Singapore: Inflation Watch

Singapore’s central bank lifted its 2010 inflation forecast to between 2.5 and 3.5 per cent today and said it was carefully watching property and asset prices, though it saw no significant change in underlying price pressures.(Reuters;18 November 2009)

The Monetary Authority of Singapore also said the behaviour of the Singapore dollar’s exchange rate band, which it uses to set monetary policy, was consistent with its policy for zero appreciation in the currency.

The central bank, which decided against encouraging currency appreciation in October, is expected by economists to potentially tighten policy when it next meets in April, after the trade-dependent city-state emerged from its worst ever recession.

“The Monetary Authority of Singapore might be watching inflation more carefully but I think they will still be keeping the exchange rate band steady till April,” said David Cohen of consultancy Action Economics.

“The global economic situation is still uncertain. An awful lot can happen between now and April.”

Singapore said today that the upward revision in its forecast for the consumer price index in 2010 was due to a pending increase in property tax rather than any broader increase in underlying inflation.

The previous forecast was for CPI to rise 1 to 2 per cent next year.

“There has not been any significant change in our assessment of underlying cost and price pressures in the economy from the time of the monetary policy statement release in October,” Monetary Authority of Singapore Deputy Managing Director Ong Chong Tee said at a briefing.

The higher inflation view came after Singapore’s economy grew 14.2 per cent in the third quarter on a seasonally adjusted annualised basis, revised slightly down from an earlier estimate of 14.9 per cent growth but in line with forecasts.

Singapore gave its first forecast for 2010 growth at between 3 and 5 per cent, but cautioned that a recovery in advanced economies remained fragile with a boost from stimulus measures and inventory cycle adjustments likely to taper off in the second half of 2010.

The Singapore dollar was little changed at 1.3847/62 versus the US dollar by 0810 Malaysian time, versus 1.3842 before the GDP data. The stock market edged up 0.6 per cent.

Economists were more bullish than the government.

“The risk is on the upside for both inflation and growth. Crude oil prices have risen from US$35 (RM118) to US$80 (RM270) a barrel, there’s higher commodity prices, and China, India and many non-OECD countries are recovering quicker-than-expected which will push up prices,” said Selena Ling, head of treasury research at Oversea-Chinese Banking Corp.

“People tend to look in the rear-view mirror and see Lehman, deflation, etc, but if you look forward, the risks are more on the upside in many Asian countries.”

Japan’s economy expanded at its fastest pace in more than two years in the third quarter as government stimulus helped domestic demand produce its first contribution to growth in six quarters.

China, South Korea and Indonesia also have reported a pick up in annual economic growth in the September quarter compared with the previous quarter.

An economic rebound in Asia’s major Western export markets, however, has been far more tepid amid weak consumer sentiment.

Medical Tourism: Potential Coffer?

So, it looks like the Malaysian government is finally getting more serious about medical tourism after playing with it like a kitten with a ball of wool.

And so a Minister is now jumping on the bandwagon to try to identify and reduce the so called "irritants" impeding its growth. He said concrete measures will also be taken to stem the brain drain of highly skilled doctors. Haven't we heard of this tune before?

According to the Singapore Business Times,the establishment of the brand new Malaysia Health Travel Council — helmed by Ooi Say Chuan, the former deputy secretary-general of the International Trade Ministry — seeks to advance the sector which earned an estimated RM400 million last year, by acting as a one-stop centre and serving as a platform for the private sector and government to iron out problems.

“With medical tourism, we cannot go wrong as we have very good doctors,” Minister in the Prime Minister's Office Tan Sri Nor Mohamed Yakcop said at a seminar on healthcare tourism here yesterday.

“Unfortunately some of our doctors are attracted to neighbouring countries to work, but we will get them back. We must look at what the irritants are and remove them,” he added, noting these could include mutual recognition of overseas accreditation and certification.

His comments on addressing the issues driving away skilled professionals echoes recent comments by Prime Minister Datuk Seri Najib Razak that more needs to be done to reverse the serious brain drain if Malaysia hopes to have the talent to innovate so that the country can transform into a high-income economy.

To promote medical tourism, the income tax exemption on the value of increased exports was raised to 100 per cent from 50 per cent in the last budget, Nor Mohamed said, adding more incentives would be revealed later.

Despite having the ingredients to be a big player in the booming sector, estimated to be worth US$40 billion (RM140 billion) globally, Malaysia has been slow to leverage on the advantages, a number of participants lamented, pointing to the lack of focus over the past decade even though the potential had already been identified after the Asian financial crisis in the late 1990s.

The various initiatives submitted had gotten nowhere in the tangle of government agencies and, as a result, “we have muddled our way through”, one participant observed.

Another noted the renewed focus on healthcare and medical tourism notwithstanding, Malaysia needs to find its niche to stand out in the region against more established markets such as India, Singapore and Thailand.

Over the past decade, the brain drain has also intensified and in the medical line, Malaysia now faces a dire shortage of doctors — especially specialists — in public hospitals. At the same time, doctors in private practice are drawn to better-equipped hospitals and fatter salaries and prospects overseas, many of them moving over to Singapore.

However, some entrepreneurial doctors have also been quick to exploit the demand for private healthcare and medical tourism, and according to Association of Private Hospitals of Malaysia (APHM) president Jacob Thomas, a number have returned, in part due to improving facilities.

The APHM, however, does not have statistics on the numbers of Malaysian doctors practising overseas or those that have returned.

Ooi told participants they ought to capitalise on the new “phenomena” of patients from developed nations travelling to less-developed ones for medical procedures.

A medical procedure in Malaysia would cost about one-tenth of that in the United States, he said, and provided the example of a heart by-pass, which costs US$9,000 locally versus US$11,000 in Thailand and US$18,500 in Singapore.

Given the sector was worth only RM59 million in 2003 and about RM400 million now — indicative figures only because not all hospitals give details — the potential is vast, with Penang and Malacca the leading states in the country.

Malaysia:Neither Here nor There

Malaysia risks missing its goal of becoming a high-income nation as it has lost its edge as a low-cost producer and lacks the investment to compete in more advanced industries, .

In its first country report on Malaysia, the Washington-based body also said that as a trade-dependent country, Malaysia should not unwind its RM67 billion in economic stimulus as that could choke off a nascent recovery.

“The economy seems to be caught in a middle-income trap - unable to remain competitive as a high-volume, low-cost producer, yet unable to move up the value chain and achieve rapid growth by breaking into fast growing markets for knowledge and innovation-based products and services,” it said.

Private investment in Malaysia, which famously spurned advice and cash from the International Monetary Fund in 1998, is below that of virtually every other Asian country and has fallen dramatically since the Asian financial crisis.

According to World Bank data, private investment in Malaysia fell to 12 per cent of gross domestic product in 2008 compared with 30 per cent prior to the Asian crisis.

The government that has ruled this country for 52 years has announced a series of economic reforms aimed at winning back foreign investment that increasingly finds a home in neighbouring Thailand and Indonesia.

However, portfolio and direct investment flows have been negative since the second quarter of 2008 and there have been few signs that investment has picked up in response to the government measures.

The World Bank noted that while Malaysia has a high proportion of high tech exports it served as a low-skilled assembler of imported parts “rather than a creator of technological and product innovations”.

One major limitation on moving up the economic value chain is Malaysia’s education system, which churns out tens of thousands of graduates who are ill-equipped for the kind of high-value work such as biotechnology that the government has identified as growth areas.

Education in Malaysia has become mired in a deep political row as the government recently switched to Malay language instruction for math and science from English, a move critics said was designed to appease its ethnic Malay voter base.

While private investment has plummeted, the government’s spending has risen sharply. Malaysia expects to rack up its biggest budget deficit in 20 years at 7.4 per cent of gross domestic product this year.

The government expects the economy to shrink 3 per cent this year and to grow by 3 per cent next year, although the World Bank was more optimistic.

“With East Asia leading the recovery and advanced economies showing progressive improvement, the Malaysian economy is projected to grow at 4.1 per cent in 2010, following a contraction of 2.3 per cent in 2009,” it said.

The bank was, however, less optimistic on the government’s plans to slash the budget deficit in 2010 to 5.6 per cent of GDP, forecasting that it would be 6.4 per cent of GDP.

World Bank: Don't Exit Too Quickly!

The World Bank warned today that Malaysia should not exit its fiscal pump priming as it could choke off the country's economic recovery.

However, the bank also cautioned that extending fiscal support for too long "may hamper the credibility of medium-term fiscal consolidation, reduce room for future stimulus, increase the risk of asset price bubbles and constrain the private sector once demand picks up," the World Bank said in a country report on Malaysia.

Malaysia is expected to rack up a budget deficit of 7.4 per cent of gross domestic product this year, its biggest in over 20 years, in part due to two fiscal stimulus packages worth a total of RM67 billion.

The extra spending was aimed at offsetting a slump in global demand that has hit Asia's third-most export dependent economy hard.

The government expects the Southeast Asian country's economy to shrink 3 per cent this year and to grow by 3 per cent next year, although the World Bank was more optimistic.

"With East Asia leading the recovery and advanced economies showing progressive improvement, the Malaysian economy is projected to grow at 4.1 per cent in 2010, following a contraction of 2.3 per cent in 2009," the World Bank said. —

MCA: Feel the Force of Incumbency

The Malaysians have a word for this. It's called 'pusing-pusing'. One day they are enemies. The next day,they are friends. Such strange bedfellows these politicians really are, particularly in MCA.

Throughout the first 9 months of 2009, the Presidential Council and the Central Committee had nothing on their minds but on how to get rid of Dr. Chua, their Deputy President. To them, Dr. Chua was one huge liability because of his notorious sex scandal which was conveniently filmed on DVD and readily available on the Internet.They sacked him as Deputy President and terminated his MCA membership which they later converted to a suspension.

At the infamous Double Tenth EGM on 10 October, to the dismay of many, Dr. Chua got back his membership in MCA. To make matters worse, the Registrar of Society subsequently decided thet Dr. Chua was still the Deputy.

In the face of an impending revolt from other members wanting his blood, party president Ong Tee Kiat, conveniently reinstated Dr. Chua back to his original position.

As expected more fall-out took place. That is what I called 'pusing-pusing'. Liow Tiong Lai (Vice President and also Deputy President for a brief moment), Wee Ka Siong (Youth chief)and Chew Mei Fun (Women Wing chief) got caught in the middle as they showed their hands 'too early' for wanting to get rid of Ong Tee Kiat.


Today at a Central Committee sitting, Wee Ka Siong and Chew Mei Fun, among others were booted out unceremoniously from the Presdiential Council. Wee and Chew weeped unabashedly.



Such is the MCA wayang at this stage. We shall see some more on 28th November when the so-called illegal EGM takes place.