March 13, 2017
Manjit Bhatia’s article’s article is on my blog.
What follows is my friend Nurhisham Hussein’s response.
My own reaction is that I do not trust Malaysian government statistics since they are subject to manipulation by politicians in power. I do respect Nurhisham’s views and commend him for attempting to defend “economic data from Malaysia”.
The sad truth is that there is so much fake news from Najib Razak and his cohorts in recent years that I have difficulty in knowing what is fact and what is fiction. It is something I experienced in attempting to figure out Donald Trump. But when it comes to Malaysia it is pretty straight forward since in the Malaysian context, fiction is fact.
By the way, what China has to do with the issues raised in Manjit’s article. This statement which I quote from Nurhisham’s article –“One of the key tests to determine whether economic data is falsified is internal consistency and statistical irregularity. China, for example, fails on both counts”–is irrelevant.
Allow me to quote a comment from Greg Balkin who regards Nurhisham’s article as: “A very strong rebuttal to Manjit Bhatia’s shoddy arguments.
Unlike MB who simply fights against the wind and even with his own shadow, at least Nurhisham Hussein provided actual facts and statistics for readers to contemplate on and question if necessary.
by Nurhisham Hussein
The article further states that there is no data for the job participation rate in Malaysia. This is rather unconventional classification, as everyone else uses the term labour force participation rate (LFPR) instead. In any case, the article is completely mistaken. The LFPR for Malaysia has been available at monthly frequencies since 2009, quarterly since 1998, and annual frequencies going back to 1982. The annual numbers are further broken down by age, gender, education, and ethnic background. The data shows, far from a decline in labour market conditions, a steeply rising LFPR from 62.6 per cent in 2009, to a near record high of 67.6 per cent in 2016 (with a long term average of 65 per cent). It should also be noted that Malaysia’s long term average unemployment rate is just under 4 per cent. At the current rate of 3.6 per cent, the labour market would still be considered to be at full employment.
Between Idris Jala and Najib Razak–A Deformed Malaysia
The article goes on to say that Malaysia’s minimum wage is scarcely enforced. On the contrary, data from the EPF, to which all salaried workers are required to contribute, show a massive shift in Malaysia’s salary distribution when the minimum wage was introduced in 2013. Fully 10 per cent of the workforce shifted from below the minimum wage to above it, and the wage effect was evident across the entire bottom half of the distribution.
Fourth, the article claims that, “In Kuala Lumpur alone, credible estimates put inflation at least twice the ‘official’ number”, and “inflation hits close to double-digits, in real terms, according to some investment banks’ research.” The second statement is nonsensical – there is no such thing as inflation in “real” terms, because in economics real prices of goods refer to inflation-adjusted prices. But the larger point – that inflation is perceived to be higher than official statistics – is actually well known. Well known because the same discrepancy has been documented nearly everywhere.
A recent Federal Reserve research note explicitly addressing this issue, found that US citizens perceptions of inflation were consistently twice as high as the official statistics. Why that is so is an interesting question in itself and would take far too long to explore, but the larger point is that differences between perception and official statistics cannot be taken as prima facie evidence that those statistics are false. There is plenty of evidence that the opposite is true, for example via MIT’s Billion Prices Project, that it is perceptions that are mistaken and not the statistics. Furthermore, research into the methodology and mechanics of constructing consumer price indices conclude that if anything, the CPI tends to overstate inflation, not understate it.
Fifth, the article claims Malaysia’s fiscal deficit and national debt are “ballooning”. In fact, the deficit has been halved since 2009, to just 3.1 per cent for 2016, while the debt to GDP ratio has been kept under the 55 per cent limit the government imposed on itself. Manufacturing, far from being routed, has continued to thrive, with sales breaching an all time high of ringgit 60 billion a month over the past few months. Moreover, Malaysia has been one of the very few countries in the region to record positive trade growth over the past two years.
In the Age of Trump, democratic institutions are under attack everywhere. Trust in public institutions has declined, not just in Malaysia, but globally. Globalisation itself is in retreat, and schisms and conflicts that we thought were gone, have arisen anew. Be that as it may, undermining confidence in public institutions without substantive evidence reinforces these troubling trends, and works against the very foundations of a democratic society. Without them, the very thing that Manjit Bhatia appears to be arguing for, becomes further from reality.
Nurhisham Hussein is General Manager, Economics and Capital Markets at Employees Provident Fund, Malaysia.