Malaysians- Beware the Imminent Perfect Storm

Drowning Storm of Debts

Malaysia is one of the most vulnerable Asian economies should a “perfect storm” of a disorderly debt default in Europe a slowdown in China and the US and rising tensions in the Middle East materialise Roubini Global Economics RGE has said in a recent report The strategic research firm best known for its founder “Dr Doom” Nouriel Roubini who predicted the collapse of the US housing market and the 2008 global financial crisis said that Malaysia had the highest exposure to a pullout of capital as its eurozone and US bank claims amount to more than 25 per cent of GDP.

Super Exposure-Suicidal?

RGE added that Malaysia was the second most exposed in terms of a demand slowdown in the US the eurozone and China making it the most exposed Asian economy overall The report also said that the country was among the lowest ranked in terms of monetary and fiscal capacity to respond to a crisis coming in ahead of only Thailand Japan and Indonesia “Malaysia Taiwan South Korea and Vietnam appear to be the most exposed to a perfect storm through their trade and financial linkages while South Korea Australia Vietnam and the Philippines appear to have the most policy space to offset such an external shock ” said RGE “Taking these two factors together Malaysia Taiwan Japan and Thailand are the most vulnerable of the 10 economies considered in this analysis while Australia India South Korea and the Philippines are the least ” RGE said that while Malaysian government revenues have increased the hole in its finances could grow due to “populist” spending and an expected cut in Petronas’ dividends “In the run-up to elections the government is likely to offer more cash handouts in the 2013 Budget leaving fewer resources for productive investment ” said the report “We see the debt-to-GDP ratio reaching 54 6 per cent next year leaving little room to manoeuvre in the event of an external shock ” RGE noted that in its most recent effort to boost its popularity ahead of an upcoming general election the Malaysian government announced a supplementary budget of RM13 8 billion in June some 80 per cent of which is allocated towards maintaining oil subsidies and raising civil servant wages It added that it expects Bank Negara to cut interest rates to 2 5 per cent by the end of 2013 to deal with slowing growth in Europe and China.

Economists and analysts had earlier said that Malaysia’s federal government debt which nearly doubled since 2007 to RM421 billion pose a fiscal risk to the country if not managed carefully as it impairs the country’s resilience to the increasing frequency of economic shocks They said that while government debt — currently at about 54 per cent of gross domestic product GDP and the second highest in Asia — has not significantly impacted the country and its credit standing so far the volatile nature of global markets may cause sentiment to turn with little warning Figures from the Federal Treasury’s Economic Reports show that the federal government’s domestic debt almost doubled in the space of less than five years — from RM247 billion in 2007 to an estimated RM421 billion in 2011 — far outpacing its revenues which only grew 31 per cent or from RM140 billion to RM183 billion during the same period Government-backed loans rose rapidly as well between 1985 and 2010 — from RM11 billion to RM96 billion — representing a growth of 8 7 per cent per annum Investors in recent weeks have reportedly shown a preference for US and Singapore assets rather than Malaysia’s in times of uncertainty despite the 10-year MGS Malaysian Government Securities offering a yield of about 3 4 per cent compared to less than 1 5 per cent for both 10-year Singapore government bond and 10-year US Treasury bonds Roubini had in May reportedly predicted that four elements — economic slowdown in the US the debt crisis in Europe a slowdown in China and emerging markets and military conflict in Iran — would combine to create a storm for the global economy in 2013.

The Problem with Proportionality

One-on-one is one expensive affair

As I was walking out of the Bangsar LRT, I got a call.

The person on the other end enquired whether I could get a Hokkien teacher for a student.

Apparently, this student, an Indonesian, wanted to learn how to speak Hokkien orally.

No reason was given for his motivation.

I told him it was not easy to get one as Kuala Lumpur was a Cantonese speaking enclave.

Anyway, I told him since he also wanted the tutor to be able to converse in Mandarin as well; so as to use inter-language in the teaching of Hokkien to this student, it would not come cheap.

So, how much is the student willing to pay and where is the teaching venue?

It is somewhere in an office adjacent to a shopping complex on Tuanku Abdul Rahman Road.

There is also only one student. Teaching period will by 90 minutes.

I told him that it is awfully long for a conversational lesson. The longest should be an hour.

"So how much is the rate you are going to pay this tutor?" I asked innocently.

"RM65.00 for the entire 90 minutes. Two times a week."

"Wow!" I retorted.

"No one will teach at this rate."

Some people just do not have the sense of proportionality.

This chap will have a ghost of a chance to get a specialist to tutor this Indonesian boy.

Period.

Protecting Proton and Perodua-The Opposing Perspectives

Preve-overpriced?

The Car Conundrum is the most befitting theme for this post. 


Is Proton worth saving after all these years of sub-standard ouputs? 


What about Perodua? 


The joke of the power windows has been a thunderous guffaw and still is, with the life-long warrantly attached to it for new sales for Proton.

The Gen 2 was a first rate disaster with  that prototype CAMPRO engine; its lack of torque and self-shifting gears when you least want it to happen.


The Preve which was immobilised on a test-drive along the roadside for all to see;cheap upholstery and all. Good vibrations?


Woes upon woes has beset Proton.


Now it has gone private and put under the wings of Syed Mokhtar's DRB Group. It is no longer the people's car even though you want to claim it as the national car. Should the car still be protected since it has become private investment?

World Standard

What about Perodua?


Despite that foreign advertisement of  a person sledgehammering a Kelisa to a pulp, the perception is it is that better buy. Sales for the compact Myvi continue to soar and so is the vivacious Viva. Problems are few and re-sale value is good.


There are two good dictums to be used as rules of thumb.


The first one is: 


Where you see water, you see Chinamen.


The second one is:


If the Chinaman buys it, it must be good.


So, the Chinamen bought Perodua vehicles and not many prefer the more politicised Proton.


That is the screaming difference!


Now that the issue of slashing excise and import duties has become a bone to chew on for the next General elections,what has the learned economists to say to this?


In today(30 July 2012), we have some luminaries airing their views. 


Michelle Chun reports:


"The government cannot continue protecting the local automotive industry through excise duties at the risk of jeopardising the national economy, say economists.


Prominent economist Tan Sri Ramon Navaratnam said while there were reasons to help the local car industry in its infancy, it must be asked why car excise duties are still in effect.


"Local carmakers should become self-reliant and competitive, but because of this prolonged protection, they have become weak and dependent on this to  be successful," he told the Sun today.


Navaratnam was commenting on the statement by Minister in the Prime Minister's Department Tan Sri Nor Mohamad Yakcop on Saturday that the reduction of car excise duties and prices would result in economic instability and increase in bankruptcy cases.


"This is a delicate matter that calls not for ad-hoc solutions or quick fixes, but rather comprehensive studies and professionalism.


"If not handled properly, it will have long-term implications on the global innovative and competitive position of the local car industry, and on the economy as a whole," Navaratnam said.


Nor Mohamad, who heads the Economic Planning Unit, made the statement following PKR strategist Rafizi Ramli's promise that car excise duty would be reduced if the opposition won the 13th general election.


Malaysians currently pay between 75% and 105% in excise duties for motor vehicles manufactured in the country, excluding import duties (for imported cars) and sales taxes. 


Nor Mohamad said the government collects around RM7 billion annually from these excise duties.

Nevertheless, the chief executive of the Institute for Democracy and Economic Affairs, Wan Saiful Wan Jan, said removing excise duties would not negatively affect the nation's economy as a whole, but rather reduce the government's income.


"I doubt such a move would jeopardise the national economy, and removing or reducing car excise duties is a good idea, both politically and economically.


"These excise duties seem to portray that the government is more willing to protect the interests of a company, such as Proton and Perodua, at the expense of the consumer," he said when contacted today.


Wan Saiful added this showed it was dangerous for a government to be involved in the setting up of businesses, as it would then be obliged to protect the businesses' interests.


"This would stunt economic growth as the economic environment would not be a competitive one," he said.


However, Wan Saiful said excise duties should not be removed overnight, but over time, or there may be repercussions, especially on the second-hand car market.


These comments are fair. 


Will the government slowly dismantle that dastardly wicked excise and import duties on cars to free Malaysians to have a more decent life?


The forthcoming general election will be that watershed.


It can be a kingmaker or king killer!

Sabah-The Wild wild East

The Perfect Storm?

Just when you think that it is time to let your fix deposit ride the next interest-bearing period when a potential hazard appears on the horizon.

Ukin and Bumburing has now thrown in the towel  and left Barisan.

Will this be a sign that the flood-gates of an all Sabah conflagration is being let loose as the inaction of Putrajaya on Sabah's issue of being overwhelmed by Mycard carrying foreigners since the time of the Mahathir era?

Three scenarios come to mind.

First, a storm in a ta-cup-contained and nothing more.

Second scenario-attrition starts and the disenchanted especially the old guards up the ante and leave as well to join the new front.

Final scenario-massive shift in the template where the fears in BN will mount as Putrajaya may slip through their fingers.

A November date for the 13th GE?

Unlikely as the monsoon floods may also affect BN's chances.

So, given this, it is back to the drawing board and perhaps Najib will stay the entire term until April 2013.

Different type of Shoppers, Half Empty Trolleys

Empty trolleys have their stories to tell

I see a very disturbing trend at our hyper-markets these days.

There was a time when the middle class frequent these places.

The very poor and working class actually shop at pasar malams, pasar pagis, and wholesale markets.

Not anymore.

Today, you see the invasion of foreigners at our supermarkets.

There are the Bangladeshis shopping for onions and garlic, dry chilies and hogging the budget areas for salvageable vegetables and fruits.

Here and there you see the Nepalese smiling at each other and shopping for fresh produce as well.

The Myamarese and Vietnamese can be observed buying frozen beef shoulder to give themselves steaks as their weekly treats.

One thing that I see is most of the shopping carts are half-full.

It is the sign of the times.

Runaway inflation and and growing urban poverty.