Wednesday, January 13, 2016

Malaysia Economy 2016

I am surprised that the prime minister has to spend time to revise his budget as the price of oil plunges further.

If the economics department of the government were to have been staffed professionally in the first place - rather than employing part-time MBAs and jack-of-all-trade consultants to disguise the emptiness - somebody would have (a) done a risk analysis on the oil scenario that would swing either way around the USD 50 a barrel at the time of the budget, and (b) foreseen the rise of US interest rates two or three years ago and the impact on the stock market, the real estate market and the ringgit and local interest rates.

The paucity of strategic policy thinking and the lack of understanding of how the real economy of the country works is shown up clearly by the mishandling of the GST, a topic which this blog has covered at length and with great passion arguing against it.

The GST cannot be the saviour of the national budget. The use of the GST, without the abolishment of the personal income tax, is an abuse of the theoretical argument for indirect consumption taxes. That the GST can be saviour of the national budget must mean that the income and welfare of the general public must deteriorate by the same amount of the revenue raised by the GST.

The current call by the government for all enforcement agencies to raise their tax revenues from customs, inland revenue, fines and other miscellaneous sources including increased dividends from listed companies, must be seen as a desperate act to "make the numbers look good for the rating agencies" and the ordinary people must suffer. But for what?

That the government can continue spending recklessly? The civil service has been drained of professionalism but that lack of professionalism is costly, not only in terms of lack of work done and the end to employ consultants to do their jobs, but also the need to spend most to send them for courses in reward of their incompetence (pay, and no need to work), the tendency to organise PR activities to sell the image of the government rather doing the actual delivery, and the tendency to triviality (re dress codes to be eligible for government services).

The biggest white elephant will be the public transport system now being built in KL with money collected from all states. By the time it is done, the economy will be in the deepest recession. It is not stimulating the economy, nor will it solve the urban traffic problem. With the recession, there will be much diminished traffic on the road.

What needs to be done for the economy is a complete overhaul of the current system. There is too much concentration of economic power in the hands of a few organisations who therefore act as monopolies. They extract fees but do not improve their delivery. TM's Unifi is a sham. All the utilities can raise their rates and nobody can complain. The call for improved dividend payouts by listed monopolies can only mean increased fees across the board and a general deterioration in the purchasing power of the ordinary people.

The closure of the formal economy to half the population to a third of the citizenry does not only mean a multiplier effect on the contraction of the potential of the local economy but a general mental blockage about trading with the rest of the world. Unless, of course, the objective is to exclude the local non-inclusive while sharing the largesse with the politically-inconsequential non-locals.

It is this paranoid and distorted thinking on nationhood and the deliberate repression of a selected section of the society that is destablishing the social fabric and the economic engine. The lack of incentive to invest in one's own country and the need to squirrel away ill-gotten gains in some foreign hideouts merely means that the local currency can only be weak.

It can be observed that after every boom in the economy, the currency will appreciate during the boom but deteriorate after the boom. This happened in every decades since 1982. It cannot be attributed to one regime but the entire economic system that has been set up to provide economic gains to a particular racial and political group.

The nation has come to logical end of the economic system that was hoisted in 1970. The 1970s saw the transformation from a professional civil service to a race-based system and the reclamation of so-called national assets from foreigners. The 1980s saw the failures of the autarky and the beginnings of dealing with foreigners who were erstwhile enemies. The 1990s saw the transformation of the economy from agriculture to manufacturing and the wholesale building of infrastructure for industries, funded by short-term foreign capital in collaboration with local political powers and the eventual collapse of the currency. The 2000s was spent covering up the damages with oil money. The current decade attempts to use the money that is not there to bolster the economy with big public projects. There is simply no encouragement of local citizens to invest in value-added businesses by a revamped banking system that is not focused entirely on the stock market and the real estate market.

Are the local government system and the local banking system geared towards promoting private investments not only in the old industries (plantations, real estate) but new industries and services which the modern world wants? The way the local immigration policy is conducted, we are painfully exchanging high-calibre citizens for disease-born illiterate workers from the bottom of other countries.

Politicians and senior civil servants should cut down drastically on their overseas travelling and should instead spend more time thinking through on the nature of local issues and how they may be resolved in our own way, rather than plugging standard solutions from consultants. It is only when we learn to solve our own problems that we can begin as a nation to be able to stand on our feet and bring happiness to our own people.


walla said...

People who created this system are the last expected to change it since they created it in the first place to empower themselves over others to cover their own inadequacies and limitations.

They try to maintain their power by raking racial and religious sentiments of the clueless majority in numbers whom they galvanize by saying they of those two groups will share the same fate if others not of their kind get to co-rule this nation.

However, such sentiments can only be raked if threats are made up so that the minorities are made out as threats even when all know that they being smaller in numbers and benign all the while cannot threaten those bigger in numbers which was the rationale used in the first place to manufacture the fear.

Such are the politicians and religious leaders we have today. People who practice convenient lies in order to hide inconvenient truths.

Coupled with their own inadequacies and limitations, they entrench a system that makes sure those not of their limited thinking and base-level emotions will be marginalized. So that whatever it takes to keep their power over hearts, minds and votes, they break the economy and bend the institutions. This is being witnessed everyday by everyone at every place in this land.

Meanwhile to salve whatever left of their equally inconvenient conscience, they reward themselves in this life with money and material not of theirs in order to make up for what they will not get in the next for causing a nation of promise to sink to their same level of limited thinking and base-level emotions.

And on this we continue to harbour a sliver of hope things will get better and those in power will listen to facts and reason?

The remotest possibility of that happening needs something more decisive - a massive swing in votes in the next general election that will overcome not just the narcotized soporific mindless heart-set of many besides the entrenched unfair advantage of gerrymandered electoral boundaries already passed which is why a half-baked government can still command parliament of today taken as license for even religious charities to go to Europe ostensibly to counsel the weak when they should be counseling themselves first closer home. They don't think but they will continue to travel on your heavily-taxed account.

People who don't think but use money not of theirs for personal aggrandizement, furthermore upkeep of a system that enables them to continue doing so, are the problem today.

If they are the solution, we would not be having this dialog.

walla said...

Years ago even before the rankings and the WB warning, i had already fingered that the vietnamese were already getting ahead of us in education. Today that's being knelled. Education is the last life-line of the young to change the situation they will inherit from the system the present government has established.

If stakeholders of this country blindly depend on the public education system of the present government for the education of their charges, it will only disadvantage the young later in life by which then it will be too late to make personal and national recoveries.

So to all our young, drop the thumb culture and invest your time instead to learn on your own from what the world offers and needs; put things in the head not in the eyes. Let the racial and religious zealots and goons wallow in their own blinkered and egoistic stupidity; after all, they have long been sitting ducks still alive only because, beyond the wildest explanations, you were and paying for their salaries.

Likewise apply the same new proletarian approach for those who make and trade. Start a second economy that is decoupled from the one the present government wants you to subscribe, a government that doesn't even realize that, apart from capital, the challenge the rural poor face to get up on their own is mobility.

Now that fuel prices are down, everything should be done to make ownership of motor vehicles cheaper for them so that they can transport goods and family easily every day. They are hampered by a lack of mobility which wastes the time needed for them to operate effectively. Whether opening up the market completely free from duties and gate fees won't knock the stuffing off the currency is no longer the issue. We have already passed that point of branded incompetence. Better to have a global auto industry inside so that youths can learn and use new technologies as quickly as the foreign workers already doing so.

Lastly, most of the youngest billionaires today made their money in internet business. Whatever the human enterprise, the internet connects all across the globe; first the dialog, then the trade, finally the valuation. The smallest guy in the backyard with an idea whose time has come can rock the planet and earn big bucks.

We haven't scratched the surface because we can't because we don't have the language to learn the ropes and communicate the offer. With a head-start when we began until we were even ahead of Korea, Hongkong and Singapore, we are now not even tailing them. Pick up the language so that the knowledge out there can be acquired quickly and applied confidently.

Personal motivation arrives when doubts depart on the spark of first successes from self-improvement engaged.

walla said...

walla said...

'The master-economist must possess a rare combination of gifts.

He must reach a high standard in several different directions and must combine talents not often found together.

He must be mathematician, historian, statesman, philosopher – in some degree.

He must understand symbols and speak in words.

He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought.

He must study the present in the light of the past for the purposes of the future.

No part of man’s nature or his institutions must lie entirely outside his regard.

He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician.'

(JM Keynes)

Boy said...

what your point of view on TPP ? Would love to read your POV