Sagging Confidence in Asia toward Business Conditions–Malaysia an exception?


December 15, 2016

Sagging Confidence in Asia toward Business Conditions--Malaysia an exception?

by Reuters@ http://www.khmertimes.com.kh

Confidence in Asia toward business conditions over the coming six months dropped in the final quarter of 2016 to its lowest level in a year as firms fretted about sluggish demand in a persistently low-growth economic environment, a Thomson Reuters/INSEAD survey found.

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Malaysia’s No. 1 Problem–The Source of Political Uncertainty

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2015

Firms also flagged political uncertainty as a key near-term risk, including that brought by the election of Donald Trump to the US presidency – an outcome some cited as a key risk in the same survey three months prior.

The Thomson Reuters/INSEAD Asian Business Sentiment Index, representing the half-year outlook of 118 firms, fell to 63 from 68 in the September quarter, although it remained above the 50 mark separating optimism from pessimism.

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2015

“The fall in the business sentiment index confirms what we have seen over the past few years. The world economy is growing but in a way that looks suboptimal,” said Singapore-based economics professor Antonio Fatas at global business school INSEAD. “It seems very difficult to regain a high state of confidence.”

Asian companies are particularly reliant on demand from China where slowing economic performance has been the main cause for concern over the past few years. But in recent weeks, political worries have come to the fore.

Mr. Trump has advocated more US-centric trade relations and the cancellation of the Trans-Pacific Partnership trade pact. He has also vowed to repatriate jobs such as in the outsourcing industry which flourishes in the Philippines, where new president Rodrigo Duterte is known for anti-American rhetoric.

In South Korea, lawmakers have voted to impeach President Park Geun-hye over an influence-peddling scandal after weeks of protests, while in India, Prime Minister Narendra Modi abolished 86 percent of the country’s cash overnight to tackle corruption.

Firms have to navigate such events “with the possibility of either ‘muddling through’ as we have managed to do over the last two years or hitting a wall because one of these uncertain events turns negative,” said Mr. Fatas.

Thomson Reuters and INSEAD polled firms across Asia from November 28 through December 9. Of 118 respondents, just over 42 percent were positive toward business prospects over the next six months, 41 percent were neutral and 16 percent were negative.

Respondents included Australia’s Transurban Group, India’s Reliance Industries Ltd., PT Telekomunikasi Indonesia (Persero) Tbk., Japan’s Asahi Group Holdings Ltd., Korea Aerospace Industries Ltd. and the Philippine National Bank.

Firms in Australia were the most positive with their subindex of 86 although that was still two points lower than three months prior. Only Singaporean firms were negative with a subindex of 46, albeit an improvement from the 38 of September.

Sentiment tumbled the most in the usually upbeat Philippines, to 70 from 94. Though optimistic, the subindex compared with that economy’s average of 91 over the survey’s seven-year life.

Sentiment fell in China, to 80 from 90, in India to 70 from 75 and in Thailand to 60 from 72. But in South Korea it rose to 57 from 50 despite the political turmoil.

“Outside of Thailand, we expect to see a slower pace of economic growth in our main markets in Asia-Pacific, including Australia, China and Singapore in the near term,” said chairman and chief executive William Heinecke of Thai hotelier and retail distributor Minor International PCL.

Mr. Heinecke also said his company expected global tourism to be resilient in the current climate, and that the retail food service industry would be stable in its key markets.

By sector, the retail and leisure subindex fell to 56 in the fourth quarter from 68 in the third. Household, food and beverage firms were the most optimistic at 79, up from 72, whereas those in the autos sector were the most pessimistic at 40 from 60.

http://www.khmertimeskh.com/news/33160/poll–asia—s-confidence-slips/

Americans voted a Real Estate Celebrity as POTUS–That’s Politics


November 12, 2016

Americans voted a Real Estate Celebrity as POTUSThat’s Politics

by FMT Reader

http://www.freemalaysiatoday.com

After months of rallies and campaigns, banners and slogans, and countless trolling by both the Democrats and the Republicans, the United States voted for a real estate celebrity who has no political history whatsoever.

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 Image result for Najib the Celebrity

He is an eccentric businessman who gave ample opportunity for haters to hate, in every given situation, be it his electoral promises, choice of words, demeanour even his hair. To his haters, he was everything a president should never be.

But, eventually the election came and America took a stand. They wanted the eccentric businessman to lead them. And everyone wants to know why.

What was the sentiment that drove his supporters, a large number of Americans, to vote for him? He had no track record to prove his capacity as a powerhouse leader and no one knows what are his strategies to make America great again.

Yet, with such ambiguity, the people voted for him and made him their president. Very much like how Malaysians had voted for the same coalition party for 59 years, or 13 general elections to be precise.

While one may think that the election campaign was ugly, it is the aftermath that has turned out uglier. Protesters took to the streets to profess their dissatisfaction. They are angry and they do not want Trump to lead them.

The elections were rigged they say, Hillary won the popular vote they claim (which she did), the whole process was a joke they roar.

Another déjà vu for those of us in Malaysia. Will all these protests bring about a different outcome than it did in Malaysia? I sincerely don’t think so.

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This is mainly because, when we protest, we don’t really have an end goal. We are angry, disappointed and we express ourselves. We feel our voices are being ignored and that sends us into a fit of rage. To me, that is all there is to street protests. We challenge a system that we so graciously put in place, a system that we are a part of.

The Americans had just proved their participation by casting their votes less than 48 hours before these protests.

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Image result for Jamal Yunos and The Red Shirts

This is an indication that people, Americans and Malaysians alike, are very much confused in their political and democratic objectives and they remain emotionally charged. People are still very much fueled by factors like race, religion and gender and these, when cleverly knitted into a web of fear and uncertainty, sadly will determine who gets their precious votes.

America has chosen its president. Social media can troll him as much as it wants. People who aren’t in favour of him can mock his policies, his hair, and his poor vocabulary all they want, but will it change anything “bigly”? Absolutely not!

Will it “bigly” change the outcome in the 2020 elections? Most probably it won’t either. Because racial sentiments, divide and rule policies, religion and gender supremacy still binds the mentality of the voters, the outcome will be the same, be it in America or in Malaysia.

Looking at America today feels exactly like looking at Malaysia during the last few general elections. Something that no one would have expected to happen did because the fundamentals have now become equal.

Democracy, in essence, is a system where the supreme power is vested on the people. A system that enables a people’s government by the people.

Thus, it is powered by the exact same energy that powers the people into voting. If race, religion, gender and creed supremacy is what drives one to pick one’s government, then that is exactly the kind of government one will end up with.

Malaysians can learn quite a bit from the American elections this time, or rather refresher lessons. The next time you walk your way to the polling booth, look for a government that can enhance your lives with policies beyond the shackles of religion, race, gender etc.

Look for policies that can propel the nation and all its people to greater heights.

Can’t find any? Then opt for a lesser, maybe even unknown evil. A lesser, unknown evil, in my opinion, is far better than a known evil, as I would have known the degree of “evil” that I’m dealing with and how much I can tolerate.

For the past 13 elections, we have elected a single party to run our country. We have always been led to believe that this is the party that works in the best interest of this country and its people.

Fifty-nine years have passed, why dispute that notion now? Well, the answer is that a generation of voters have changed since but the ideology still clings on to each and every one of us.

So, only when we free ourselves from these “restrictions”, can we truly look forward to an effective, neutral and inclusive government. But are we truly ready for the leap?

Maybe yes, maybe no. But it is a perspective worth pondering and we, Malaysians are all still left with a little bit more time to decide.

An FMT Reader.

 

Mike Pence meets Tim Paine


October 5, 2016

Mike Pence meets Tim Kaine: The Debate favours Pence

I watched the debate on CNN this morning and give Governor Mike Pence the edge in the first of two debates between the two Vice Presidential Nominees.  And here is why.

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The former Indiana Governor was on the offense and talked most eloquently about change and alternative domestic and foreign policies  under the Trump Presidency. That could resonate with millennial voters, who are sick and tired of the gridlock  in Washington DC

Governor  Tim Kaine, on the other hand, was put on the defensive, having to justify Hillary Clinton’s policies, which are perceived as being a continuation of those of the Obama Administration. To make things worse,  he interrupted his Republican opponent during the debate on a number of occasions. He appeared nervous and unsure of himself.

I think Governor Pence could have been a better Republican nominee than Donald Trump. So it is fortunate for the Democrats that he is not running against Secretary Hillary Clinton.

Fortunately too that the Vice Presidential debate likely have very little effect on the final outcome on November 8, 2016. We have, therefore, to watch the remaining Clinton-Trump debates later this month to see whether  Mr. Tump will do much better than what he did during his first encounter with Mrs. Clinton to convince American voters that he is qualified to be the next POTUS. –Din Merican

 

Obama’s Trickle-Up Economics


September 17, 2016

by Dr. Paul Krugman

Only serious nerds like me eagerly await the annual Census Bureau reports on income, poverty and health insurance. But the just-released reports on 2015 justified the anticipation.

We expected good news; but last year, it turns out, the economy partied like it was 1999. And this tells us something very important — namely, that a government that wants to can make American society more equitable, improving the quality of life for ordinary families.

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The reports showed strong progress on three fronts: rapid growth in the incomes of ordinary families — median income rose a remarkable 5.2 percent; a substantial decline in the poverty rate; and a significant further rise in health insurance coverage after 2014’s gains. It was a trifecta that we haven’t hit since, yes, 1999.

It’s true that the surge in median income comes after years of disappointment, and even now the typical family’s income, adjusted for inflation, is slightly lower than it was before the financial crisis. But the percentage of Americans without health insurance is now at a record low. And the overall performance of the Obama economy has given the lie to much of the criticism leveled at President Obama’s policies.

Think back to the 2012 election campaign. There were already signs of the conspiracy-theory, bigotry-driven politics of this year’s election; Donald Trump was loudly proclaiming that Mr. Obama’s birth certificate was fake, and Mitt Romney eagerly accepted Mr. Trump’s endorsement.

But there was also something of a policy debate. Republicans accused Mr. Obama of being a “redistributionist,” taking money away from “job creators” to give free stuff to the 47 percent. And they claimed that these socialistic policies were destroying incentives and blocking economic recovery.

There was, in fact, a grain of truth in the first part of this accusation. Mr. Obama is no socialist, but since his re-election he has presided over a significant rise in taxes on high incomes. In fact, the top one percent is now paying about the same share of its income in federal taxes as it did in 1979, before Ronald Reagan began the era of big tax cuts for the rich. And some of the increased tax take is being used to subsidize health insurance for middle- and lower-income families.

Conservatives predicted disaster from these initiatives. Tax hikes on the rich, they insisted, would stall the economy. Obamacare’s combination of regulation and subsidies, they declared, would kill millions of jobs without increasing the number of Americans with insurance.

What happened instead after Mr. Obama was re-elected was the best job growth since the 1990s. But family incomes, at least as estimated by the Census, continued to lag. So there was still some statistical basis for the right’s Obama-bashing. Now that statistical basis is gone.

You might ask whether these numbers reflect reality. It’s often claimed that Americans aren’t feeling any economic recovery — and if anyone were to ask Mr. Trump, he would no doubt claim that the Census numbers, like every number he doesn’t like, are cooked.

But be wary of polling on this issue. When Americans are asked how the economy is doing, many of them just repeat what they think they heard on Fox News: By large margins, Republicans say that unemployment is up and the stock market is down under Mr. Obama, the opposite of the truth. On the other hand, when you ask people how well they personally are doing, the Obama years have been marked by large improvements — a sharp increase in the percentage of Americans who see themselves as thriving.

So the good news is real. And it should (but won’t) finally break the grip of trickle-down ideology on much of our political class.

You know how the argument goes: Any attempt to help working families directly, we’re told, will backfire by hurting the economy as a whole. So we must cut taxes on those “job creators” instead, counting on a rising tide to raise all boats.

It would be an exaggeration to say that the Obama administration has done the reverse, but there definitely was an element of trickle-up economics in its response to the Great Recession: Much of the stimulus involved expanding the social safety net, not just to protect the vulnerable, but to increase purchasing power and sustain demand. And in general Obama-era policies have tried to help families directly, rather than by showering benefits on the rich and hoping that the benefits trickle down.

Now the results of this policy experiment are in, and they’re not bad. They could have been better: The stimulus should have been bigger and more sustained, and Republican opposition hamstrung the administration’s economic policy after the first two years. Still, progressive policies have worked, and the critics of those policies have been proved wrong.

A version of this op-ed appears in print on September 16, 2016, on page A27 of the New York edition with the headline: Obama’s Trickle-Up Economics.

The tide of globalisation is turning


September 9, 2016

The tide of globalisation is turning

Trade liberalisation has stalled and one can see a steady rise in protectionist measures. 

by Martin Wolf

Image result for The Tide of Globalisation is turning

Has the tide of globalisation turned? This is a vitally important question. The answer is closely connected to the state of the world economy and the west’s politics.

Migration raises quite specific issues. The era of globalisation was not accompanied by a general commitment to liberalising flows of people. So I will focus here on trade and capital flows. The evidence in these areas seems quite clear. Globalisation has reached a plateau and, in some areas, is in reverse.

An analysis from the Peterson Institute for International Economics argues that ratios of world trade to output have been flat since 2008, making this the longest period of such stagnation since the second world war. According to Global Trade Alert, even the volume of world trade stagnated between January 2015 and March 2016, though the world economy continued to grow. The stock of cross-border financial assets peaked at 57 per cent of global output in 2007, falling to 36 per cent by 2015. Finally, inflows of foreign direct investment have remained well below the 3.3 per cent of world output attained in 2007, though the stock continues to rise, albeit slowly, relative to output.

Thus, the impetus towards further economic integration has stalled and in some respects gone into reverse. Globalisation is no longer driving world growth. If this process is indeed coming to an end, or even going into reverse, it would not be the first time since the industrial revolution, in the early 19th century. Another period of globalisation, in an era of empires, occurred in the late 19th century. The first world war ended this and the Great Depression destroyed it. A principal focus of US economic and foreign policy after 1945 was to recreate the global economy, but this time among sovereign states and guided by international economic institutions. If Donald Trump, who has embraced protectionism and denigrated global institutions, were to be elected president in November, it would be a repudiation of a central thrust of postwar US policy.

Given the historical record and the current politics of trade, notably in the US, it is natural to ask whether the same could happen to the more recent era of globalisation. That requires us to understand the drivers.

Read more:https://www.ft.com/content/87bb0eda-7364-11e6-bf48-b372cdb1043a

Grain Prices: Four hundred years of free fall


September 8, 2016

Grain Prices: Four hundred years of free fall

by Jim Plamondon

Image result for Rice Fields of Cambodia

Image result for Rice Fields of Cambodia

A four centuries long downward trend means grain prices aren’t set to soar any time soon, writes Jim Plamondon.

A decade ago, when grain prices spiked sharply upwards, many were convinced that rising grain prices were the ‘new normal.’ Influenced by new factors such as the economic emergence of China, global climate change, population growth, water shortages, and more, surely the price of grain (and especially rice) would continue to rise… right? Wrong.

Grain prices have been on a downward trend for over four-hundred years. Recent research suggests that this centuries-long downward trend is likely to continue until at least 2050.

Let’s start by skimming four-hundred years of history in just a few charts.

Figure 1 below (from Hearfield 2009) shows the cost of a loaf of bread (and hence of grain) in Britain from 1575 to 1825 (250 years). It shows the cost decreasing in “real” terms (as a percentage of wages, on the left-hand scale) by approximately 75% (from 27% to 7%). The red arrow (added by me, in this and all subsequent figures) emphasises this downward trend.

Figure 1: The cost of a loaf of bread in Britain, 1575-1825.

Figure 1: The cost of a loaf of bread in Britain, 1575-1825.

In 1575, Britain was an entirely agrarian island nation of approximately four million people. But by 1825, it was the industrial leader of a global empire, with approximately 10 million in the same area. In between, the Little Ice Age froze the Thames solid at its peak in the 1600s, followed by global warming (relatively speaking) in Figure 1’s latter centuries.

In short, this centuries-long period included social, economic, and climatic changes that are similar to those that today’s world faces in the next few decades. Despite these dramatic changes, the wage-adjusted cost of a loaf of bread – and hence, the price of grain – fell by approximately 75%.

The downward trend in grain prices accelerated in the 20th century, as seen in Figure 2 below (USDA), falling by approximately 75% in a single century. Inflation-adjusted prices peaked upwards briefly during world wars and, more recently, following spikes in the price of oil, including the 1970s OPEC embargo and the 2007-8 oil price shock. Each grain price spike was followed by a downward over-correction that was deeper than the long-term trend.

Figure 2: The price of grain in the USA, 1912-2014.

Figure 2: The price of grain in the USA, 1912-2014.

The data from the USDA chart ends in 2014. What has happened since then? Figure 3 below (Bloomberg) shows a reversion to the centuries-long downward trend.

Figure 3: The price of commodity rough rice globally, 2014-Present.

Figure 3: The price of commodity rough rice globally, 2014-Present.

Clearly, the historical trend has been downward for more than 400 years. One might agree that this was true, and yet argue that “this time it’s different,” perhaps due to global climate change, population increases, changing dietary habits, the end of the Green Revolution’s productivity gains, water shortages, and the economic rise of rice-loving Asians, among many factors.

Baldos et. al. studied that question in detail, publishing a working paper in 2014 and a follow-up in 2016, provocatively titledDebunking the ‘new normal’: Why world food prices are expected to resume their long run downward trend.

They built a historically-predictive model of grain price influences, and then added to it all of the potential new influences that might make it “different this time.” Then, they ran the model repeatedly, varying the inputs. The results were clear (see Figure 4 below).

Figure 4: Global commodity grain prices projected through 2050. The trend is more than twice as likely to be down than flat or up.

Figure 4: Global commodity grain prices projected through 2050. The trend is more than twice as likely to be down than flat or up.

According to their research, grain prices have a 72% chance of returning to their historically-downward trend, and only a 28% chance of rising or remaining flat, between now and 2050. That is, between 2015 and 2050, the price trend is more than twice as likely to be down than flat or up.

The OECD and FAO recently concurred. Their July 2016 publication, the OECD-FAO Agricultural Outlook 2016-2025, states that grain prices are likely to fall, and includes Figure 5 below (for rice, see the right-most chart in Figure 5). Notice that the real (that is, inflation-adjusted) price of rice is expected to fall more steeply than the other grains.

Figure 5: OECD-FAO projects falling grain prices, 2016-2025.

Figure 5: OECD-FAO projects falling grain prices, 2016-2025.

With all that in mind, what’s a decision-maker to do? There’s a financial rule called the Kelly Criterion which states that, all else being equal, you should divide your investments according to the likelihood that they will pay off.

Knowing this (and all else being equal), the wise investor – including aid agencies, development organisations, government ministries – would invest 72% of their available funds into proposals that would prosper despite commodity rice prices declines, while putting only 28% into proposals that would prosper only if commodity rice prices were flat or rising.

Taking the profitability of the different investments into account might skew the investments even further towards investments that would prosper when commodity grain prices fell.

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Harvesting in Cambodia–The Best Time of the Year

The bottom line — hedge your bets. The “safe” path of simply increasing the production of commodity rice isn’t safe anymore… because after 400 years, prices are still trending down.

Formerly a high-tech marketer with Microsoft and Rackspace, Jim Plamondon now lives in a rural Cambodian village. There, he’s exploring ways to help Cambodia profit from its rice industry, of which his company, AwardBest, is a very small part.