From Economic Analysis to Inclusive Growth


January 23, 2017

From Economic Analysis to Inclusive Growth

by Kemal Dervis

Most economies are seeking a recipe for inclusive economic growth, whereby high rates of investment, rapid innovation, and strong GDP gains are pursued alongside measures to reduce income inequality. Conservatives insist that growth requires low taxes and incentives such as flexible labor markets to encourage entrepreneurship. But reducing inequality requires higher levels of government spending and taxation (except when government is pursuing deficit spending to stimulate a depressed economy).

Related imageFree Education for All–Investment for an Educated Citizenry

The Scandinavian economic model is often invoked to bridge this gap. The Danish “flexicurity” system, in particular, has historically delivered solid economic performance alongside low inequality. Leading economists such as Philippe Aghion have published excellent analyses of how this model could balance growth, equality, and overall satisfaction of citizens elsewhere in the world.

These economists argue that labor markets with few restrictions on hiring and firing, low taxes on entrepreneurship, and generous incentives for innovation are compatible with a relatively equal income distribution, high social spending by government, and equalizing social policies such as universal free education.

This model has sustained an ongoing debate in Europe, one that is now relevant in the United States, because Donald Trump’s new administration has promised to help globalization’s “losers” while improving innovation and growth. But in the US, it is far more difficult, politically, to argue for generous public spending on education, health care, and financial security for retirees, because doing so always raises the specter of high taxes.

An inclusive growth model would seem to have to square the policy circle. It would have to increase substantially public spending, particularly on education, unemployment benefits and training, and health.

Image result for inclusive green growth

Inclusive Green Growth?

It is useful to look at the numbers from the oft-cited Danish and Swedish examples. Generally speaking, these countries have excellent economic indicators. Although GDP growth is not higher than in the US, most people share a high standard of living, and surveys show that Scandinavians (particularly Danes) are some of the happiest people in the world. But, as the following chart shows, these countries also have some of the highest government spending- and taxation-to-GDP ratios in the OECD.

spending to taxation ratios

Hypothetically, if the US adopted Denmark’s universal free education policy, but kept its tax-to-GDP ratio unchanged, its fiscal deficit would exceed 6% of GDP. The US has run deficits that high only during World War II and the Great Recession of 2008-2009, when a huge stimulus package was implemented to spur recovery. So, just providing universal free education in the US would run the country’s deficit up to the highest level ever recorded in normal times.

In the context of this comparison, it would seem that the circle cannot be squared without a major macroeconomic shift. Scandinavian countries are smaller and can more efficiently collect revenues and administer public services. But even if the US approached this efficiency – a difficult feat in such a large and diverse country – social solidarity still would demand high effective taxes, as it does in Denmark and Sweden.

Another crucial component of the Scandinavian model is labor-market flexibility. On the OECD “Employment Protection Legislation” index, the US scores a 1.2 on a 0-5 scale, where zero indicates full flexibility. Meanwhile, France and Germany come in at 2.8, Italy at 2.9, and Denmark and Sweden at 2.3 and 2.5, respectively. This shows that, though Scandinavian labor markets are more flexible than elsewhere in continental Europe, the US labor market is far more flexible – and provides less security – than any of them.

Such broad static accounting suggests that we should proceed cautiously in applying lessons from the Scandinavian model to large countries like the US. Then again, to assess a model’s long-term impact on citizens’ welfare, we would need a more dynamic analysis over the course of at least a decade. Only then could we gauge how strongly investment and innovation would respond to incentives, how much free universal education would cost in the medium term, or how demographic structures would affect different social policies.

Economic analysis alone cannot settle the political debate between right and left. What it can do is help to narrow and focus that debate. The key is for participants on both sides to be more explicit about the values and objectives they believe that society should pursue, and to quantify their assumptions about how dynamic performance will respond to particular incentives. Only then can a democracy choose effectively between potential paths.

Good economic analysis can enable “constructive populists” to debate the “post-fact, fanciful populists” who seem to be on the rise, with a realistic alternative discourse – one that is transparent and based on credible expectations of economic policies and outcomes. In other words, economic analysis can facilitate good choices; it cannot make them.

Foreign Policy: ASEAN and The Trumpian New World Disorder


January 22, 2017

Foreign Policy: ASEAN and The Trumpian New World Disorder

by Dr. Munir Majid@www.thestar.com.my

Image result for Munir Majid

THE buzzword among think tanks on global strategy in the West is “World Disorder”. This follows, particularly, Donald Trump’s victory last November in the United States Presidential election – he will be inaugurated on January 20 – but also the British Brexit vote in June and anxiety over the possible triumph of populist right-wing parties, in France especially, this year.

There is a common opposition in these developments to the global and local liberal order, to free trade and movement of peoples, and to the political value system that has characterised the West and, tangentially, the rest of the world.

However the reality for emerging and developing countries is likely to be different, and the stack of concerns over disturbance to the world order is not the same.

For the longest time those not in the West had been buzzing, if we remember, about a new world, particularly economic, order. There has been some little progress, notably establishment of the G-20 in 1999 whose leaders’ summit did not convene until 2008 following the Western financial crisis, but by and large the institutions of the international order set up at the end of the Second World War remained intact.

Developing countries nevertheless benefited immensely from the open system of trade of that international order – China, particularly, since its opening up in 1978 – as they were able to take advantage of their low cost of production to penetrate Western markets.

ASEAN countries have also been beneficiaries of this open trading system. Now ASEAN is on the path of greater economic integration to attract investment and to encourage trade, not just among member states, but also from and with the world. A number of them have moved or are moving up the economic ladder, aiming for greater productivity and higher value-added products and services – all predicated on the existing open global trading and economic system.

Now this system may be changed, or may not be as open. It would however be a mistake for ASEAN – and rising Asia more generally – to succumb to the doom and gloom that seem to have settled on the West. Now is the time for Asia and ASEAN to show their mettle.

Efforts at ASEAN economic integration should be redoubled to extract growth from regional economic activity. Intra-regional trade should be enhanced beyond the present 25% of total trade.

In its first year, the ASEAN Economic Community (AEC) did not show any spectacular rise in intra-regional economic activity, or any great push to address barriers to trade and investment.

Thailand, for instance, reported only a 1.8% increase in exports to ASEAN in baht terms for 11 months up to November in 2016. Yet the increase to CLMV (Cambodia, Laos, Myanmar and Vietnam) was 2.8%, with an expected 3% increase in 2017.

Related imageFocus  of Future Growth in  ASEAN–Cambodia, Laos,  Myanmar and Vietnam

This shows that where there is greater intensity of economic activity and integration – CLMV+T (Thailand) – there will be potential gains. Many barriers have come down and connectivity is improving. The CLMV+T sub-region is becoming the powerhouse of ASEAN growth, with the inclusion also of China’s Yunnan and Guangxi provinces. CLMV economic growth is actually 6-8% while the ASEAN average is closer to four.

The removal of non-tariff measures and barriers (NTBs) will help generate greater trade, investment and economic activity across ASEAN. Alas, there was no significant NTB action in 2016, despite agreement by Asean economic ministers that focused working groups start addressing the problem in four prioritised sectors.

The officials and private sector must step up the pace this year as ASEAN is increasingly challenged by the global post trade liberalisation environment promised by the Trump administration.

The Regional Comprehensive Economic Partnership (RCEP) is rightly seen as a further extension of the AEC and, with the impending demise of the Trans-Pacific Partnership (TPP), as its successor leading right up to the Free Trade Area of the Asia-Pacific (FTAAP).

The question is who will lead the charge as America shies away from free trade? The obvious – and ironic – answer is: China. Indeed, Xi Jinping was up to the challenge, going by his statements at the APEC summit in Peru last November.

Image result for China in Asia

However, China itself has many adjustments to make such as opening its markets further and liberalising foreign investment in protected sectors. So there is plenty of negotiation to come. But it cannot take as long as the ten years it took to arrive at the TPP agreement.

The point is, alternative regional growth areas have to be founded. Asia’s rise, especially economic, that has been so much talked about, used to come easy in terms of the ready framework of free trade. Now it gets harder. Asia, including ASEAN countries of course, have to take the lead to fashion for themselves the rules and details of the order upon which they will plot their further progress.

There are some among the 11 TPP Remainers who argue for its resuscitation, even if it is without the US. It is, however, going to be a complex exercise. Dropping the entry into force provisions is easy enough, but would it make economic sense without the US? Would China be invited to join? Would the provisions in the TPP form the basis of the FTAAP or should they be introduced in the RCEP which was supposed to have been concluded at the end of last year but is now going full speed ahead for completion this year? Certainly, increased complexity would push it back.

It might be better, therefore, to work on what is there in RCEP and add to it later. Who knows, America may, after Trump, want to join the regional grouping.

So Asian and ASEAN countries must now take the lead in free trade arrangements, regionally to begin with, but with others as well. This is the main challenge they face from the “world disorder” being widely discussed in the West.

Asia – and ASEAN – are less troubled by the two other components of global liberal order threatened by right-wing populism in the West. First, between individual rights and state control, they are far closer to the latter. Thus the threatened values such as equal justice and tolerance are of less concern to them as they found their legitimacy on economic satisfaction – at least for now.

Secondly, apart from Japan and Korea, they range from agnostic to hostile on security arrangements and alliances. As the wheels come off Barack Obama’s pivot to Asia-Pacific, they will just wait to see what takes its place. The loose screws were to be tightened by the TPP.

With the TPP as good as gone, what has been lost is meaningful US strategic commitment to the region. But it would be wrong to assume America has gone isolationist.

With the rise of China, belief in the region in manifest American destiny – if ever it existed to any degree – has receded. Some ASEAN countries may have wanted greater US commitment in the region as a balancer – but at no time as Roman Consul.

Think tanks in the West, with their affinity to American leadership and commitment, are greatly concerned with the uncertainty that will be caused by Trump’s transactional approach to security. In Asia, even Japan and Korea have come to learn that their security can be exposed to transactional risk. There is no certainty about their security. It is constantly being tested. They see variable results, in the Middle East, with Russia in the Ukraine and Crimea. With this realism they see less movement towards “world disorder”.

Of course, Trump will be more nakedly transactional. In Asia and ASEAN the gravest danger, as they see it, is to their trade. They see that Trump feels the cost of the series of transactions has been too high for America.

But it should not be concluded Trump will abandon American leadership. In fact he is making it more muscular, in his way, whether short-sighted or not. For ASEAN – and Asia generally – the main concern is its ramifications in trade and economy. Less so grand and emphatic recoiling from the threat of “world disorder.”

Tan Sri Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB ASEAN Research Institute.

World Economic Forum–Davos 2017–On Leadership


January 21,2017

World Economic Forum–Davos 2017

What does it take to be a great leader in times of change? We asked six experts @ WEF, Davos, 2017

Written by Stéphanie Thomson Editor, World Economic Forum

Watch a Compact for Responsible Business Leadership and Responsive and Responsible Leadership in 2017 from the World Economic Forum’s Annual Meeting 2017.

Image result for wef klaus schwabWEF Founder and Intellectual Innovator Professor Klaus Schwab

“Leaders must understand that we are living in a world marked by uncertainty, volatility and deep transformational changes,” World Economic Forum founder Klaus Schwab wrote at the start of the year.

As thousands of global leaders descend on the Swiss village of Davos to discuss these very issues, we asked six of them this question: what does it take to lead in these times of turbulence?

Adam Grant, Professor, Management and Psychology, Wharton School

In times of uncertainty, a critical skill for responsible leaders is to say “I might be wrong” – and mean it. I work with too many leaders who cling to their convictions with an iron will. As intoxicating as that confidence can be, it’s a huge barrier to making wise decisions and pivoting as circumstances change.

 Adam Grant quote:

The leaders who fare best at predicting the future are the ones who recognize that the future is unpredictable. By embracing doubt, they stay open to new ideas. As a result, they’re ready to act when headwinds turn into tailwinds. So I have a simple message for leaders: if you want to increase the odds that you’ll be right, accept that you’re probably wrong.

Phil Tetlock and Dan Gardner, Authors of Superforecasting

Heightened uncertainty puts a premium on good judgement. And nothing is more fundamental to good judgement than intellectual humility.

Note the adjective. This isn’t self-denigration. Intellectual humility simply means appreciating both the infinite complexity of reality and the fallibility of human beings. It’s invaluable because, taken seriously, three consequences follow.

One, intellectual humility causes the wise leaders to distrust quick-and-easy answers. The intellectually humble always want to learn more and explore different perspectives, in hopes of finding additional bits and pieces of truth.

Two, intellectual humility spurs introspection. Mistakes are inevitable. Only relentless critical examination of one’s own thoughts can catch and correct them.

Three, and perhaps most importantly, intellectual humility dispenses with certainty. Indeed, for the intellectually humble leader, “nothing is certain” is axiomatic. All judgements are matters of probability only, with the goal of this “probabilistic thinking” being to accurately distinguish ever-finer degrees of uncertainty.

Want to know if you could predict future trends? Take the survey at http://wef.ch/forecasting

Linda A. Hill, Professor of Business Administration, Harvard Business School

Leaders must be able to build organizations that are agile and can routinely innovate. People don’t want to follow a leader to the future – that is yesterday’s model. They want to co-create it.

 Linda A. Hill quote:

Innovation is a collective activity, one in which different people – depending on their particular talents – come forward at different times to move the group where it needs to go. Leading innovation is intellectually and emotionally taxing work, much of which takes place behind the scenes. It requires a belief in others’ slices of genius and a sense of generosity to share power, control and credit. Leading innovation is more about being the stage-setter than the performer, not always easy for leaders with star talent themselves.

Kishore Mahbubani, Dean, Lee Kuan Yew School of Public Policy

One key skill that all responsible leaders need to have today is a deep understanding of the key global trends driving change. Three tidal forces are sweeping across our world simultaneously.

Image result for Kishore Mahbubani

The first is the return of Asia and the end of Western domination of history. The second is accelerated globalization creating a small, interdependent, borderless world. The third is explosive change in technology, which is driving the Fourth Industrial Revolution that Klaus Schwab has spoken so eloquently about. Each of these tidal waves must be understood in depth.

That’s the easy part. The hard part is working out how each tidal wave affects the other. This is why it is so difficult to work out the future of US-China relations. Globalization and technology are creating a deep interdependence between them. The shift of power is driving them apart. Hence, it is not enough to watch personalities like Xi Jinping or Donald Trump. We also need to understand the deeper forces driving their behaviour. Any leader who fails to understand this unique complexity of our time is ill-equipped to provide leadership to their society.

Lynda Gratton, Professor of Management Practice, London Business School

The path to leadership is both an inner and outer journey.

Image result for Lynda Gratton, Professor of Management Practice, London Business School

The role of the inner journey is to create within the leader a deep sense of their values, a narrative that is unique to them, and the courage to act on their values.

The outer journey connects the leader to the world, to understanding the place of their leadership in this time of extreme change, and to use wisely the power and resources that are at their disposal.

Listen to  Philip Tetlock:

Malaysian Economy: 2016 uneventful but 2017 is not rosy either


January 20, 2017

Malaysian Economy: 2016 uneventful but 2017 is not rosy either

By Dr. Shankaran Nambiar

2016 has been rather eventful for the Malaysian economy. The growth rate — the one big indicator of macroeconomic health — has crumbled. From a past average of 5 per cent in real GDP growth, 2016 is likely to see something like 4.2 per cent.

Related imageLike Tun Dr. Mahathir Mohamad in 1997, Najib Razak can now blame the Jews for Malaysia’s Economic Woes, instead of his inept economic management

What is of more concern is that growth in the country is mostly fuelled by domestic demand, which grew by 6.3 per cent in the second quarter of the year — picking up from the 3.6 per cent growth of the first quarter. Domestic demand has its limits given the small size of the domestic economy and the short duration that domestic demand can push growth for.

By contrast, external demand has taken a thrashing in the past months. Growth in net exports shrank by 3.8 per cent in 2015, sank to negative 12.4 per cent in the first quarter of 2016, and remained dismal in the second quarter at negative 7 per cent.

External demand is unlikely to rise again soon. The Japanese economy is not showing signs of any major pick-up. The Chinese economy is heading for a (hopefully gentle) slowdown, and Europe is unlikely to provide export demand for Malaysia due to Brexit and the fear of its potential successors. Malaysia will have to look to the improving US economy for help in spurring its export numbers.

Image result for Najib Razak--Minister of Finance

Asking Money from taxpayers

But there is also a flip side to the strengthening US economy. The Trump administration may roll-up the TPP, hurting Malaysian trade and investment — both crucial variables for Malaysia’s economy at this juncture. What’s more, the Federal Reserve’s decision to hike up interest rates in December 2016 was not in Malaysia’s favour. The hint that there may be at least three more rate hikes to come in 2017 is not welcome news and raises the threat of the ringgit sliding further against the US dollar.

It is not surprising, therefore, that export growth was at 2.7 per cent in the first quarter of 2016 and dropped to 1.4 per cent in the second quarter. Average export growth for the first eight months of this year has been a mere 0.9 per cent (it was 6.3 per cent in 2014). If this trend persists, the trade balance will likely shrink.

Image result for Malaysia's Corruption

Against this rather stark background, the rationale for Malaysia’s 2017 budget becomes understandable. The budget is primarily targeted at increasing domestic demand. Its measures include RM2.6 billion (approximately US$579 million) more financial aid for the 1Malaysia People’s Aid program and various other programs to increase access to housing — particularly for those in the bottom 40 per cent (B40) of income-earners. There are also incentives for public servants as well as RM50 million (approximately US$11 million) to train 20,000 graduates to enhance their employability.

While these efforts will likely increase domestic demand, their appropriateness is questionable. For instance, the intention of extending financial assistance to the B40 runs against the grain of upholding a market-oriented, subsidy-free economy. Once financial aid is provided it will be difficult to withdraw it. As for graduate employability, the problem should be treated as a structural one, rather than ad hoc and directed at only 20,000 graduates. And the policies for improving access to affordable housing are insufficient given the enormity of the problem.

Nevertheless, it is noteworthy that the government is committed to fiscal discipline and also determined to close the fiscal gap. A widening deficit will be detrimental at this point, although if there had been a good record on this score in earlier years it might have been a convenient tool to reach for.

The rapidly slipping value of the ringgit against the US dollar is another flash point. Although most emerging markets have experienced drops in their respective currencies against the dollar, the ringgit has suffered the biggest relative fall in the region. One reason for this is the perceived decline in good governance. Although the Malaysian authorities have cleared 1MDB of any wrong-doing, continued reporting in international media and the US Department of Justice’s interest on the matter may have put off some foreign investors.

In the face of the falling ringgit, Bank Negara Malaysia (BNM) has reminded market players that the ringgit is still not a fully internationalised currency. BNM has requested that non-resident foreign banks don’t engage in non-deliverable forward-related (NDF) transactions. In restricting NDF trade the central bank is only ‘re-enforcing’ existing rules against offshore trading of the ringgit. But foreign traders have been sceptical of the move.

Another measure to curb the falling ringgit has been to impose the requirement that exporters can only retain up to 25 per cent of export proceeds in a foreign currency, while the remainder must be converted into ringgit. Bank Negara Malaysia has stated that exporters are free to convert currency to meet up to six months of loan obligations not denominated in ringgit, stoutly denying claims that these measures are tantamount to capital controls. Nevertheless, they are interventions in the market and disrupt the decision-making process of exporters.

Image result for Quotes from President Kalam on corruption

2017 may not be rosy for the Malaysian economy. Taking a pessimistic view, the growth forecast could slip to the range of 4–4.2 per cent for the next year. We can take solace in the fact that the fuzzy edges of oncoming negative news can be vaguely seen in the distance and it is easy to count on Malaysia’s seasoned and expert policymakers to manage these predictable shocks.

Dr.Shankaran Nambiar is the author of the recently published book Malaysia in Troubled Times. He is also a senior research fellow at the Malaysian Institute of Economic Research. The views expressed in this article are his own.

This article is part of an EAF special feature series on 2016 in review and the year ahead.

Shameful Injustice


January 20, 2017

Shameful Injustice

by KJ John@www,malaysiakini.com

What is the cost of one human life? What if the person is an Islamic State (IS) terrorist? Does his life cost any less? What if the person is a Palestinian? What about an Israeli? Are there different rules of human value for different peoples? What would be that basis? Would it be colour or ethnicity or looks or brains? What then do we humanly mean by rule of law, in any state; is it not more like, all men are brothers, but some are more equal than others?

Recently, a court in Israel found a soldier “guilty of manslaughter, rather than murder”. I do not know the full facts of the case, nor am I really too interested in specifics, but suffice to know that I heard three versions of news reports on the matter; from Al Jazeera, BBC and CNN. To me, it was a simple case story of an act of cold-blooded murder.

Image result for Israeli soldier who shot a wounded Palestinian

Elor Azria was the Israeli soldier charged with manslaughter after shooting a prone and wounded Palestinian assailant in the head.

All three channels spoke of “obvious and willing killing of the injured Palestinian with a shot through his forehead by that lone soldier”. It was a military court in Israel that found him guilty of manslaughter but my question is, why was it re-framed as “manslaughter” when it was obvious that the criminally convicted soldier knew that the Palestinian was already badly injured and “essentially captured”?

But this soldier still chose to put a bullet through the Palestinian’s forehead. Did we not already deal with such concerns at the Nuremberg Trials? Adolf Eichmann claimed he was following orders and was declared guilty by an Israeli court.

Culture of closing one-eye on facts

The scientific method of verification of truths in a modern court is based on two equally rational systems of fact-finding; one based on evidence-based facts, and then there is a due process of rule-making and decision-taking but all designed to questioning and challenging these methods for certainty assertion. The judges decide finally.

Therefore, when all such due processes are followed, in all matters, the question of how the judgment is received is moot and quite irrelevant! But, in the above specific case, my concern is that “the system had compromised justice even before the case started”. Why do I say this?

Image result for Chelsea Manning and President Barack Obama

Private Chelsea Manning who leaked classified information to Wikileaks was pardoned by President Barack Obama–A Controversy.

Why would the public prosecutor agree that the original charge made, after police investigations, to be reduced to manslaughter? Why would the Israeli military court allow such a negotiated compromise even before hearing the facts in this case? The soldier shot the injured Palestinian through the forehead 11 minutes after he was lying on the ground. It was murder by most definitions.

Is this ‘really showing grace’ or was this not really ‘an abuse of the due process of law?’ There are already international rules of conduct in public places under non-war conditions. Even if their Israeli mindset is in a constant state of war-mindedness, is such an act and visible breach of human law of mutual regard, by another human being, right, good, and true?

How then can an entire onlooker global and Israeli system choose to close one eye if the appeal of Israeli Prime Minister Benjamin Netanyahu to abrogate the verdict is subsequently taken seriously? Are we not creating and promoting a culture of obvious wrongdoing and closing one eye to all such wrongs?

High-level collusion for corrupt motives

Whether in Israel, or Myanmar, or ‘Melayusia’; are not a culture of collusion in favour of corrupt values, and the consequent abuse of democracy, a denial of our only real ideal?

In my current lived geography, quite unaware of what they are really doing, a group of vigilantes have been doing almost a similar thing, as follows:

1. Some volunteers formed a society and registered it with the Registrar of Societies (ROS). But their constituent members are only selective members (of only four roads) even though they claim to represent the entire community or settlement with their name ‘Katura’ or Kampung Tunku Residents Association which should theoretically represent all 30 roads of the Kampung Tunku settlement, and not just the selected four.

2. They claim to have got the Petaling Jaya City Council’s (MBPJ) agreement with their ‘illegal and unrepresentative proposal’ to create a pseudo-guarded community made up of only four out of 30 streets.

3. I have registered more than one complaint with the mayor, and another with the council and a third with the police and to date there is still no hope on the horizon for those of us who feel like Palestinians in an Israeli-claimed geography.

4. Recently also, all others who are badly affected by the programme’s road closures are also protesting. These three road closures are affecting drivers who access these roads to get to where they are going. My understanding is that such closures should only be at midnight, but obviously these vigilantes are self-made heroes, right? They follow their own rules.

5. My police report to police HQ by Internet filing no is: RMP.008579. They promised a response in three days and so I will choose to wait before I pursue the matter with them.

My core question to all in local governance is“when was security of our lives privatised to Nepali guards by the Royal Malaysian Police?” When was the Federal Constitution amended to make the this concession? Even the National Security Council (NSC) Act does not allow this, yet.

Privatising motives to ‘illegal others’

Ever since ‘the government’s privatisation policy’ was abused, over time, into a policy for cheating, stealing and lying (CSL), to achieve specific agenda of promoters, those perpetrators began a culture of cheating, stealing, and lying to cover their tracks. But such rape and theft continues unabated in spite of a change of government at the state level. Now, proofs are made available by the Malaysian Anti-Corruption Commission (MACC) arresting a secretary-general.

I have always labelled such an abusive policy, a ‘piratisation policy’, or a policy that seeks to use public assets and resources for private motives, including for a political party’s sectarian goals or agenda. Public Policy always exists to protect and preserve Public Interest.

Image result for Najib is Malaysian No 1 Official

The world-famous Malaysian Official 1 (MO1) is one classic case of such a ‘piratisation’ agenda as revealed by evidences from the US Justice Department (DOJ), the Swiss and the Singapore government agencies.

In fact in a different way, I heard even Dr Mahathir Mohamad say that “such stealing” was not so blatant under his governance of UMNO; he in fact even argued that he was always concerned that more than one trustee was appointed to manage all such UMNO funds. He also claimed that he never allowed such monies into private accounts of any one person.

Now, is my geography also adopting such a CSL policy with impunity? I have acted against these illegal actions every step of the way, in the last 30 years, but I have not been successful to stop this rot and growing culture of corruption. The sad reality is that such abuse has continued, even if at a slower rate, with a different political alliance leading the state. Nonetheless, it still appears like more of the same even if at a slower rate. Power does in fact corrupt all.

If Anwar Ibrahim was charged with abusing political influence wrongly, and for improper motives, my question to the MACC chief commissioner is, while you appear to be a new broom sweeping our dirt clean; why only pick on public servants and not yet the most important politician? And, especially those who by default have been proven to have abused public funds by putting them into personal accounts; even if unknowingly?

By the way, was tax paid for personal funds in the account held by MO1?

Image result for we are malaysians

We are Malaysians–Dumb Ones

As a Malaysian, I am also frankly tired of seeing everything wrong with every Israeli action but with an inability to seeing wrong with similar issues in our own country. Actually, we govern ourselves almost exactly like the Israeli’s govern their system with two different sets of laws; one for the governed and another for the governors.

Rakyat Malaysia, how can we change this form of mis-governance for the good of every citizen; and especially those who have greater needs?

Malaysians are concerned with the Economy


January 19, 2017

Donald Trump aside, Malaysians are concerned with the Economy

by Martin Khor@www.thestar.com.my

As the new year gets underway, ordinary citizens are concerned about the rising cost of living, the ringgit’s low level and the outflow of capital.

Image result for Felda Global Ventures a messMaking Malaysia messy is his forte

WHILE Donald Trump’s inauguration as the new United States President will hog the headlines this week, it is the bread-and-butter issues that preoccupy the man and woman in the street as the new year gets into stride.

In Malaysia, a major talking point is the state of the economy. Three issues are worrying the ordinary Malaysian – rising prices, the fall of the ringgit and the outflow of capital. Each is an issue in its own right, but they are also all interlinked.

Inflation has become a hot issue because it is accelerating and will continue to do so. There are one-off factors influencing retail prices, such as the removal of the cooking oil subsidy, the weather affecting vegetable output or the slight recovery of the world oil price.

 But prices across the board are affected by the weakening of the ringgit since this increases the prices of imports.

Malaysia is very dependent on imports for a wide range of products, from food and household utensils to machinery and components for making cars, computers and all kinds of other goods.

As the most recent ringgit plunge started in mid November, prices of products that have high import content may not have fully risen yet because the shops are still clearing stocks bought earlier. But you can expect the new prices to kick in more and more.

Image result for irwan siregar

Irwan Siregar —  Fox in the  Malaysian Financial Hen House

The second issue is the ringgit decline itself, which has bad and good effects, with some sectors and people losing and others benefiting. The negative effects include:

  • Consumers having to pay higher prices for imported goods and services.
  • Traders and retail shops getting less business as the demand for the dearer imports goes down.
  •  Manufacturers and construction firms paying higher costs for parts and production inputs, which will translate into higher consumer prices and eventually higher house prices.
  • Parents with children studying abroad must fork out more ringgit even if the fees and hostel rent remain the same.
  • The Government and its enterprises and private companies that took loans in foreign currencies lose significantly as they have to spend more ringgit to service their loans.

Among the good effects:

  • Smallholders and companies exporting palm oil, rubber, petroleum and other commodities will receive more revenue in ringgit terms.
  • Local manufacturers exporting goods such as rubber gloves and furniture become more competitive as they can reduce their prices in foreign currency, or else they receive more in ringgit if they retain their international prices.
  • The tourism and hotel business should thrive since it’s cheaper for foreigners to visit Malaysia. Locals who now can’t afford to travel abroad may also spend their holidays in the country.

On balance, will the gains outweigh the losses? From a public perspective, this is unlikely as the higher cost of living will affect all Malaysians, especially the poor and middle classes, and the higher external debt repayment will affect the public and the economy overall.

The prospect of further depreciation of the ringgit also has a bearing on capital flows, the third issue. Malaysia is one of the countries most vulnerable to the shocks of foreign funds moving out, because so much capital was allowed to move in.

In recent years, a new type of vulnerability emerged when foreign funds were welcomed to invest in government bonds denominated in ringgit.

It was originally thought that foreign loans in ringgit would be safe as the borrower would avoid the foreign exchange risk, as contrasted with loans denominated in US dollars.

This is true but the sheer volume of bonds now owned by foreigners makes the economy vulnerable to large outflows in a short period.

Comparison is usually made between potential capital outflows and the level of foreign reserves. The reserves as at December 30, 2016 were US$94.6bil (RM424bil).

The total foreign debt outstanding was RM865bil at the end of September 2016.

Of this, offshore borrowing (in foreign currency) was RM472bil, and ringgit-denominated government bonds held by non-residents were worth RM211bil, according to Bank Negara data.

Some of the investors have a long-term commitment and not everyone will move in the same direction at the same time, but in recent weeks external conditions such as a rise in US interest rates (and anticipation of more rises in 2017) have prompted capital outflows from emerging economies, including Malaysia.

Image result for Malaysia's National Debt

The country also has high foreign participation in the stock market (22.6% in November 2016), and in recent months there has also been a net withdrawal of equities by foreigners.

November 2016 was a bad month, as foreigners withdrew from the country RM19.9bil of government securities, and RM4.2bil of equities, according to a report in The Star (January 7, 2017). The potential and probability of more capital outflows in 2017 is a factor weighing on the perception of the ringgit’s prospects.

A high trade surplus has previously acted as a strong buffer against potential large capital outflows. The trade and current account balances are still positive, but the surpluses have been declining.

Government measures could help, such as the requirement that exporters convert 75% of their ex­­port proceeds from foreign currencies to ringgit.

Other measures can be considered if the situation does not improve. For example, companies and funds, starting with government-linked ones, can be discouraged from investing abroad – for the time being at least.

Malaysia has ruled out more drastic measures such as capital controls and pegging of the ringgit.

Developments in these three economic issues will be closely watched, not least by the public whose pockets are affected, as the year progresses.

External events could improve the situation, such as if prices of Malaysia’s export commodities increase, or could worsen it, especially if the US raises its interest rates further and if Trump really pursues protectionist policies.

However, domestic policies to respond to the problems are crucial and there should be a comprehensive plan to tackle these issues, since they may persist as 2017 progresses.

Martin Khor (director@southcentre.org) is executive director of the South Centre. The views expressed here are entirely his own.