Malaysians are angry at Russia. Over the social media, I see people cursing the Russian President, Vladimir Putin. That is not something you see every day. Malaysians typically do not care about Russia.

Russia is the largest country in the world, but it is so far away from Malaysia. Trade between the two countries is limited. Malaysia sends less than 0.5% of its total exports to Russia. Imports are slightly higher but Russia is not China or the United States to Malaysia.

There are Russians in Kuala Lumpur, and you can spot pretty models there from time to time but this is not Pattaya in Thailand. My colleague calls Pattaya a little Russian colony in Southeast Asia. He sent me an editorial comic from the Thai press some time back once, when Russia was annexing Crimea from Ukraine. It showed after Crimea, Russia would come after Pattaya next. Looking at arrival statistics, about 28,000 Russians landed in Malaysia from January to April this year, out of more than 9 million visitors in the same period. So, as far as the typical Malaysians were concerned, Russia could be the size of Monaco. It did not matter.

That has changed. Malaysia Airlines’ Flight 17 crashed close to the Ukrainian-Russian border. There is a strong suspicion that the pro-Russia rebels shot the plane down, killing nearly 300 people in it. The colorful Joe Biden said “it was blown out of the sky.” Whether or not Russia is directly linked to bringing the plane down, the circumstances for Russia do not look good. Fingers are already pointing to Russia. Malaysian fingers are pointing to Russia, whatever the Malaysian government actually thinks. Tony Abbott definitely did so in a typically frank Australian fashion.

Somebody on the ground has found the black box. But there is a problem. Given the suspected Russian involvement in the whole conflict, having the black box sent to Moscow for analysis is among the worst of all bad ideas. We want to know the truth. Russia, with conflict of interest aplenty, is standing in the way. If indeed Russia is involved, then it is in its best interest to temper with the black box.

I just do not trust Putin. I have never trusted him but previously, it was academic, a good point for coffee table conversation with not real effect on Malaysian national interest. That is no longer true. There is a Malaysian wreckage in Ukraine now, no thanks to Russian intervention in Ukrainian affairs.

There is already outrage. Having Russia scrutinizing the black box will increase that outrage. The best way to resolve this is to send the black box to a third party. Preferably, all the way back to Malaysia.

I doubt Russia would care though. Russia did not care about the world’s opinion when it annexed Crimea. It did not care when it invaded Georgia in 2008. Europe meanwhile is way too timid despite playing a role in the Ukrainian-Russian conflict. And who is Malaysia to Russia?

And so, Russia is becoming the most popular country in Malaysia right now. Popular in a bad way. Infamous. It was Israel before, but Russia just took the top stop. There are Malaysians protesting against Israel… in front of the US embassy today in Kuala Lumpur. But I think the most reliable friend we have now who can support us beyond words of sympathy is the US.

And Europe, if they plan to have a backbone soon.

The price of that thing you wanted to buy is RM8.95. You give out a RM10.00 bill. You get a RM1.00 bill in return. There is a 5 sen coin missing, but why fuss over it? It is only 5 sen.

Except, it happens way too often and the one getting the extra 5 sen are big corporations like McDonald’s and Aeon. I do not cite these two names as generic examples. I cite them because these two are among the most notorious brands that have failed to return to my 5 sen. That is extra profit from them.

The top excuse the cashier gives is that they ran out of 5 sen coins. Funny because when they run out of those little coins, they will take the 5 sen away from you. Never do they give out 10 sen to you, giving away their 5 sen instead. It is always you giving up your 5 sen, and the implicit reason, “don’t be cheap, it’s only 5 sen.” Never them. Always you.

But if it is only 5 sen, why don’t these firms give us their 5 sen instead?

The extra 5 sen is not recorded in their receipt. If it does not go into the receipt, then I would think it is not taken into their accounts when they do their taxes. That means they get to keep those 5 sen coins of pure profit for offering nothing.

Now , I do not know if the effect of these 5 sen is huge that it makes a difference in profits in a significant way. But if you visit one of those places every day, they earn RM1.5o from you. That is about the cost of a sundae and a half!

I think that is unfair to us consumers. I think it is unethical for big corporations like McDonald’s and Aeon to do so. I call that theft. I call it cheating.

I think it is the responsibility of these corporations to return the change and if they do not have the 5 sen change, then they should not take the 5 sen away from the consumers. They should give the consumers discount for that 5 sen instead, given that it is very rare for them to run out of 10 sen coins.

After all, it is just 5 sen, right dude?

I have not been following the Indonesian presidential election closely in the sense that I am unfamiliar with detailed policy proposals from both candidates, Jokowi and Prabowo. I remember from some time back that Jokowi specifically offered little detail, leading to the criticism that he has no idea what he is doing and betting on his clean, humble image to win. But I think I have heard or read some proposals along the way. But what I do know is that there is a difference between the two candidates and Prabowo comes out as nationalistic, protectionist candidate, which I think is bad for Malaysia and for Asean integration.

Malaysia and Indonesia are having it relatively good in the past year or so. There have not been too many ugly and petty spats around the accusation of cultural theft. Others are more serious, like the abuse of Indonesian workers in Malaysia and the haze. I should not mention the haze because looking outside right now in Kuala Lumpur, it is pretty bad. Normally I can spot the Petronas Twin Towers from here but right now, it is all white. Walking outside is unpleasant. It is hot, humid and acrid. It is impossible to tolerate the condition. In the past,  Malaysians (and Singaporeans) had been quick to blame their largest neighbor but I think both have to come suspect and possibly realize that the perpetrators of the opening burning in Sumatra and elsewhere (including in some parts of Malaysia) are Malaysian and Singaporean-held plantation companies. And besides, we consume the very products produced by the plantations there. I do not mean that Indonesia is blameless, but solving it requires regional cooperation to address it.

Still, apart from the unpleasant smell, we are not at each other’s throat and I think that is partly because of the reconciliatory tone, or rather, non-aggressive approach taken by the political leadership of both countries, Malaysia and Singapore. I suppose, it is also because the current President Susilo Bambang Yudhoyono has no incentive to appease the more populist crowd who love a chance to slam Malaysia. He is approaching his term limit after all. But even earlier in his term, I think he preferred discussion rather than Sukarno-style rhetoric when dealing with Malaysia.

I do not believe the relatively good period of Malaysia-Indonesia relations will last very long if Prabowo becomes the new Indonesian President. Prabowo appears very nationalistic and I think he would be easy for him to ride on those anti-Malaysian sentiments, especially if things do not go according to his plan in Indonesia. It will always easy to shift the blame to foreigners than focus on the actual problems at hand.

Prabowo also appears to be a protectionist. Having a nationalistic and protectionist President is probably bad news for Malaysia and for Asean integration. It is bad news for Malaysia because there is a lot of Malaysian investment in Indonesia, from plantation to banking. Indonesia is already trying to limit exports of raw material, hoping to develop its own industries. Prabowo looks like the person who would go further for a more comprehensive protectionism across industries. Indonesia is also behind in Asean Open Skies initiative, while most others have agreed and even done opening up.

Also, having Prabowo campaigning with fascist theme is not all too hot for a libertarian like me. Having a fascist Indonesia will take pressure off Malaysia to liberal further. As in right now, I think Indonesia has some democratic and liberal credential to nudge Malaysia in the right way, in a small way. I suppose it is like the one of those Newton’s laws: bodies of mass attract each other and Indonesia is a very large body compared to Malaysia. Having a big, bad fascist right next door is like having a big, bad, black hole across the narrow sea.

Asean wants to integrate closer by 2015. It does not appear that all the goals set will be achieved within target but having its largest members dragging its feet or even regressing will make integration harder than it already is.

This is not to say Jokowi is all free-trade liberal. But I think Jokowi is more even-minded when it comes to Indonesia’s role in making the AEC a success.

I am a regionalist and I am so because I see global effect at closer integration is going nowhere. So, I would like to see the Asean initiative moves forward. Also, as a Malaysia, it is really tiring arguing about petty stuff. I think only Jokowi can do good on both fronts.

So, good luck Mr. Jokowi. I hope you will win the Indonesian election.

In general, quantum mechanics does not predict a single definite result for an observation. Instead, it predicts a number of different outcomes and tells us how likely each of these is. That is to say, if one made the same measurement on a large number of similar systems, each of which started off in the same way, one would find that the result of the measurement would be A in a certain number of cases, B in a different number, and so on. One could predict the approximate number of times that the result would be A or B, but one could not predict the specific result of an individual measurement. Quantum mechanics therefore introduces an unavoidable element of unpredictability or randomness into science. Einstein objected to this very strongly, despite the important role he had played in the development of these ideas. Einstein was awarded the Nobel Prize for his contribution to quantum theory. Nevertheless, Einstein never accepted that the universe was governed by chance; his feelings were summed up in his famous statement “God does not play dice.” Most other scientists, however, were willing to accept quantum mechanics because it agreed perfectly with experiment. Indeed, it has been an outstandingly successful theory and underlies nearly all of modern science and technology. It governs the behavior of transistors and integrated circuits, which are the essential component of electronic devices such as televisions and computers, and is also the basis of modern chemistry and biology. The only area of physical science into which quantum mechanics has not yet been properly incorporated are gravity and the large-scale structure of the universe. [Stephen Hawking. A Brief History of Time. 1988]

I am not a fan of Isma and their narrow worldview. I find them destructive to Malaysia but this time around, one of their views is useful. They want hudud to be applicable to all Malaysians regardless of beliefs. I think them pushing the idea is a great thing.

Please do not misunderstand me. I oppose hudud. What I am getting at is this: with the new slogan “Hudud for All,” opposing hudud is becoming politically easier than before. Allow me to explain.

Sometime not too long ago, there was an argument that hudud would apply to Muslims only. The Christians, the Buddhists, the Hindus, the agnostics-atheists and the others need not worry about the harsh punishments associated with hudud. They could live their life as if nothing happened. PAS members use the argument from time to time in front of their non-Muslim audience to emolliate non-Muslims’ fears of hudud.

I have always been sceptical about that argument. Even if hudud were to be limited to Muslims only, I believe other Malaysians would not truly be free from it. They might be free from the actual punishments but not from the social changes that would definitely come along with hudud.

The implementation of hudud would change the make-up of Malaysia regardless of the exemptions made for non-Muslims. It is naïve to think that a great change in the majority population would not affect the religious minorities. When the majority suddenly turns religiously conservative, voluntarily or by force, no high walls and barb wire can protect the minority from the pressure to be more… decent. How do you isolate yourself from social changes?

What effectively an Islamic state for the majority and a secular state for the minority would end with is only one outcome: the end of the secular state. Even with our current dual justice system – one for the Muslims and one for the others – conflicts are aplenty.

We fight for the guardianship of our children and we even fight for the burial rights of our dead. The implementation of hudud for Muslims will raise the level of conflict among us. If a Muslim is caught stealing from a non-Muslim, the thief would get his hand chopped off. If a non-Muslim is caught stealing from a Muslim, the thief would get away with his hand. How is that fair? What if a non-Muslim raped a Muslim and vice versa? Which standards of proof should be used? The looser one for the non-Muslims and the tighter one for the Muslims?

How would the unfairness affect relations between the communities?

I have written about this before and I am writing this again: the conflict would divide us further.

I would not want to live in that Malaysia.

And let us not kid ourselves. When there is a conflict between the two existing legal systems, the Muslim side has an advantage. Remember that case when the Muslim father took away his children from his Hindu wife? The Islamic court ruled in favour of the father and the civil court ruled in favour of the mother. The police did nothing.

Clearly, the current relatively mild setup already is affecting the non-Muslims. Why should hudud be any different? Why would a step towards Islamic state be any different?

But my scepticism is my own. It frustrates me to know some non-Muslims buy the argument that hudud will be applicable to Muslims only. They believe hudud is purely a Muslim matter, falsely believing they have no stake in the debate. And so, the non-Muslims would not discuss it critically and maybe, they would not demand a vote against any Islam-related matter in the Parliament.

Here is another way to look at it. Hudud promoters do not take non-Muslims’ democratic rights away. But they are encouraging non-Muslims to forfeit those rights. When the non-Muslims forfeit it, the proponents will find it easier to push hudud through.

After all, with the non-Muslims out of the way, when matters of Islam are pushed through, with the rhetoric of God’s rights soaring through the sky, which Muslim Members of Parliament would dare personally say no in the open? Dare they oppose the almighty God?

The Muslim MPs who oppose would be in the minority, sticking out like a sore thumb but no more than that.

Today, our Prime Minister Najib Razak’s position on the matter is as elusive as Anwar Ibrahim’s. Worse, Umno is working with PAS to study the hudud proposal. Things like this make me misses Dr Mahathir Mohamad. He has done a lot of damage to Malaysia, but he has also done a lot of good. And he is a staunch opponent of hudud. He stands his ground.

But now, well now hudud is for all. Maybe now those who think hudud is none of their business would wake up from their naïve dream.

Better yet, the respectable Mohd Asri Zainul Abidin, an Islamic cleric and the former mufti of Perlis, has argued for the same. He is no Isma and he is no Ridhuan Tee. That suggests the idea of hudud for all is not exclusive to the realm of Muslim-Malay ring-wing groups. It can come from a typically reasonable Muslim too. That should scare the naïve you. The fact that Umno and PAS are working together should also scare you.

PAS is postponing its plan to table its hudud bills in the Parliament. That is good. But the debate is unlikely to go away anytime soon. That means you, whoever you are, can still use your democratic right to oppose hudud. The Muslims who oppose hudud need you to exercise your rights.

And after all, Malaysia is not a country belonging to the Muslims only. Malaysia belongs to all of us regardless of beliefs. Why should we surrender the future of Malaysia to the proponents of hudud? Why should you forfeit your rights to the proponents of hudud?

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in The Malay Mail on May 16 2014.

I woke up to terrible news on Thursday. Lying on a bed and bracing myself for the work morning, I reached for my phone trying to stay in bed longer. I glanced through my phone to see if there was anything urgent. There was none and I felt relieved. My eyes then were focused on messages that popped while I was sound asleep.

There were several messages at round 3am or 4am. These went: “Karpal Singh is dead.”

I was still unsure if I was awake then. It would not be the first time I thought I was awake but really, I was still dreaming. I took a few more minutes staring blankly into the ceiling, assessing my reality, before checking my Twitter account to verify the news.

True enough, condolences were everywhere and news agencies as far as Australia were already breaking the news. Karpal Singh died in a car crash in Perak, while he was on his way to Penang.

I have deep scepticism to politics revolving around personality. But in times when our institutions can disappoint us, failing to check the powers that be and worsening the excesses of power, personalities like Karpal Singh can do a lot of good.

He was almost always there to remind us of the limits of power and to put pressure on our institutions to do what was right, even at his expense. That happened in Perak in 2009 when he questioned the Sultan of Perak for the monarch’s intervention that led to an outrageous change of government. He was charged for sedition and was found guilty in March 2014.

It is hard to think how such a conviction is possible in this age. Maybe it is more than a possibility because the royal institution is ancient and it requires all the help it can get to survive in this modern world.

He was also steadfast in his beliefs. He has been a strong opponent to the implementation of hudud and he was the rock in the middle of the road. Even when things were relatively at peace and the component parties of Pakatan Rakyat rather not talk about the Islamic penal code so that they could focus on the commonalities between them, he continued to voice his opinion. I know some people in DAP cringed whenever he talked about hudud. They thought it was unnecessary to disturb the peace in the coalition with everybody working together, at times when hudud was put on the backburner.

Now, hudud, that monster that will not die, is back. PAS plans to table two private member bills in the Parliament to allow Kelantan to implement it.

I disagree with the current legal system in Malaysia. I am no legal expert but I see two laws for two different peoples in this country. It divides us all and makes fun of the idea of equality of rights. The implementation of hudud will exacerbate that.

The way hudud has been promoted highlights its distaste for equality: That it only affects the Muslim population. The advocates say so in the hopes of addressing the concern from the non-Muslim side, so that the Buddhists, the Hindus, the Christians, the atheists and others would step aside as if it is purely a Muslim issue.

“Everybody, stay out! It does not concern you,” the more argumentative pro-hudud men and women would say. They are sacrificing whatever equality we have to get what they want.

We know it is not true that it will affect the Muslims only. We know there will be overlaps of rights. We know there will be conflict. We know hudud will change the way Muslims and non-Muslims will interact which each other. We know it will change the characteristic of this country. There is no way on earth will a great change in the majority population not affect others.

Even in the current shariah system, we are already seeing overlaps and conflicts. Our institutions, with all of their bias, offer no justice in that situation.

I foresee the implementation of hudud making that kind of conflict worse. So much worse that I contend hudud will be the end of Malaysia as we know it.

Karpal left us at an inopportune time. I am upset at him now because it is in this exact situation that we need him. He left abruptly too soon. We will need a new one if we want to prolong our shared story. We need a new rock blocking the road to the end of Malaysia.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
First published in The Malay Mail on April 20 2014.

I am pretty taken aback by the expansion of the Malaysian labor force in the past year or so. The rise has made me skeptical about the utility of the labor market numbers to ascertain the health of the economy. Whenever I look at it, I tell myself, wait until it normalizes. When? If you look at the first chart below, it seems like soon because for the “outside of the labor force” number, it is sort of reverting to its old mean.

The number of workers increased by more than 0.9 million people in 2013 alone and you can see in this in the first chart below. That is about 7% of the total labor force. It is huge. Concurrently, there was a drop of number for those outside of the labor force:

20140611 Msian labor force

I did not really know why it increased in a big way in a very short time frame. Previously, I had read three points explaining the drastic increase. None was satisfying enough to me, but it explained something nonetheless.

The first was the minimum wage. The argument goes that the implementation of the minimum wage caused a lot of people joining the labor market (technically, joining means looking for jobs, not necessarily getting them). The drop in the number of those outside of the labor force strengthened the minimum wage argument (see the red line in the first chart). It made sense, until you realized the unemployment rate itself did not remain elevated for too long. It spiked back in October-November 2013 at 3.5% but it then stabilized at around 3.0%-3.1%:


It would make sense that the unemployment rate did not change much, if all of those attracted to minimum wage jobs would find placement immediately, but I am having problem believing that. Sounds way too outrageous. And data on this is a bit hard to find to prove anything conclusively. (p/s – looking at the data again, the spike in unemployment rate of 3.5% happened when the number for those outside of the labor force was at its lowest. So, the minimum wage may have some explanatory power. The V-shape can be explained by discouraged workers, who entered the job market only to find it was harder than expected to find a job, and left it altogether soon after. This makes the minimum wage narrative very promising but getting a hard number to test it out is hard.)

The second was the legalization of undocumented migrants. This was my favorite explanation, until recently. There was an amnesty program for these workers that began in October 2011 and ended in September 2013. Jason Ng at the Wall Street Journal reported about 0.5 million workers were legalized.[1] The figure sounds right except the program ran for 2 years. Why would the labor force size increased significantly only in 2013? Was it the case of last minute legalization? Was all of the 0.5 million registered only in 2013? There was a renewed effort by the government in July and August 2013 to get all those undocumented foreign workers to register with the authorities but I think it would take guts to say yes and be all confident about it. Also, the increase in labor force was 0.9 million, which is far, far higher than the number of amnesty given out. So, there is a hole there. And… it cannot explain the drop of those outside of the labor force. The legalization, I think, should not affect that number. They are already working and their legalization would only increase the labor size. For these workers, it is merely a transfer from the underground economy to the “above ground” economy, not from outside to inside of the labor force.

The third possible reason was a population boom and this is my least favorite because it is a bit convoluted. If you look at Malaysia’s demographics, there is a bulge for cohort aged 20-24 in 2010.

Malaysia demographic projection by Department of Stastistics

There were close to 3 million of them and the year 2013 was about the right time these people graduated out of schools. But here is the thing. There were about 1.1 million students in Malaysia’s higher ed institutions, doing diplomas, bachelors and higher level degrees. It cannot be there the 0.9 million graduated in just one year. There is also a V-shape that cannot be explained by graduating students because it suggests these graduates leaving the labor market after joining them, which I do not think it is the case.

So, the three possible explanations come short in their own ways.

I was researching on something else recently until I re-discovered that Malaysia raised its mandatory retirement age in July 2013, from 55 years old to 60. I remember reading about this a long time ago but it completely went through my head within the context of labor size. That is an embarrassing thing to admit because it was such a big thing that I forgot. So, the raising of the retirement age sounds like a promising possible factor behind the increase in labor force. First, there were about a million of them. That is a good number because again, remember, the increase of the labor force in 2013 was about 0.9 million. Now, it is likely that not all of them are in the labor force. This is a number that needs some researching.

There is a problem with the explanation, though I think it is not as bad that it completely rules out the retirement age point. The problem the retirement age factor faces is not as big as those faced by the amnesty and population boom factors. The problem is that the labor force size markedly increased around January 2013, six months earlier than the implementation of the new retirement age. This requires a bit of a research but a possible explanation is that those nearing the old retirement age in 2013 just before the implementation date were given the choice to continue working. A sort of grace period for them. Since the retirement age act was gazetted in December 2012, the market knew of the details pretty early in the game. This can easily explain the rise of the labor force. The new retirement age might even attract those outside of the labor force who had retired to rejoin, and this can explain the descending slope of the V-shape for those outside of the labor market. I am unsure how to explain the rising slope however.

So, here is my explanation for the drastic increase in the labor force.

The retirement age increase drastically reduced the outflow of labor from the market for one time. The inflow of remained about the same, or maybe slightly bigger than before because of the amnesty program, minimum wage introduction and the (minor) population boom.

Summary? The raising of the retirement age is the main cause of the drastic increase in the labor force.

The new problem now is to explaining why the labor force has contracted since it peaked in October 2013 and why the number for those outside of the labor force rose after September 2013.

Mohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reserved

[1] — About 1.3 million of an estimated two million undocumented foreign workers had registered with the amnesty program, which started in October 2011 and ended in September of last year, according to government data. However, only about 500,000 received legal documentation, while around 330,000 were repatriated. The program that ended on Monday was an extension of the one that ended last September. [Malaysia Gets Tough on Illegal Immigrants As Amnesty Program Expires. Jason Ng. The Wall Street Journal. January 21 2014]

I rarely agree with Rafizi Ramli on policy matters. His advocacy for free tertiary education is an example; I think there has to be cost to education and if help is required, it has to be selective based on needs, not through blanket means which can have disastrous effect on public finances. His suggestion for the auctioning of approved permits for imported vehicle is another; auctions it will make things more transparent but it will not cut car prices down. But I do agree with him on some other issues and his position on the tiered vehicle-fuel subsidy regime as proposed by the government is reasonable.

He does not think well of it and I think the proposed system is horrible.

As reported in the papers, low-income consumers will enjoy full subsidy, mid-income consumers will get a quota of subsidized fuel and those in the high-income brackets will have to pay the unsubsidized price.[1]

Rafizi argues those enjoying full subsidy can resell their fuel to other groups at a price higher than the subsidized level but below market price. I think so too. The government can make such transfers illegal but being illegal does not mean it will not happen. And I cannot imagine the authority spending considerable resources to hunt down on a whole lot of Malaysians trying to benefit from such loophole in the tiered system. Rafizi has explained it rather well and so, if you want more explanation I suggest you give his blog a read.[2]

Because of the major loophole, I am not so convinced there will be any savings from the restructuring at all. In an efficient market faced with such tiered regime, people will buy subsidized fuel through the low income group (the new middle man) only. So, the cost of the government maintaining the proposed much-more-complicated system can be as expensive as, if not more than, the current simplistic blanket subsidy system. It can be as expensive because the quantity of subsidized fuel purchased will not go down in an efficient market. It can be more because you have to keep a more complex control system for the system to really work. If you want to fight post-sale transactions, then you will have to consider enforcement cost, on top of the actual fuel subsidy cost itself.

We do not live in an efficient market but I can easily imagine a lot of people doing it, if not all. This is already happening for subsidized diesel that companies enjoy from the government. The smuggling of fuel to outside of Malaysia is another proof that it is already happening. These two examples are example of tiered markets.

And remember, the beneficiary of the proposed tiered system is the lower-income households. They need the money. They have a strong incentive to resell their subsidized fuel to others who do not have access to it. Others in the mid-income brackets can be as saving-driven as others. There is an uncaptured producer (or is it consumer?) surplus there and it makes sense to internalize that surplus. The only who will not care are the super-rich who cannot be bothered with the hassle (unless they organize a smuggling business themselves, eh?).

It helps the low-income households, but that is such an expensive and a complex way to do it.

I prefer the plain old subsidy cut to the tiered subsidy (though I think Rafizi disagrees with this). Plain old subsidy cuts guarantees savings.

And if we want to help the low-income households, I prefer cash transfer, like I have always for the longest time. We already have the BR1M program. Just improve on the infrastructure. Cash it directly into the bank accounts of these low-income households. If they do not have an account, create one for them. Address the abuse and corruption instead. No need to get overly creative on this matter.

Mohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reserved

[1] — KUALA LUMPUR: Only those with a monthly income of below RM5,000 and cars with an engine capacity below 2,000cc will be entitled to unrestricted purchase of subsidised petrol under the new petrol subsidy system, according to a report by Sin Chew Daily yesterday. The report said the target is to launch the new system in the third quarter of this year. Those who earn between RM5,000 and RM10,000 per month will only be able to purchase 300 litres of subsidised diesel and RON95 petrol per month, the Chinese daily said in the report. Those with a monthly income of RM10,000 and above will have to purchase RON97 petrol, which will be based on market prices and without any subsidy. [Fuel subsidies to be means tested, says Sin Chew. The Edge. June 3 2014]

[2] — Berdasarkan maklumat yang dilaporkan setakat ini, saya khuatir sistem subsidi baru petrol dan diesel ini akan mewujudkan pasaran gelap yang menjual petrol dan diesel seperti berikut:

1. Kumpulan yang dibenarkan membeli petrol dan diesel pada harga subsidi boleh membeli secara kerap dan menyimpan petrol dan diesel ini;

2. Mereka kemudian menjual kepada ejen pasaran gelap yang membeli petrol dan diesel ini pada harga yang lebih tinggi;

3. Ejen pasaran gelap kemudian menjual petrol dan diesel ini pada harga yang lebih rendah dari harga pasaran kepada syarikat, pengusaha atau pun orang persendirian yang mahu mendapatkan harga petrol dan diesel pada harga yang lebih rendah. [Sistem Subsidi Baru Petrol & Diesel: Risiko Penyelewengan Dan Kesan Berganda Kenaikan Harga Barang. Rafizi Ramli. June 3 2014]

If you have been following the Malaysian House Price Index published by the National Property Information Center (NAPIC) in the past few years, you would probably have seen some sharp drops in house price growth. You would think, all the government and the central bank’s initiatives were working well.

But if you were really paying attention to it, you would notice that the series has been suffering from drastic revisions since 2010. You would realize the revised drops were shallower than before, or it was not really a drop at all. Which makes me unsure about the effectiveness of all those tightening by the authority.

I have noticed this for quite some time now but it was only recently that I decided to look into it. And true enough, the latest data point from the index usually underestimates the rise in prices. Or more accurately, the preliminary reading underestimates the final data.

You can see the difference between the revised data and the preliminary data below (red is the revised/actual  index and blue is the series if there is no revision at all):

20140602 MHPI

The revised series is just the latest series available from NAPIC, which is reproduced by Bank Negara Malaysia in its Monthly Statistics Bulletin. For the unrevised data series, I had to go through old databases maintained NAPIC and the central bank and collate all preliminary readings for each quarter.

You can see how drastic the revisions can be from the chart above. If you like numbers, the root mean square deviation for 2003-2009 is 0.9% while the average RMS for 2010-2013 is 3.3%. I chose 2003-2009 and not earlier because earlier unrevised figures are somewhat unreliable because they were not published every quarter.

The drastic revisions give a very wrong impression of reality (assuming the revised series gives the right version). That may sound obvious but if you know nothing of the revisions, the series may scare you. In 1Q13 for instance, you would see a sharp collapse price growth, which would probably push homeowners into panic mode (see the blue series below):

20140602 MHPI comparing indexes

If pre-revised data is to be believed, house price growth slowed to 6.0% YoY in 1Q13 vs 12.2% YoY in the previous quarter. The end is near, one would say. Finally, BNM tightening were working, you would say. But after revision, growth was at 10.7% YoY (the short red line in the second chart), much higher than the preliminary release.

From the look of the revised index, house prices growth are decelerating, but only slowly.

More importantly, since the preliminary data is subject to large revisions, there is essentially a 6- or 7-month recognition lag. It is only after 6-7 months that you can say something about house prices with great confidence from reading this index. If you do not have the patience, then the only thing reliable from the preliminary data is the direction of change.

The Malaysian federal government appears committed to cutting its fiscal deficit down to 3.0% of NGDP by 2015 (from 3.9% in 2013) and then balancing it by 2020. I think the 2015 target is achievable, especially with the GST coming in next year. As for the 2020 goal, that is far into the future to matter right now (in any case, I am a bit skeptical).

The deficit is slowly coming down. Sure, the expanding NGDP has helped a lot in bringing the ratio down but yearly government expenditure in 2013 did grow only 0.4% YoY, in contrast to the double-digit yearly growth seen recently. You could see it from the annual deficit in absolute terms. It was MYR43.8 billion in 2010 and in 2013, it was MYR39.5 billion.  There is seriousness in the deficit cutting exercise, even if it is a recent phenomenon.

The seriousness however may bring another problem.

The combined government spending and government investment (public GFCF) figure has been growing pretty slowly. I would not call it austerity like some have. That is just loose talk. But still:

growth public sector

We do not really see the effect of slower public spending-investment growth on the RGDP headline in 1Q14, which grew 6.2% YoY, partly due to a low base effect (I think if you somewhat control the base effect, real growth might come out to 5.3% YoY, which is okay). Exports have been recovering strongly and that hides the weakness in government-related GDP components. Government-related components, make about 20%-30% of the total GDP.

Not that I am advocating more government spending. But if you are worried about just the headline growth regardless of its components, then this should probably bug you.

The strong export recovery also hides a weakening private consumption expansion caused by the subsidy rationalization exercise, which is a bigger issue. Private consumption makes up 60%-70% of the GDP. It grew slower from 7.4 YoY in 4Q13 to to 7.1% YoY in 1Q14. The 7.1% YoY is not a bad growth but it would likely decelerate further, with more subsidy cuts seem to be on the way as well as that expected benchmark rate hike. Also, the 2H13 private consumption growth rates were pretty high: it would be hard to maintain the same rates unless the consumers and the private sector get some big break. A break would mean no more subsidy cut for the year.

In short, the strong export recovery would probably hide the slower expansion experienced by the domestic GDP components in 1Q14.

Exports would like continue to grow for the rest of the year, but I am unsure how it well it would carry the whole economy when the other pistons are having issues (and one purposely being suppressed).

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