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.

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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