People or Profit, a Hazy Outlook for Newly Launched Asean Economic Community

BY SHERIDAN MAHAVERA
The Malaysian Insider
Published: 23 November 2015 7:00 AM

The Asean Economic Community (AEC) launched with much fanfare yesterday seeks to offer prosperity to its 625 million people, but a civil society leader cites the region's annual smoke problem as a symbol and test of whether it can live up to the promise. 

Kuala Lumpur and much of Malaysia and Singapore were enveloped in thick
smoke last month due to forest fires started by big plantation companies in
Indonesia. The new Asean Economic Community must stop the recurrence
of the problem if it is serious in its objective, activists say. – The Malaysian
Insider file pic, November 23, 2015

Jerald Joseph, the head of local rights group Dignity International, part of the Asean People's Forum (APF) 2015 attended by the region's biggest civil society organisations last April, cited the smoke problem as an example when talking about AEC. It is a symbol because it is the by-product of what AEC plans to achieve on a grander scale: allow Asean businesses the freedom and ease to set up shop in any of the ten member countries to take advantage of cheaper labour and untapped resources

Reuters: Banks' Dollar Borrowing adds Layer of Risk to Malaysia's Creeping Crisis

Sectors Reuters 

By Vidya Ranganathan

Published: Sun Nov 8, 2015 9:00pm GMT

* Ringgit down around 20 percent against dollar this year
* Malaysia overseas borrowings $98 bln, currency reserves $94 bln
* Bankers say foreign borrowings mostly offset by dollar lending
* Current account surplus shrinking, forecast $2.6 bln in 2016
* Corruptions scandal seen creating policy uncertainty

KUALA LUMPUR, Nov 9 (Reuters) - To get an idea of how fragile Malaysia's external account is, consider this: the amount of foreign money invested in ringgit bonds and the dollar borrowings of its banks will together more than wipe out the country's currency reserves.

Eighteen years after being battered by the Asian financial crisis, Malaysia is once again facing a perilous combination of heavy short-term overseas borrowings by banks and scarce foreign exchange reserves.

Add in a festering political scandal and looming interest rate rises in the United States and the country is showing many of the symptoms that could presage another currency crisis.

Apocalypse Now: has the Next Giant Financial Crash Already Begun?

Paul Mason

The Guardian

Published: Sunday 1 November 2015 20.00 GMT

The 1st of October came and went without financial armageddon. Veteran forecaster Martin Armstrong, who accurately predicted the 1987 crash, used the same model to suggest that 1 October would be a major turning point for global markets. Some investors even put bets on it. But the passing of the predicted global crash is only good news to a point. Many indicators in global finance are pointing downwards – and some even think the crash has begun.

 ‘The biggest risk is not deflation of a bubble. It is the risk of
that becoming intertwined with geopolitics.’
Photograph: Getty Images/Time & Life Pictures Creative

Let’s assemble the evidence. First, the unsustainable debt. Since 2007, the pile of debt in the world has grown by $57tn (£37tn). That’s a compound annual growth rate of 5.3%, significantly beating GDP. Debts have doubled in the so-called emerging markets, while rising by just over a third in the developed world.

John Maynard Keynes once wrote that money is a “link to the future” – meaning that what we do with money is a signal of what we think is going to happen in the future. What we’ve done with credit since the global crisis of 2008 is expand it faster than the economy – which can only be done rationally if we think the future is going to be much richer than the present.

Our Worst Fears Confirmed – Mohd Nizam Mahshar

Kamal Salih Comments: 

Nizam has consistently taken the position as point-man for those opposed to the TPPA recently negotiated by the 12 governments of the Pacific Region.  He is chairman of the lobby group Bantah TPPA (Against TPPA).  He is also the Executive Director of MTEM (translation: Malay Economic Action Council) a research body set up under the National Malay Chamber of Commerce and Industry.  The following article is a propo the position taken by the Council.  

READ THE FULL TPPA TEXT HERE

Mohd Nizam Mahshar

Malaysian Insider

Published: 5 November 2015 7:02 PM

The disclosure of the finalised texts of the Trans-Pacific Partnership (TPP) agreement has confirmed our worst fears about the purported 21st-century agreement.

Despite what governments and cheerleaders claim, our concerns have not been overblown, and it only goes to show what happens when we allow a select few – their every move monitored and driven by multinational commercial interests – to craft a deal behind closed doors.

Given that we will be legally bound to follow the TPP – or face trade or other sanctions should we be found in violation – the prospects are dire.

Malaysia’s Spectacular Drop in Inequality, is it for Real?

Kamal Salih's Comments - My colleague Dr. Lee Hwok Aun (HA) from the Department of Development Studies at FEA, University of Malaya, wrote this piece which expresses some doubt about recent official figures relating to inequality in Malaysia.

HA together with Dr. Muhammed Abdul Khaleed and I co-authored the first UNDP Malaysian Human Development Report 2013, which was released last year, analysed many of the underlying factors in Malaysian Inequality situation.

The EPU also calculated the Gini Coefficient based on the latest Household Expenditure Survey (HES) instead of the Household Income Survey (HIS) and found that the HES Gini is even lower at 0.33 compared to the 0.401 according to the HIS data.  We had counted that the improved figure is due largely to the debt component in the household fiscal capability (purchasing power) figure.  This is consistent with high household debt levels in Malaysia.  This too should not distract us from Hwok Aun's incredulity at the official inequality assessment.


Lee Hwok Aun

The Malaysian Insider

Published: 16 October 2015 9:45 AM

Income inequality has fallen sharply in Malaysia. The divide between rich and poor phenomenally narrowed the past few years. If only you knew.

Judging by public discourses and perceptions, most people do not know. And most of the time we talk about inequality, we hear the opposite: inequality has been rising and rich-poor gaps are widening.

Writings on our socioeconomic condition, such as the commendable "Rich Malaysia, Poor Malaysians" by Anas Alam Faizli, largely argue that the benefits of economic growth trickle down to the masses much less than the affluence sucked upwards to the rich.

The government knows about this massive decline in inequality; our official statistics plot out the trend. The Gini coefficient, a figure between 0 and 1, is a widely used, simple and effective measure of inequality. The higher the Gini, the more unequal the distribution.

Visualising it helps. Malaysia's Gini coefficient series shows a clear downward trend in household income inequality from 2004 to 2012, after which it falls off a cliff. In 2014, inequality plunged to the lowest level ever.

These calculations are based on the Household Income Survey, a large and nationally representative dataset, and the best resource for computing income statistics. But are we handling the dataset properly?

The latest inequality figures painfully stretches the limits of plausibility. The data have been reported, without any attempt to explain possible causes for such a spectacular outcome. Even if we can rationalise this downtrend in inequality, could it have dropped so steeply?

Kamal Salih on Ringgit Sense TV3

Risk of Global Financial Crash has Increased, Warns IMF

Phillip Inman

The Guardian, Global Economy

Published 7 October 2015, 15.08 BST

The risk of a global financial crash has increased because a slowdown in China and decline in world trade are undermining the stability of highly indebted emerging economies, according to the International Monetary Fund (IMF).

The Washington-based lender of last resort said the scale of borrowing by emerging market countries, whose debts are vulnerable to rising interest rates in the US, mean policymakers need to act quickly to shore up the financial system.

José Viñals, the IMF’s financial counsellor, said the threat of instability and recession hanging over economies including China, Brazil, Turkey and Malaysia was one of a “triad of risks” that could knock 3% off global GDP. The second, he said, was the legacy of debt and disharmony in Europe, while the third is centred on battered global markets that are more likely to transmit shocks rather than cushion the blow.

At the very least, central banks would need to remain vigilant and be prepared to increase their stimulus programmes should difficulties in emerging market countries spill over into the financial system.

Addressing the prospect of an interest rate rise in the US, Viñals said there was little reason to tighten monetary policy before Christmas while inflationary pressures and wage rises remain low. “The risks of a premature tightening are greater than those of waiting two or three more months,” he said.

The warning follows a summer of turmoil in global markets triggered by China’s attempt to increase its flagging exports with a currency devaluation. The move sparked panic in stock markets, which tumbled around the world, as investors recognised for the first time the impact of China’s slowing economy.

Earlier this week, the IMF downgraded its forecast for global growth in 2015 to 3.1%, which would mark the weakest performance since the trough of the downturn in 2009.

Viñals said the IMF’s latest Global Financial Stability report showed western economies had regained some momentum in the past year and reduced their exposure to global shocks.

But those gains were underpinned by low inflation caused by a slump in oil and other commodity prices, with knock-on effects for oil and mineral-rich countries that rely on the income from commodity sales.

The IMF is especially concerned that corporations and banks in some emerging economies continue to rely on massive debt financing to maintain growth, making them vulnerable to further falls in commodity prices and declines in trade.

Malaysia at Risk in Event of Global Financial Crash, Says Report

Malaysian Insider

Published 10 October 2015 10:49 AM

Malaysia is one of several emerging economies at risk in the event of a global financial crash because of its high debts and unstable economic situation, the International Monetary Fund (IMF) said.

In a report by The Guardian, the fund highlighted corporations and financial institutions which relied on massive debt financing to maintain growth, adding that Malaysia was one example of countries allowing their their largest corporations to borrow heavily.

Other emerging economies included Brazil, Turkey, India and Argentina.

IMF financial counsellor Jose Vinals was reported as saying that the threat of instability and recession shadowing such countries could knock 3% off global gross domestic product (GDP).

“A collective effort to deliver a policy upgrade is needed urgently to face up to rising challenges in an uncertain world, to ensure financial stability and better growth prospects. Three per cent of global output is at stake,” he was quoted as saying.

This year, the ringgit has fallen nearly 20% against the dollar and the nation’s foreign reserves dropped by about the same percentage, to below US$100 billion (RM413 billion).

“It’s almost like a perfect storm for Malaysia,” Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar said in a report by Reuters.

A widening political scandal and tumbling currency have steadily taken their toll on investor sentiment towards Malaysia, unnerving its neighbours despite the central bank’s efforts to contain the damage.

Bursa Malaysia has also been wiped out since July, primarily by the escalating political fallout from allegations of graft and mismanagement swirling around indebted state fund 1Malaysia Development Bhd (1MDB).

The scandal has amplified concerns that the country is emerging as the weakest link in a region struggling with falling commodity prices, feeble global demand and impending interest rate rises in the United States. – October 10, 2015.

Can Malaysia Deliver Inclusive Growth?

By Gemma Corrigan

Sep 8 2015

World Economic Forum

In Asia, as elsewhere in the world, there is a growing consensus that economic growth should not be a country’s ultimate policy objective. Broad-based improvement in living standards matter as well. And while it is hard to raise living standards without economic growth, it is certainly possible for a country to achieve impressive strides in GDP per capita without most of the population feeling the benefit.

But what does a country need to do to ensure that economic growth benefits all citizens? That is a relatively new question on the research agenda, one which has moved into the mainstream only as the aftermath of the financial crisis lays bare the shortcomings of previous assumptions in economics.

According to a new contribution to this research by the World Economic Forum, one country that is doing most things right given its level of development is Malaysia.

The Forum’s new Inclusive Economic Growth and Development Report 2015 identifies 140 indicators that are thought to contribute to an economy’s capacity to grow inclusively. These 140 indicators are grouped into 7 pillars and 15 sub-pillars. Not a single country scores above average in all sub-pillars relative to its peers, but Malaysia is one of a handful that come close.

Because there is no research consensus on the relative importance of factors that could contribute to inclusive growth, the report does not attempt to rank countries overall. Instead, it ranks them on each indicator against a group of peer countries at similar income levels. The aim is to enable meaningful comparisons of relative strengths and weaknesses.

A comparatively low level of corruption is among the country’s strengths, with Malaysia ranking top among the 26 countries in the upper-middle income range for indicators such as ethical behaviour of firms and public trust in politicians. It also scores top on a measure of avoiding market dominance by incumbents.

Chapter 4: The MIER Years, Episode 5 Winding Up to Wind Down is NOW OUT!!

Read it HERE

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.

Read it HERE

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.

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:

COMMENTARY BY PANG ENG FONG AND LINDA LIM

Both in Singapore Economic Review Vol. 60 No. 3 (2015), Special Issue on A Fifty-Year Retrospective on the Singapore Economy

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.

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.

It Starts: Broad Retaliation Against China in Currency War

Wolf Street

by Wolf Richter 

August 20, 2015

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

The Crux

From Jim Rickards

Editor, Currency Wars Alert

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)

by Wolf Richter

Wolf Street

August 23, 2015

 “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. 

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

Dani Rodrick: Turkish Economic Myths

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

Chapter 4: The MIER Years, Episode 4: Son of the NEP is NOW OUT!!

Read it HERE

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. 

Read it HERE

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

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.

Explaining the Greek Debt Crisis and What It Means for the Eurozone

New York Times
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.

A statue of the goddess Athena in Athens. Greece is struggling to avert bankruptcy.Credit

Aris Messinis/Agence France-Presse — Getty Images

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

Chapter 4: The MIER Years Episode 3: Policy Waltz is NOW OUT!!

Read it HERE

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. 

Read it HERE

RMK11 – MERANCANG UNTUK GAGAL

Darah Tuah Blog

Written by Datuk Akbar Ali, Former Senator

7 June 2015

A forgotten and broken promise?:

“A fair distribution must encompass the whole spectrum of measuring wealth such as equity ownership, other financial and non-financial assets, and access to wealth creating opportunities such as long term concessions and contracts. Even in measuring ownership, it should go beyond equity to include other properties, such as retail, landed properties, comercial buildings, intelectual property and other services as well as managerial positions” – Janji YAB Dato’ Sri Mohd Najib pada 30 Mac 2010 semasa melancarkan MBE.

Pengenalan

1. Sebelum saya pergi jauh, eloklah saya menarik perhatian kepada pengakuan ikhlas YAB DS Najib bahawa era kerajaan tahu semua telah berakhir. Justeru terimalah pujian, teguran dan syor saya ini mengenai RMK11 dengan berlapang dada dan seterusnya baikilah dokumen penting tersebut demi faedah kita bersama (https://darahtuah.wordpress.com/2015/05/21/rmk11-jangan-harapkan-miracles-jurang-akan-melebar%e2%80%8f/).

2. Diakui bahawa sebahagian besar kejayaan negara kita adalah kerana adanya perancangan yang dipandu oleh Rancangan Pembangunan 5 Tahun yang berturutan dari RM Pertama hinggalah ke RMK11 ini. Tidak perlulah saya mengulangi angka-angka yang telah disebut oleh YAB PM, seperti tahap daya saing yang mengukuh, untuk menyokong hakikat negara kita telah berjaya.

3. Pada masa yang sama, bermacam data telah dipaparkan dalam RMK11 untuk membuktikan kejayaan tersebut. Ia merangkumi kedua-kedua bidang ekonomi – ekonomi modal dan ekonomi rakyat.

4. Cukuplah sekadar saya merujuk kepada Human Development Index (HDI ) yang meletakkan Malaysia di kalangan High Human Development countries dan kini kita berada di tangga ke 62 di antara 187 buah negara. Tahniah kepada kerajaan di atas kejayaan tersebut dan khasnya kepada EPU berhubung penyediaan Rancangan ini.

5. Selain daripada Rancangan Pembangunan Lima Tahun ini kita juga mempunyai rancangan-rancangan besar yang lain seperti dalam bidang pendidikan, pembangunan belia dan industri.

6. Kita juga mempunyai dasar-dasar utama seperti Hanruh, Dasar Pertanian Negara dan Dasar Automotif Negara, selain Model Baru Ekonomi.

Dasar Induk

7. Walaupun banyak dasar dirangka, malangnya kita masih tidak merangka Dasar Induk (Mother Policy)seperti yang terdapat di Switzerland. Switzerland mempunyai dasar induk yang dipanggil Total Security.

8. Dasar induk inilah yang menjadi penentu dan pengikat semua dasar dan program kerajaan yang lain secara coherent agar ianya inter connected atau adanya vertical and horizontal integration. Yang demikian, semua dasar dan program kerajaan yang dirangka mestilah menjurus ke arah turut menyokong kejayaan Total Security tersebut demi survival dan keselamatan negara berkenaan.

9. Di negara kita juga terdapat raison detre mengenai keperluan mewujudkan dasar induk negara, terutama berhubung pemeliharaan perpaduan dan keamanan kerana hubungan antara kaum di Malaysia amatlahfragile, polarisasi kaum semakin ketara dan suhu perkauman terus meningkat. Dengan dasar yang tegas dan consistent ini maka bolehlah perpaduan dan keamanan itu dipelihara.

10. Sebaliknya, kerana ketiadaan dasar induk itulah maka kita lihat dasar dan program kita sering berubah-ubah dan juga dilihat sering berkontradiksi. Hal sedemikian itu boleh meletakkan para pelaksana dasar dalam keadaan yang kelam kabut dan membuat rakyat pula marah. Seterusnya boleh hilang keyakinan rakyat terhadap kerajaan. Contoh yang jelas ialah kontroversi ekoran hasrat YAB Perdana Menteri hendak memansuhkan Akta Hasutan 1948 dan kemudian menubuhkan pula MKPN (NUCC).

11. Buat kesekian kalinya saya mengesyorkan (pernah saya syorkan di Dewan Negara) agar kerajaan menggubal Dasar Induk Negara. Contohnya Perpaduan Nasional.

RMK11 – Tiada Political Will

Time to move Beyond Bumiputera Agenda, says Saifuddin

The Malaysian Insider
BY ANISAH SHUKRY
Published: 30 May 2015 5:24 PM

Former Umno supreme council member Datuk Saifuddin Abdullah
believes it is time to move beyond polices that target
favour the Bumiputera.
The Malaysian Insider file pic, May 30, 2015.

Putrajaya should not have included a Bumiputera agenda in the 11th Malaysia plan (11MP), given that poverty and income inequality is no longer defined by race, says former Umno supreme council member Datuk Saifuddin Abdullah.

Saifuddin, who is also the Global Movement of Moderates CEO, today said he hoped the plan would look beyond race and focus on boosting the wealth of all Malaysians, as recommended by the Malaysia Human Development Report 2013.

“Today, the main issue with regards to inequality is no longer interethnic inequality but intra-ethnic inequality. I was hoping the 11th Malaysian plan would continue with that discourse,” Saifuddin told a conference organised by Harmony Malaysia in Petaling Jaya.

“That’s why I am saddened that we still have the Bumiputera agenda in the 11MP. I thought the 11MP would be the first ever plan where we do not address race-based policies and look at it purely as needs-based policies.”

He said that if Putrajaya addressed poverty through needs-based policies, all races could benefit from it including the Bumiputera.

Saifuddin added that Malaysians needed to seriously discuss a timeline for the country to stop focusing on Bumiputera policies and privileges.

“The problem is that people think this is a sensitive matter that cannot be discussed, and if you discuss it you risk being charged under the Sedition Act. But we should discuss this,” said Saifuddin

The Malaysia Human Development Report 2013 found that since 1970, inequality between ethnic groups has decreased and contributes only about 4% to Malaysia’s overall inequality in 2009.

In terms of relative poverty, it noted that the rate among the Malays was 19.1%, followed closely by the Chinese at 17.9% in 2012.

Intra-ethnic inequality, however, has risen, contributing to 95% of total income inequalities among Malaysian households, according to the report commissioned and published by the United Nations Development Programme.

Through the 11MP, the federal government outlined five strategies to enhance Bumiputera Economic Community to increase wealth ownership.

The plan detailed how the government would empower Bumiputera human capital and enlarge Bumiputera wealth ownership share.

However, Malay rights group Perkasa has complained that the five-year development blueprint sidelined the Bumiputera agenda, because only 5% of the 389-page document mentioned the Bumiputera economic strategy.

Perkasa president Datuk Ibrahim Ali said on Thursday Putrajaya should reevaluate the 11MP, as its focus on the Malay Bumiputera position was “not very obvious”.

Prime Minister Datuk Seri Najib Razak launched the 11MP on May 21 as the final lap to thrust the country into developed status by 2020. – May 30, 2015.

Chapter 4: The MIER Years Episode 2: A Bright Outlook is OUT NOW!

Read it HERE

The first National Outlook Conference (NOC) was set for the first Tuesday of December of 1986, for two days.  Following a structure that was retained for every subsequent annual national outlook conference held by the Institute, the inaugural 1986 NOC was planned as the official launch of MIER.  After the opening speeches, by the chairman of the Board of Trustees, and Tun Daim the Minister of Finance as the guest of honour, the first session in the morning would cover the world and regional economic forecasts and followed by the main feature, the MIER economic forecast for Malaysia for the following year, in this case for 1987.

Read More HERE

In the News: A New Game Plan to take Malaysia Further

The Star Online
By Michelle Gyles-McDonnough
Published: Monday May 18, 2015 MYT 12:00:00 AM

THIS month, Malaysia will be launching the 11th Malaysia Plan, which will serve as a platform to transition from a developing nation to a developed nation in 2020.

To reach Vision 2020, a set of important and deep reforms are needed to ensure the country not only achieves the target level of Gross Domestic Product or income per capita, but also that the growth process and the resultant development gains are inclusive, resilient and sustainable.

As we look ahead to 2020, it is imperative to reflect, as the Government is presently doing, upon past successes and the unattained milestones and remaining challenges. It is also imperative to acknowledge new challenges – par for the course in a dynamic world – and make the best decisions for the future.

The challenges include: the growing concern over relative and multidimensional poverty, especially in the states of Sabah and Sarawak; the persistent and increasing inequality of wealth and assets on the back of wage stagnation; the lack of a proportional middle-class growth, despite steady and rapid economic changes; persistent gender gaps in terms of pay, employment, and participation in decision-making; and the continuing need to address the complexities of affirmative action and vehicles for securing inclusion, social cohesion and harmony in a multiracial and multicultural society.

For this, Malaysia would need a new game plan.

Therefore, the Malaysia Human Development Report (MHDR) 2013: Redesigning An Inclusive Future, launched by UNDP in November last year, was to provide an assessment of Malaysia’s growth and policy choices in order to contribute to the development dialogue in the country before 2020.

The report is anchored in the idea that while economic prosperity may help people lead freer and more fulfilling lives, other non-income factors such as education, health and living standards play a vital role to influence the quality of people’s freedoms as well as the opportunities to realise their potential as human beings.

Chapter 4: The MIER Years Episode 1: Academic Fall-out is Now Out!

Read it HERE

A few years after I was settled into my MIER years,  I got feedback that Musa had acknowledged in Senate that the expansion plan that he was implementing in USM was in fact based on the ten-year plan I had introduced.  I was gratified to hear that, for it meant that my effort in USM was not wasted after all.

Read More HERE

The Big Mac Index

The Economist

By D.H. & R.L.W.

Published: January 22nd, 2015

THE Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries. For example, the average price of a Big Mac in America in January 2015 was $4.79; in China it was only $2.77 at market exchange rates. So the "raw" Big Mac index says that the yuan was undervalued by 42% at that time. 

Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of at least 20 academic studies. For those who take their fast food more seriously, we have also calculated a gourmet version of the index.

This adjusted index addresses the criticism that you would expect average burger prices to be cheaper in poor countries than in rich ones because labour costs are lower. PPP signals where exchange rates should be heading in the long run, as a country like China gets richer, but it says little about today's equilibrium rate. The relationship between prices and GDP per person may be a better guide to the current fair value of a currency. The adjusted index uses the “line of best fit” between Big Mac prices and GDP per person for 48 countries (plus the euro area). The difference between the price predicted by the red line for each country, given its income per person, and its actual price gives a supersized measure of currency under- and over-valuation.

Find the Interactive Chart HERE.

The Episodes: Chapter 3: An Academic Firmament Episode 5: The Crisis of 1985 is Now Out!

Read it HERE

1985 was a year of crisis, for the country, for USM and for me personally.  All crises are turning points.  The Chinese said crises are also moments of opportunity.  And Allah said in the Holy Koran, “Fa innamaal ‘usriyusraa. Innamaal ‘usriyusraa.” (94: 5-6).  (For verily, with every difficulty there is relief.  Verily, with every difficulty there is relief).  He said it twice.

Read more HERE

The Costs of Inequality: Not just a Case of ‘Poor Envy’

The Malaysian Insider

By Nicholas Chan

Published: 6 May 2015 4:40 PM

For 2014, inequality is undeniably the buzzword in public policy domain, largely thanks to Thomas Picketty's unlikely bestseller, "Capital in the 21st Century".

Solving inequality has been propounded to the forefront of most political and intellectual debates, replacing the paradigm of poverty eradication which even for Malaysia has reached its end (with the exception of some chronically under-developed states like Sabah and Sarawak).

Arguably, the Malaysian government has also paid attention to the issue of inequality by implementing certain policies of redistributive nature, like the cash transfer via the BR1M programme.

However, to see inequality merely from the perspective of "income inequality" avoids the larger question, which is what are the consequences of inequality?

The discourse on inequality will not be complete, let alone constructive, if this dimension of the problem is sidelined. While the word "inequality" itself invites moral judgement, the issue cannot be seen as simple as that.

Oil Market’s Bounce Masks Persistent Risk in Malaysian Debt

Reuters

By Nicholas Owen and Trinna Leong

May 6, 2015

April was a good month for Malaysia's economy, one of the most deeply exposed to foreign debt in Asia, as a bounce in oil prices boosted foreign reserves and its currency rose the most in three years. But behind the good news lurks lingering danger.

The energy exporter faces an imminent downgrade of its debt by ratings agency Fitch, just one reminder of the risks from oil and commodity prices that are still low by historical standards and from cracks in the political stability that once supported its solid growth.

If mounting concerns spur an exodus of foreign investors, who have already been unloading Malaysian holdings, they could destabilise the economy and undermine its growth prospects.

"The decline in foreign holders of ringgit debt since the peak in August 2014 is comparable to the global financial crisis when everyone was clearing the decks," said Andrew Colquhoun, head of Asia-Pacific sovereign ratings at Fitch.

During the 2009 crisis, he said, Malaysia was rescued by U.S. and Chinese stimulus policies, but things are different now: "It's hard to see where the cavalry's coming from."

Negative Interest Rates put World on Course for Biggest Mass Default in History

Telegraph 
By Jeremy Warner
Tue, Apr 28, 2015 19:14 BST

More than €2 trillion-worth of eurozone government bonds trade on a negative interest rate. It's a bubble that is bound to end badly.

Here’s an astonishing statistic; more than 30pc of all government debt in the eurozone around €2 trillion of securities in total is trading on a negative interest rate.

With the advent of European Central Bank quantitative easing, what began four months ago when 10-year Swiss yields turned negative for the first time has snowballed into a veritable avalanche of negative rates across European government bond markets. In the hunt for apparently “safe assets”, investors have thrown caution to the wind, and collectively determined to pay governments for the privilege of lending to them.

Is there another way for Malaysia?

On a country by country basis, the statistics are even more startling. According to investment bank Jefferies, some 70pc of all German bunds now trade on a negative yield. In France, it's 50pc, and even in Spain, which was widely thought insolvent only a few years ago, it's 17pc.

Not only has this never happened before on such a scale, but it marks a scarcely believable turnaround on the situation at the height of the eurozone crisis just a little while back, when some European bond markets traded on yields that reflected the very real possibility of default. Yet far from being a welcome sign of returning economic confidence, this almost surreal state of affairs actually signals the very reverse. How did we get here, and what does it mean for the future? Whichever way you come at it, the answer to this second question is not good, not good at all.

The Episodes: Chapter 3: An Academic Firmament Episode 4: Conference of the Birds is Now Out!

Read it HERE

In the epic Persian sufi poem, Conference of the Birds, the writer Farid ud-Din Attar described the birds’ of the world search for a king, and led by the hoopoe, the wisest of them, at whose suggestion they went to look for the Simorgh, a legendary bird likened by the phoenix in western literature.  Flying over seven valleys (representing life’s struggles), thirty of them finally arrived at the dwelling of the Simorgh, there for them only to find a lake in which they could see only their reflection.  The allegorical poem is a reference to human qualities and failings (represented by each of the birds), the journey being a test of character for anyone to attain enlightenment (tauhid). It reminded me of events that propelled a life through a logic only the Divine can fathom because He ordained it.  The two strands of thought and action that wound through events in my life, one set academic and the other political, were brought together over the coming decade of my years in USM.  This intertwining of the professional and the political in my career only became unwound, only just, during the time I was at the Malaysian Institute for Policy Research, MIER, still ten years away.  Before then, it was as if I inhabited in two minds, sometimes in conflict sometimes in cahoots in determining the path of my life and career.  It was T. Jefferson Parker in his 1996 crime novel, The Triggerman’s Dance, which I was reading who quoted Aeschylus, “Man grows wise against his will”.  I had hoped that the USM experience would have made me wiser.

Read More HERE

The 11th Malaysia Plan and the Denial of Income Inequality

The Malaysian Insider

Rama Ramanathan

Published on 23 April 2015

For reasons best known to himself, the chairman of the Malaysian Rubber Board who happens to be the MP for Jasin, asked the government whether the gap between the rich and the poor was widening in Malaysia. The government’s response was: “No way!”

The government’s response was that Malaysia uses the Gini coefficient to measure income inequality and that the Gini for 2014 is 0.421, which is smaller than the Gini for 2012 (0.431) and for 2009 (0.441). The claim is “lower Gini, therefore lower inequality”.

Yet those who monitor such data know that in 1989, the Gini coefficient was 0.422. So, if the Gini coefficient were the only measure of inequality, the government would have to say that the inequality in 2014 was the same as it was 25 years ago.

In the News: Low Wages Linked to Fewer, Weaker Unions

The Malaysian Insider
BY SHERIDAN MAHAVERA
Published: 4 April 2015

The goods and services tax (GST) which kicked in on April 1 has turned the spotlight once again on the country’s low-wage rut, with economists pointing at the weakening bargaining power of workers, influx of migrant labour and national economic policies as the main causes.

A long-standing problem, experts have said low wages were the result of Malaysia's industrialization policy, which has long focused on the manufacturing sector.  But it also correlates with a steady fall in union membership, in part caused by dependence on foreign labour.

Dr Muhammed Abdul Khalid TMI
pic by Mukhriz Hazim April 4, 2015

In fact, an economist at a recent forum on the welfare of Malaysians, said better bargaining rights for workers, such as through unions, could ensure better wages and benefits. Dr Muhammed Abdul Khalid (pic), who co-authored the United Nations’ Malaysian Human Development Report 2013 (MHDR), said countries with high unionization rates tended to have citizens who were fairly paid.

Union proponents claimed that industrial productivity gains in the past few years have not been matched with a rise in wages, partly because the power of unions to press for them has been diluted by the flood of foreign workers.