National economic outlook: Believe it or not?

At long last, is this the signal that the government is starting to acknowledge the folly of its economic policies?

Are the winds of economic reform finally blowing across our country? Or is this just another pretty but inconsequential speech delivered by someone who has spent much of his political career as an Umno insider, and one who many cynics will point out is part of the toxic system that is slowly but surely bringing the country’s economy to its knees.

Minister of Finance II Ahmad Husni Hanadzlah’s speech on the occasion of the ‘National Economic Outlook Conference 2010-2011’ in Kuala Lumpur last Tuesday (Dec 1) contains many of the right ideas and initiatives to restart our swooning economy:

* Boosting private initiative as the primary
engine of growth.

* Improving the dynamics of competition in the
domestic market place.

* Raising the private and social returns on
education.

* Moving Malaysia away from its low-value-added, low-wage and low-productivity structure.

* Allowing meritocracy to prevail.

*Stressing transparency and adherence to the highest standards of governance.

* Encouraging greater participation from all races in the public institutions, where performance is the key measurement.

* Implementing better competition policies and fostering a better regulatory environment which can allow market forces to operate in an orderly manner.

Not new ideas


All these ideas underscore a tacit acknowledgment that the success of the nation’s economy must take precedence over the short term interests of a few protected groups.

They are not new ideas; many of them have been around for at least over 20 years since 1990 when the NEP was supposed to have come to an end. Instead what’s happened has been another two decades of retooling the NEP and in many cases even reinforcing its stranglehold on the economy for the sake of – as what the minister’s speech has correctly pointed out – “a few protected groups”.

In the next few weeks and months, we look forward to hearing more concrete details of how the long overdue changes to the country’s economy and society (and the related political and other key institutions) will come about. We will monitor these details and assess what they are worth.

Ahmad Husni’s exhortation in his speech that “1Malaysia equals inclusivity and [that] by being inclusive, we introduce competition” makes fine rhetoric but unfortunately we have been disappointed too many times before.

- Dr Lim Teck Ghee


(DR LIM TECK GHEE is director of the Centre for Policy Initiatives. )

Malaysia to re-emerging as an “Asian tiger” ?

ASIA’S tiger economies have suffered some of the sharpest declines in output during the global recession, and some fear that, because of their dependence on exports, they will not see a sustained recovery until demand rebounds in America and Europe.

Amid the shifting global dynamics that will see the development of new engines of growth and the gearing up for the next industrial revolution, Levitt Capital Management LLC (LCM) founder and chief investment officer Robert Levitt has been investing his clients’ money in emerging markets, including Malaysia.

LCM, which manages over US$400 million (RM1.36 billion) for clients globally, is based in Boca Raton, Florida, the United States. Levitt, who splits his time between the US and France, has been in Malaysia for the past three months to identify investment opportunities.

Though liquidity, or lack thereof, is an issue, Levitt is not wasting any time and in just two months, LCM has invested between US$10 million and US$15 million in stocks here, spending an average of US$1 million to US$2 million per stock.


“An investment theme that I’ve been looking at for several years is a group of countries that missed the industrial revolution, such as China and India, which are now catching up, and countries with large populations such as Nigeria, Pakistan and Indonesia, that don’t want to miss the next revolution.

“The fast growth of these countries with large populations adds an element of growth that is not really being considered by investment professionals in the United States and Europe. They are growing in affluence and income and are supported by governments trying to eliminate barriers to communication,” he said.

He sees Malaysia, though small population-wise, as among the countries “unwilling to miss the next industrial revolution”. He said Asian economies would be part of the world’s new engines of growth, in a market of increasing importance to investors.

“Malaysia will fit into that category and will become interesting again as one of Asia’s emerging tigers as it was in the 1990s, because it is opening itself to the world and especially if it is able to attract Chinese investments, which could be a huge boost to the economy,” Levitt said.

LCM also sees countries with growing affluence, emerging healthcare and aging populations in developed countries as an investment theme.

Levitt said the company looked at investment themes that would sustain for multiple years, in a world transitioning from exporting to the US and Europe for growth to increasing inter-regional trade, such as in Asia, which was growing quickly and where populations had increasing purchasing power.

Read more here

Job Losses Feared as Recession Bites

PENANG, Nov 26 (IPS) - The global economic slowdown is slowly creeping onto Malaysian shores leaving many worried about the impact it will have on workers.

Although Malaysia's financial institutions and banks are in better shape than they were during the East Asian financial crisis in 1997, the economy is already feeling the effects of the recession in the West.

Economic growth for the country is projected at 3.5 percent for next year but even that could be optimistic. Some analysts are not ruling out an economic contraction and there is growing concern that workers, both Malaysian and migrants, could be vulnerable.

''The recession here next year could be worse than the Asian crisis in 1997,'' warns economist Subramaniam Pillay, an associate professor in international finance at Nottingham University's campus in Malaysia. ''It would be more like 1986, when commodity prices slumped and exports weakened, prompting factories to retrench workers."

Now there are similar fears that as consumer demand in the West falters, exports here could slide and factories could once again shed workers before long.

With the experience of the recession of the mid to late 1980s in mind, activists have been calling for a comprehensive social security plan. Increasingly, calls are being heard for a national retrenchment fund to protect workers in anticipation of possible job losses. The government has said it is considering this ''but even if they start it off now, the fund won't be big enough to handle the recession next year,'' warns opposition parliamentarian Jeyakumar Devaraj.

The Malaysian Trades Union Congress has proposed that employers and employees should each contribute one ringgit per worker to the fund. With around five million salaried workers in the private sector, such a retrenchment fund could collect more than 100 million ringgit (27 million US dollars) in a year.

"But there is no commitment frorm the government up to now," laments Devaraj. "Instead, we see them injecting 5 billion ringgit (1.38 billion dollars) from the (state-managed) Employees Provident Fund (a retirement fund for workers) into the stock market.''

Some have pointed out Malaysians will be cushioned from job losses by the presence of these migrant workers who could be the first to lose their jobs. But that may give a false sense of security as thousands of Malaysians are also employed in free trade zones especially as operators in the electronics multinational corporations.

Subramaniam feels that the government should review its low-wage policy in attracting foreign investors. Local wages are suppressed by the presence of some three million low-wage migrant workers, about a third of them undocumented.

''What's the point of being among the world's top trading nations when your workers are being paid peanuts?'' he asks.

Meanwhile, economic analysts have noted that a revised budget for next year is necessary as the present one tabled earlier this year was calculated based on an assumption of a global oil prices for next year of 125 dollars -- whereas the price now has plummeted to around 50 dollars now.

About 40 per cent of the national budget is traditionally funded from petroleum revenue - Malaysia is a net exporter of oil - with the remainder coming from taxes, observes Subramaniam. A sharp drop in the prices of oil and palm oil products will erode Malaysia's earnings and affect the budget - though the country has ample foreign exchange reserves.

Meanwhile, the government has announced a 5 million ringgit allocation to re-train retrenched workers. Human Resources Minister S. Subramaniam said the government would top up 1 ringgit for every 1 ringgit spent by employers to retrain workers and upgrade their skills. From Nov 1 this year, all skills upgrading retraining programmes would receive full financial aid.

In addition, the government has also announced a 7 billion ringgit (1.93 billion dollars) economic stimulus package of pre-emptive pump priming.

Devaraj says instead of giving out large infrastructure contracts to private contractors who may hire low-wage foreign workers, the Public Works Deparment could hire temporary local workers directly as ''work brigades'', which he says would be a more effective way of creating a multiplier effect for the local economy.

Despite the fall in oil prices, many Malaysians are still finding it hard to cope with the cost of living especially higher food prices, which particularly squeezes the poor.

On Nov.17, the government slashed the pump price of petrol from 2.15 ringgit per litre to 2 ringgit -- the fifth reduction in recent months as global prices sank to 55 dollars per barrel.

But many noticed that the local pump price is now still higher than it was on Jun. 5 when petrol prices were then raised by 41 percent to 2.70 ringgit (75 US cents) at a time when the global oil price was around 125 dollars.

The effect of the Jun. 5 oil price hike is still being felt. Even as the pump prices locally were reduced, food prices -- driven up by commodity speculators and local retailers -- have not fallen correspondingly.

''It may be true that the price of oil has gone down but the prices of rice and other basic necessities are still sky high,'' complained one reader from Sabah in North Borneo of the popular Malaysia Today website.

"I was in Kuching (in neighbouring Sarawak state) a month ago and I noted that the price of Beras Malaysia (local rice) was only 15 ringgit (4.1 dollars). Here in Kota Kinabalu (in Sabah) it is sold at 18 ringgit (4.9 dollars). Why is the difference so big?''

Even the poverty line has come under scrutiny. Though the official threshold for monthly household income was raised a couple of years ago from 588 to 691 ringgit (162 to 190 dollars), many analysts feel that that benchmark for measuring poverty is grossly understated. A more realistic poverty line could be double that figure, putting many more Malaysians -- up to 30 percent in the industrialised state of Selangor -- in the poverty bracket.

Concerned that workers rights could be affected as the economy slides, a coalition of civil society groups, the Oppressed People's Network (JERIT), is organising a nationwide bicycle campaign to highlight their concern about the more difficult conditions for workers.

Scores of cyclists from three main locations in the north, south and east coast of the peninsula will be flagged off simultaneously on Dec. 3 and they will pedal towards the Federal Parliament, converging there on Dec. 18. There they will be present a memorandum to Prime Minister Abdullah Badawi and opposition leader Anwar Ibrahim, highlighting their demands.

Their main demands include the introduction of a minimum wage, decent housing, price controls for essential goods and an end to the privatisation of essential services. They are also linking this to broader civil and political rights including the restoration of local government election and the repeal of the draconian Internal Security Act, which allows indefinite detention without trial.

Along the way, they will also distribute leaflets to the public and present similar memorandums to the chief ministers of the various states.

Devaraj notes that recent global events have proven that the neo-liberal model -- with its accompanying assumptions of deregulation and the unchecked pursuit of wealth -- has had adverse results ranging from climate change to worsening food security to imbalances in the distribution of wealth between and within nations. ''So we need to look at new and alternative paradigms of development,'' he says.

- By Anil Netto. IPS

Oil prices soar above $134 a barrel !!

Oil jumped nearly 9 percent to a record $139 a barrel !!

Crude oil futures have shot up nearly US$7 a barrel, extending big gains from the previous day and racing toward an all-time high after a Morgan Stanley analyst predicted prices could hit US$150 by July 4.

The U.S. unemployment rate jumped to 5.5 per cent in May - the biggest monthly rise since 1986.

Wall Street suffered its worst losses in more than two months on Friday after crude oil prices spiked over $138, an increase of nearly $11, and the unemployment rate rose more than expected.

All 30 of the stocks that make up the Dow Jones industrial average took a hit as the index dropped nearly 400 points on fears that high energy prices will extend and deepen an economic slowdown.

The Dow fell 3.13 percent, or 394.64 points, to close at 12,209.81. The broader Standard & Poor’s 500-stock index lost 43.37 points, or 3.09 percent, to 1,360.68, its lowest point in four months. The technology-laden Nasdaq composite index declined 75.38 points, or 2.96 percent, to 2,474.56.

Shares opened lower after the government reported that the unemployment rate in May increased the most in one month in 22 years. The market decline accelerated as crude oil rose steadily, closing $10.75 higher in its biggest one-day climb ever.

Oil prices surged almost 8 percent, to $138.54 a barrel after a senior Israeli politician raised the specter of an attack on Iran and the dollar fell against the euro.

“As soon as that news hit the tape, oil spiked about $6,” said David Kovacs, an investment strategist at Turner Investment Partners.

Prices were buoyed further by a report from Morgan Stanley that predicted oil would reach $150 a barrel by July 4 because of higher demand in Asia.

Could it be the beginning of another Great Depression ?

The U.S. unemployment rate jumped to 5.5 per cent in May - the biggest monthly rise since 1986.

With food and energy prices marching upward, paychecks aren't stretching as far.

Employers worried about a sharp slowdown and their own prospects, they clamped down on hiring in May, according to the Labor Department.

The unemployment rate soared from 5 per cent in April, surprising economists who were forecasting a tick-up to 5.1 per cent.

The job losses in both March and April turned out to be larger than the government previously reported. Employers now have cut payrolls for five straight months.