Saturday, January 23, 2016

The People Protest Again (TPPA)

I am writing here as per request.

I initially had no interest in these things because (a) the economy is already in deep trouble and what difference would this TPPA make even if it is for the worse; and (b) would anybody in government bother to rethink carefully if they know how to protect the national interest instead of the interest of the party. (But seriously, the party is over and now we have to clean up the mess.)

I think I may have something to add.

TPPA stands for the "Trans-Pacific Partnership Agreement."

Trans-pacific is a very USA terminology for when they look over the Pacific Ocean, they are looking at the whole of Area. (When they look over the Alantic Ocean, they are looking at Europe.) So the TPPA is a very American intiative. The US wants it, not us in Asia.

It is obvious that China is not included in the TPPA negotiations. For one, China wouldn't be so stupid to be tied by the US. Two, the US is obviously tying up with its "allies" in Asia in order to counter China which has surged to scary heights economically. The US is in decline economically and is in sore need of a strategic move to at least play defensive against China.

1. If I were the US, what I want from the TPPA is for all partner-nations to operate subservient to US companies with the US government setting the rules of the game. In other words, the US government will play judge and jury in any business disputes which US companies would surely raise if they were to lose their investments because of country risks.

In the TPPA, there would be no country risk for US companies and if there is, the country must pay. Country in the end means the people in terms of inflation, currency depreciation, high interest rates and high unemployment, as the errant country must pay a huge sum in US dollars and its government must run a budget deficit to do so.

2. US companies are holding many copyrights and they wish to ensure that they can extract rent out of these copyrights. Areas to attack are music, films, medicine as well as technology. Since modern technology is being used not only to save labour but also for entertainment, it is therefore likely that entertainment for the masses will an expensive hobby.

3. It is obvious that US service companies want to capture a chunk of the professional services industry in Asia. They have already done so under WTO, and it is likely that under TPPA, they will deepen it with legal implications.

4. I agree that worker conditions must improve so that every working person earns a living wage. There should be provisions for housing, medicare and schooling for their children if we want to host workers in this country. This is how a country grows, by taking care of the people who work. Only when we have this baseline drawn properly can this country move up the value chain and be a high-income economy.

My final point is that, if Malaysia really wants to sign the TPPA with the USA, then the government should also pursue such a liberal and liberating policy in our own domestic economic policy where there are no quotas and restrictions for the selected few in our own society. If we are glad to appease ourselves with foreigners, then we must also be prepared to treat all our citizens as equal.

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.