kamal Salih Comments:
A perfect storm is brewing in the immediate horizon of the Malaysian economy. I wanted to take comfort in pronouncements by the government leaders that, given our strong economic fundamentals, we (meaning government, business, exporters, importers and outbound travellers, ordinary consumers and folks) should face the blowing wind and ride out the oncoming storm. It is not as bad as the 1997 financial crisis, they say, and we had learned enough and adjusted from that experience. But the signs do not point to such self-indulgent confidence: The Ringgit is today 4.60 to the US dollar and has now 5 in view (and the government has abstained from pegging), even though there's no Soros in sight; oil prices are testing US$40 and Budget predictions for the year are flying out the window; other commodities are following suit; and the sloshing foreign funds that had fuelled the stock market and property has long taken their money out. And the GST has added more than its fair bite of living costs. With the 1MDB scandal, vacillations over the RM2.6b issue, the cabinet just reshuffled and a gaping trust deficit in the government's ability to handle the issues, we are told to continue sipping our coffee and teh tarik. Meanwhile, the over-dramatizers have been working overtime and predicting a momentous September. You can talk up a storm, but you can't talk it down. Our coffee cups are shaking...something's got to give!
To understand these massive shifts in the wind, I sought and share below with you three articles by Wolf Richter, of Currency Wars fame, to understand what's going on, and see where we can run for cover.
It Starts: Broad Retaliation Against China in Currency War
CIA insider: This is the Key to Understanding the Yuan-Dollar Relationship
What the Heck is Going On in the Global Markets! (Excerpted)
“A Global Meltdown…”
That’s what Doug Short called it in his World Markets Weekend Update. All its eight indexes finished in the red for the week. India’s SENSEX, he points out, “was the top performer, down a ‘mere’ -2.5%.” For the rest, they ranged from the Nikkei’s -5.28% to the Shanghai Composite’s -11.54%. The China bubble and implosion (blue line) is the most salient feature this year. By comparison, the selloff this week looks practically benign:
And oil got hammered for the eighth week in a row.
It was the longest weekly losing streak since March 1986. And on Friday, West Texas Intermediate plunged below the $40-mark intraday, hitting $39.86 before bouncing off to take a breath at $40.29, the worst level since the Financial crisis.
Since mid-June, when the delusions of an oil rebound came to an abrupt end, WTI has plummeted 33.6%.
US drillers have accelerated their drilling programs again. Global production, powered by Saudi Arabia, Russia, the US, and especially Iraq – and soon Iran – gives off no substantive signs of slowing down. Hopes for global demand growth are hitting the realty of economic turmoil in China and elsewhere. Crude oil in storage has reached disconcerting levels for this time of the year. And people are starting to pray for miracles.
The overall commodity complex hit new multi-year lows this week. But gold has been an exception, rising from its own dismal multi-year low at the end of July.
Shocked and appalled that the market had somehow rediscovered this dastardly will of its own, Wall Street is already clamoring for ZIRP Infinity and QE4 Infinity, a real “infinity” this time, because everyone knows that at these ludicrous valuations, the market can never stand on its own two feet again, and folks simply don’t want to give up the trillions that the Fed has so magnanimously shoveled their way.
To top it off, currency turmoil tore into the emerging markets, and a debt crisis is starting to build up on the horizon.
Wednesday, 5 August 2015
To Understand Malaysia's Economic Future, Look to Turkey NOT Greece
Comment: Perhaps we should look away from the experience of Greece, with emphasis on the debt-to-GDP ratio, to see where Malaysia's macroeconomic future is heading, and instead to consider the Turkish situation over the 2002-2014 period. Turkey's GDP per capita growth over the period is no better than Malaysia's over the period but comparable to all intents and purposes; what should concern us is the shift that both governments had adopted towards a consumption-based (and in our case, ominously) debt-driven economy. Focus on the fact that Turkey had been effectively dissaving, while we are sustained over the same period only by a higher savings rate. As GST bites into consumption expenditure, a similar process may set in over the medium term in our own situation unless serious reforms are undertaken to reverse current trends and reset the economy. I republish below for your information Danny Rodrik's recent piece on his weblog.
Kamal Salih
Preparing for a panel discussion on Turkey gave me the opportunity of putting together some notes and slides on the country’s economy.
That Turkey is not doing well at the moment, economically or politically, is well known. But the roots of the problem remain misunderstood. Many analysts blame the weakening of “structural reforms” (on economics) and the turn towards authoritarianism after the Gezi protests in 2013 (on the politics). See for example here. In truth, Turkey’s problems on both fronts predate the recent slowdown in growth and have been long ingrained in the governing party’s (AKP) strategy. I have discussed the politics before at length. Here I focus on the economics.
First, let’s dispense with some misconceptions about how well the Turkish economy did under Erdogan. As the chart below shows, Turkey’s growth performance since 2002 (when AKP took over) has been middling. A 50% increase in per-capita GDP (at constant prices) is nothing to scoff at, but it is below what Sri Lanka, Bangladesh, Uruguay, Peru, Argentina, Ghana, Indonesia, Philippines and many others – not to mention China and India – have achieved. (And no, Turkey’s income did not triple over this period, as government officials claim.)
Source: IMF
Tuesday, 21 July 2015
Chapter 4: The MIER Years, Episode 4: Son of the NEP is NOW OUT!!
Dr. Mahathir didn’t seem to be worried about the situation. It was about a year away from the end of the First Outline Perspective Plan (OPP), the twenty year timeframe from 1971 through to 1990, marking the formal end of the New Economic Policy, that was mandated by the National Consultative Council in 1970 to be implemented over the twenty years. The national consensus was to restructure Malaysian society and eradicate poverty on the back of the May 13th Incident. At this time the government was focussed on consolidating the nation’s recovery from economic recession of 1985.
Wednesday, 15 July 2015
Achieving Malaysia's Potential
Tengku Razaleigh Hamzah
14 July 2015
Kuala Lumpur - Today, 14 July 2015, marks the 40th day of the passing of my dear wife. As I overcome the sadness of her absence, I feel freer now to reflect upon and address the goings on in Malaysia during the last several months.
2. We are being constantly bombarded with an overdose of news about the sorry state of our national finance. Controversies abound and purported mega financial scandals are being discussed and gossipped over social media. Gripes about this situation are making the round. Not least is the dire strait that our sovereign fund, 1MDB, finds itself in.
3. However, the reality is that all these remain mere talk and nothing has changed. In effect, currently there is much confusion in the people's minds which have to process statements whose veracity is suspect and might not reflect the true situation.
4. We earnestly hope that there is still honour left in our beloved country and that there are honourable men who have the relevant facts to put the matter to rest. They should stand fast by their principles and take the moral high ground to assist in the resolution of the problem. If this were the case, surely there is no necessity for us to waste time instituting inquiries and investigations. Knowing the facts and the problem not telling the truth is not an option.
5. Such an action would enable the country to restore our battered and damaged image and dignity within the world community. This is essential in our effort to rebuild the confidence that was painstakingly developed by our founding fathers.
6. Most importantly, we must stay focussed on the more immediate concern facing our people; that is, the economic and financial difficulties due to the shrinking Ringgit and the indifferent take-home salaries and wages made worse by the spiraling cost of such essentials such as motor fuel and burdensome impositions such as the GST. Given the crisis we are facing, it would not be unreasonable to defer the GST as it has a negative impact on ordinary people. To mitigate the loss of revenue, it could be replaced by some other taxation. We must alleviate the hardship of the people in their trying to make ends meet. We must address how the ever increasing living cost can be mitigated and overcome.
7. It is undeniable that life is a constant struggle for the many. They worry about the future of their children and grandchildren. They fret about the continuously deteriorating quality of life. Indeed they deserve better. A particular socio-economic issue creating much worry among the people is the lack of a financial safety net to provide economic security for retirees.
8. Worries about unemployable graduates must necessarily lead us to the type of education that we are giving to our children. This does not quite prepare them for employment. What should we do? Perhaps the country could adopt a national education policy that can withstand the test of time.
9. We must, therefore, stop bickering, squabbling and politicking. We must close ranks and come together to achieve the rich potential that has always been our feature. We should consider a total overhaul of the system.
On that note, I wish every Malaysian "Selamat Hari Raya Aidil Fitri" and happy holiday ahead.
Tengku Razaleigh Hamzah
Member of Parliament Gua Musang
Kuala Lumpur
14th July 2015
27 Ramadhan 1436H
Monday, 13 July 2015
Greece Reaches Deal with Creditors, Avoids Euro Exit
By Pan Pylas and Raf Casert, Associated Press
Associated Press
Published on 13 June 2015
BRUSSELS (AP) -- After months of acrimony, Greece finally clinched a bailout agreement with its European creditors on Monday that will, if implemented, secure the country's place in the euro and avoid financial collapse.
The terms of the deal, however, will be painful both for Greeks and their radical left-led government, which since its election in January had vowed to stand up to the creditors and reject the budget cuts they have been demanding.
Before it can get 85 billion euros ($95.07 billion) in bailout cash and support for its banks to reopen, the Greek government will have to pass a raft of austerity measures that include sales tax increases, reforms to pensions, and labor market reforms.
Greece will be on a tight timetable to implement its reforms — a reflection of how little its creditors trust the government to honor a deal. Greek Prime Minister Alexis Tsipras infuriated his European partners last month when he called for a popular vote against economic reforms the creditors has proposed.
Monday, 29 June 2015
Explaining the Greek Debt Crisis and What It Means for the Eurozone
New York Times
By LIZ ALDERMAN
Published April 8, 2015
A statue of the goddess Athena in Athens. Greece is struggling to avert bankruptcy.Credit
By LIZ ALDERMAN
Published April 8, 2015
Updated: June 28
Greece, the weak link in the eurozone, is inching closer to defaulting on its debt. The country has been in a long standoff with its European creditors on the terms of a multibillion-dollar bailout. If the country goes bankrupt or decides to leave the 19-nation eurozone, the situation could create instability in the region and reverberate around the globe.
Aris Messinis/Agence France-Presse — Getty Images
What’s the latest?
What’s the latest?
The European Central Bank said on Sunday that it would not expand the emergency loan program that has been propping up Greek banks in recent weeks. But at the same time, the bank did not cut off support entirely, giving the Greek government some extra flexibility in the coming days
Sunday, 28 June 2015
Chapter 4: The MIER Years Episode 3: Policy Waltz is NOW OUT!!
The view of Mt. Cook from the lounge of the Hermitage Hotel set in the plain of the glacier valley of the famous New Zealand mountain was tourist-poster perfect. It was early summer in the second year of MIER’s establishment, and I was a guest of the New Zealand government under its ASEAN visiting fellows programme, to acquaint myself with policy research in that country’s economic reform plans.
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