Thursday, February 22, 2007

It's the Economy, Stupid...

Well that's what Bill Clinton told George Bush (Sr) when he defeated the latter in the 1992 presidential elections in the United States. It is also true that the Malaysian electorates pretty much focuses on the bread and butter issues when deciding which party they decide to vote for. Hence it is unsurprising that the Pak Lah's administration has for the past 2 weeks launched a relentless campaign in the local printed media to let Malaysians know that the economy is in a better shape than ever.

As reported by Reuters, "the mainstream media, which generally cheers the administration, went to town last week with a slew of upbeat stories ranging from a record 2006 trade volume to rocketing share prices, a stronger ringgit and rising foreign reserves."
"Good times are back," blared one headline in the best-selling Star newspaper, summing up comments by Second Finance Minister Nor Mohamed Yakcop.

"The feel good factor is clear. Retailers are enjoying better business and restaurants are packed," the minister said.

"Economy now more resilient than ever," was the headline in the New Straits Times, a daily controlled by Abdullah's ruling party.

More such stories are on the cards, said one editor, who attended a government briefing recently.
The crux of Pak Lah's feel good campaign is the booming stock market, which is apparently close to matching it's 13 years high.
"I can see the momentum is already there. What is important is that we have the momentum now and it is moving forward ... and upwards. But we need to build on it so that we can develop our economy even further."

The Prime Minister also said that after hitting a 10-year high of 1,258.63 last week, the Kuala Lumpur Composite Index might breach the 1,350 mark - the highest in Malaysia’s history. He said it was up to Malaysians to “push hard” to achieve it.
So, are the good times really back? Are Malaysians enjoying significantly better wealth and prosperity?

Before I attempt to evaluate the above, let's get a few facts out of the way. Malaysia's economy is not in the doldrums, certainly unlike the years in which we have suffered from multiple crises and recessions. Based on official statistics, there is still fairly low unemployment levels and while inflation is rising, it is still within a moderate range.

However, does it justify the rosy spin which we are seeing today? Our 'dispute' with the Government has always been on the fact that we are clearly underachieving our potentials, especially when compared against our neighbours with poorer resources, fewer people and smaller land areas.

Having written thus far, I realise that I have plenty plenty to discuss which might be too long to all dumped into a single post. Hence, I'll be breaking up this topic into several posts, with the next one focusing on the stock market, particularly on it as a reflection of Malaysia's economy.

Here's a teaser, the stock market has boomed by more than 30% in the past 6 months or so. Question: Have your income or wages increased by the same proportion?


Anonymous said...

AAB may say whatever he wants to spin to the public, but on the ground, it is a totally different scenario.

For business owners, collections of accounts receivable are so difficult nowadays, that some up to even 9 months. And for the lay persons, a meal used to cost RM3++ previously, now costs easily RM5++.

And the entry level salary for engineering grads in mid 90s used to be in the range of RM2500, now fresh engineering grads will be happy with RM1800.

So, is the economy really better now? I don't think so.

Mark Eleven

Anonymous said...

must be some sort of psychic energy floating around.

just posted something on the stagnation of wages in the face of RISING INFLATION = reduced disposal income?

economics is rusty~~~

Anonymous said...

The economy is doing better. The issue is the economy has not restructured. The reason why many people are not enjoying higher wages and benefits is because the better economy is only enjoyed by those segments that can benefit such as oil, electronics, palm oil and rubber. Go ask the small rubber shareholders in heartland and there is definite improvement.

The bulk of employment of this country is by SME that depend on domestic consumption such as property (i.e., contractors), food, retail, distribution etc. In such area there is no improvement or slight improvement.

In order to improve wages, the economy should have been restructured and the key way is by FDI and government reform, the same area the administration has failed miserably. Without new industries and businesses, there is no way the bulk of wages will catch up with cost increases and hence the unhappiness.

Who am I? said...

A bloated stock market might be the result of "irrational exuberance" by financial investors. What this means is that the investors is predicting/speculating the future outcomes. And, they 'might' actually be wrong. Stock market doesnt always correlate with profitability and wellbeing, its just an indicator that covers a small part of the economy (how was the KLSE the months before Asian Financial crisis? quite good right, at least it didnt show any signs of a meltdown)

Personally (just like an investor, i speculate), the future is pretty uncertain. US has been running ridiculously large deficits and nobody knows who's gonna do the lending and how long itz gonna last. M'sian economy still depend on exports to the US that is pretty sensitive to changes in personal income. M'sia has an economic structure that makes it exceptionally vulnerable to the volatility of the US market (in contrast to Australia that sells commodities that are much more stable in demand, and was tied up to the growing Chinese market back in Asian Financial crisis).

Malaysia might as well be performing well because the world is doing well and has less to do with what the government has done. It might actually be safe to say that the economy could have performed better if not for the ____ of the government (whatever reasons you might think of).

Also, M'sia's labor productivity growth doesnt seem too convincing and the current destination for FDI's is unlikely to be Malaysia. So, i'll keep my fingers crossed. The government would need to do much more to convince me.

Anonymous said...

"hullah, yeah, the stock is UP, I am gonna get myself a private jet for celebration"

In the 80s,
shanghai/ beijing/ guangzhou GDP per capital is usd1,000, and now shot to USD 5,000! And still growing at 15% rate.
While we remain at USD5,000 range since 90s.
Where is the BEEF?!

And Singapore and HK has surpass usd25,000,
with reliable public services,with safe living, quality education and medical services!

Anonymous said...

Spore just cut it's corporate tax rate from 20% to 18%, one of the lowest in the region.

An excellent editorial in the Spore Business Times yesterday noted that other countries can replicate Spore's advanced infrastructure, education for a new generation and quality lifestyle. But they will find it very difficult to match Spore's trusted govt and trusted business centre.

It noted that the Spore govt believes that it can attract the best and brightest from around the world and that MNCs are moving to the republic because they trust a business environment that respects and protects intellectual property.

So many lessons for Msia to learn. Is the govt and the bureaucracy willing to accept that globalisation is here to stay and that capital, enterprise and talent go where they are appreciated, respected and welcomed?

Anonymous said...

"Anonymous said...
Spore just cut it's corporate tax rate from 20% to 18%, one of the lowest in the region...."

You are right! but I suspect, as usual, those fellas are more busy and keen on "privatised the 30% mooras quick, and part it elsewhere", then the advancement of rakyat life hood.
And the typcoons just play the game rule. as famous quote goes,"Saya nampka lobang, saya masuk lah!" Uncle Lim G.Tong.

Anonymous said...

"Here's a teaser, the stock market has boomed by more than 30% in the past 6 months or so. Question: Have your income or wages increased by the same proportion?"

oh, should we all tie our salary to the stock market performance? Nice to see it increases 30% in the past 6 months, but when it drops ler?

zewt said...

spot on tony... particular on whether our income has increased 30%. freelunch did a very good post on a piece of news out in the papers a few days ago... regarding heavy discount on cars.

his question: if economy is so good, why arent ppl buying cars?

Anonymous said...

hmm, I can't speak for others but even when I have extra money (like when economics is good and boss give me bonus and etc), I don't neccessarily want to buy cars for the following reasons:
1) because I've got car already?
2) because I've rent a room next to LRT station and everyday I commute to work via LRT.
3) I hate traffic congestion.
4) I hate to pay petrol and car park fee and toll.
5) because I love environment and I am doing my part to reduce CO2 emission which cause the global warming.

Bennyloh said... (good timese are back!)..

Unknown said...

"In the 80s,
shanghai/ beijing/ guangzhou GDP per capital is usd1,000, and now shot to USD 5,000! And still growing at 15% rate.
While we remain at USD5,000 range since 90s.
Where is the BEEF?!"

Funny numbers: the GDP per capita in 2005 is US$11,160 - more than double of what you claim.

Anonymous said...

Malaysia Key Economic Indicators


25.6 million
26.13 million

RM248.06 billion
RM262.6 billion

(US$65.3 billion)
(US$69.1 billion)

GDP Growth

Per capita income


(frankly, a joke development,
after 50 years of mediocre development with proper groundwork laid b
y british system, versus HK / Spore,
on top of being one of the richest resources nation in the world)

Bennyloh said...

Good times!!