Before UMNO shares its voting intention on hudud with the public tomorrow, I would like to point out what I think are the two assumptions behind hudud politics, as pushed by PAS.

One, all non-Muslim MPs would/must refrain from voting in the Parliament.

Two, all Muslim MPs would/must vote yes.

These assumptions are the very reasons why PAS think they have the numbers in the Parliament. There are 135 Muslim MPs out of total 222 Malaysian MPs. Assuming no abstained vote and full attendance, they will need at least 113 yes votes only to pass the bill with certainty.

But these assumptions are merely assumptions and they are far from being right.

The first assumption is based on the idea that hudud would not affect non-Muslims and so, non-Muslims have no business to interfere. I have registered my hostility to that notion for a long time now and I am restating it here: hudud is not a Muslim issue exclusively. It is a national one and so it affects all of us regardless of beliefs one way or another. Why? Anything that affects the majority population will inevitably affect the character of the whole society. And already, even with the current dual systems that we have, there are conflicts between Muslim authorities and the non-Muslim population, which proves that no community works in isolation.

The second assumption is based on the idea that the Muslims – really the Malay community – are monolithic. Further embedded in the assumption is that no Muslim-Malay would go against the words of god, which in turn is dependent on yet another assumption that takes the bill for the words of god. But the Malay world is diverse and not all would believe what a preacher-politician have to say. On top of that, several counterarguments have been thrown back to PAS and among them that the bill PAS plans to introduce to the Parliament is not god’s law but rather, it is written by PAS, i.e. human-made.

There are signs that the two hudud assumptions are disintegrating. DAP and PRS will vote no, primarily breaking the first assumption. PKR and PBB will vote no as well, breaking primarily the second assumption, as well as the first one since they have a number of non-Muslim MPs.

The pro-hudud camp is angry at this. As their assumptions fall apart and unable to appeal to the mind, they are now left with only physical threats to cow others into submission. 

Beginning April 1, cab fares as regulated by the government will increase from RM0.10 per 115 m to RM0.25 per 200 m. That’s about 43.8% fare increase. The flagfall cost remains at MYR3.00 for the first kilometer. There are other hikes but I want to focus on this particular case.

Nobody likes a fare hike. Whatever sense it makes, paying for something extra for the same thing is not something I enjoy. But cab fares have not been hiked for six years and I think, it is only fair to the drivers to hike it, especially when their real wages have definitely come down.

I do take cabs from time to time and I do talk to them, asking them about when do they wake up, when do they finish, how much do they make, how much rent do they pay for the car, do they own the car, etc. It is not an easy job. So, I will not complain too much about it and I do not think I have the right to say anything bad because as a consumer, I have benefited from the six years of no hike.

But Institut Rakyat thinks otherwise and they failed to notice the effect of compounded rate. From The Malaysian Insider:

“Having failed to conduct a fare review for the last six years, SPAD has now opted for a sharp and sudden increase,” Yin said in a statement.

He said this steep increase represented a regulatory failure on SPAD’s part, as the agency was supposed to conduct fare reviews every two years with focus on small and manageable increments of 10%.

Yin said SPAD should have considered a gradual increase in fares to balance both consumer and business interests, which would help promote the use of public transport in the country.

He said a gradual phase-in of the overdue fare increase, at 10% at regular intervals over a period of one to two years, would be fairer than making up for six years in one fell swoop.

He reckons it would be fairer for the consumers if the authority does a small hike at regular intervals instead of what will be done now. [The Malaysian InsiderFare hike too sudden, steep, says think tank]

He thinks it is better for the consumers if the authority “does a small hike at regular intervals instead of what will be done now.”

I think his analysis is wrong. Here is why.

If you look at the mathematics, for passengers, it is quite clear a frequent rate increase of 10% every one or two years is actually a worse hike-mechanism versus a 44% increase after six years. Worse in the sense that total fare paid in the former case is larger than the those paid in the latter one. There is a compounded effect here that makes the seemingly small 10% increase more expensive than the 43% hike.

Here is a graph where I demonstrate just that:

Compounded rate

The light blue line indicates how much total cab fare you would have paid if the rate had increased by 10% every second year.

The red line is the current scenario, explaining the total cab fare you have paid.

The assumption here is that you travel 5,000 km per year. The flagfall cost is ignored for ease of calculation. Having flagfall cost included does not change the analysis by much; remember, the flagfall cost does not change and only the rate changes. Also, just one person passenger with no other charge like baggage, toll, whatever.

As you can see, the blue line is consistently above the red line. That means you would have paid more if the rate was raised 10% every two years instead 44% once in the sixth year. In fact, the dark blue bars show exactly how much extra you would have paid in total.

For instance, in Y6 which is 2015, under the 10% increase every 2 year regime, you would have paid MYR3,976 fare in total over the six years. Under the 44%-hike-done-after-6-years regime, your total would be MYR3,715 in the same period, MYR261 lesser than the 10% case. You can see that in the chart.

So, the right conclusion here is that the 2-year-hike regime would be fairer to cab drivers but the riders would not like it by one bit. The 6-year-hike regime would be unfair to the cab drivers but it saves riders money.

The 44% figure is of course huge compared to a mere 10%, and superficially, it is easy to say we prefer 10% to 44% rise. But that is falling into a psychological trap prepared by the gods of compounded rate. Our job is to resist that psychological temptation.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
p/s — if you are interested, I have posted the simple model here (updated. Please read the second postscript). There are at least one or two more dynamics I have left unexplained. You can figure that one yourself. I want to go home.

pp/s — And it is the day after. I ran further modelling (see tab Model 2 in the spreadsheet) and I have to say the conclusion is specifically true for the last six years. If we put the two 10%-2 -year and the 44%-6-year series head to head and run it up long enough (unlikely to happen because the authority’s plan is to hike it once every two years), the compounded effect of 44% eventually catches up with the more frequent 10%: to be exact, 12 years later in 2027. But the 44% hike seems like a one-off event, and so, the failure to hike it once every two years is a boon for riders. Thus, as a passenger, on the balance over the past six years, I would not complain too much. And just to satisfy the cat, I also added a yearly increase in the model: a yearly increase at 10% makes the total fare paid zooms away, if I may exaggerate, exponentially, and never to look back. Clearly, a yearly hike is the worst option here and if it is to work to riders’ liking, the yearly increase has to be much, much lower for it to make sense.

And so, in the media, it is reported that Malaysia’s external debt (some were more careless by giving the impression that it was total debt, just to make a sexy, alarmist headline for the clicks) increased by more than three folds. This is one of those deplorable reporting:

Malaysia’s external debts grew by more than three-fold in less than a year, from RM196 billion at the end of 2013 to a whopping RM740.7 billion in the third quarter of last year. In a written reply to William Leong (PKR – Selayang), Finance Minister Datuk Seri Najib Razak attributed the spike to “new definitions” for external debts in 2014. Almost two-thirds of the increase was due to foreigners holding on to Malaysian bonds, now considered as part of the external debts. Leong warned that this is the scenario currently taking place with debt-laden 1Malaysia Development Berhad (1MDB) where a huge chunk of its RM42 billion debt is allegedly being held by foreigners. [Eileen Ng. The Malaysian Insider. Malaysia’s external debt tripled to RM740 billion last year]

From there on comes various accusations by a whole lot of laypersons, at a time the government is already under severe attacks for the fiasco that is 1Malaysia Development Berhad. I am not a fan of this government but in this particular case, the focus is misplaced and the criticism on external debt is based on a misunderstanding. The supposedly massive rise in the external debt is a non-issue, unless you are a wonk excited about the most technical of things. This is what it is, a technical matter.

The truth is that there is really no increase of that magnitude in Malaysia’s debt, totally, externally or internally. Malaysia has always owned all of those debts. What happened was that the term “external debt” was redefined to include all debts held by foreigners. Previously, the term was used to describe all Malaysian debts denominated in foreign currencies, regardless of ownership. The former is big, the latter is small. If you need a Venn diagram to understand them, here it is (the graph does not exactly correspond with the definitions but it is good enough to highlight the difference in definitions):

Malaysia's new external debt definition

This redefinition exercise had been recommended by the International Monetary Fund for the longest time and Malaysia only recently decided to adopt the proposed nomenclature. This in fact was announced last year, as early as March. When I first learned that last year, I made a joke that somebody would scream murder. Indeed, a year later, here we are. MP William Leong definitely fell into the layman’s trap, and a whole lot of others too.

There was only an increase if you used one definition at one point and then switched to another definition at the next point, and pretend the two definitions refer to the same thing. This is wrong. You need to compare points from the same definition for the growth figure to make sense. The supposedly dramatic jump-growth as reported in the media is just a garbage figure of no value. It was calculated by including a significant, large structural break.

While the media is utterly in the wrong and clueless even as they wrote the word “redefinition” in quotation marks as if it is a meaningless term, the Ministry of Finance is the cause of this misunderstanding. While it mentioned the redefinition exercise, the ministry compared the old definition with the new one and voila, a drastic increase just because they naively calculated the growth rate, despite, knowing a redefinition had occurred. So, it is a horrible answer, as horrible as the way the Finance Minister is handling the 1MDB issue. The media was just playing the role of a loudspeaker here, with no thinking in the middle.

I repeat. There is no increase as reported. If you keep the old definition and apply it forever, you will find any change from that will not come anything close to the sensationalist headlines featured by Malaysiakini and The Star all the way to, disappointingly, The Edge, which I consider as the most economic-financially literate Malaysian publication. I like The Edge but a mistake is a mistake. If you use the new definition and then stretch it backward, there will be no big change as well. Just keep the definition consistent if you want to calculate the growth.

Finally, there is really nothing sinister about the redefinition.

The reason for the redefinition has something to do with the evolution and the maturity of the Malaysian debt market. Twenty or thirty years ago, Malaysia did not have a big bond market and it was relatively unimportant to the economy, especially compared to today. So the old definition made sense then, in some ways. But since the 1990s, the Malaysian bond market has expanded rapidly to become one of Asia’s biggest. Foreign ownership of government debts also shot up as foreign investors searched for relatively safe assets. The debt market has become so large, that the newer definition becomes the more attractive one to use.

As in a lot of stuff out there, which definition to use really depends on your purpose. Just understand the data before using it.

So, ladies and gentlemen, please do not get too excited here. On this front, there is nothing to see really. Go, instead, to the next stage right across the road. Yes sir. A much more entertaining play called 1MDB is running there. Get your tickets. Sit back, and… be angry with 1MDB and not with the technicalities of debt redefinition.

January inflation clocked at only 1.0% from a year ago while in December it was 2.7%. That was a pretty drastic slowdown that I bet someone will cry deflation wolf somewhere soon.

The cause of the slackening is easy to explain. It is unambiguously due to the drop in retail petrol and diesel prices. RON95 fuel price, the most popular fuel in Malaysia by far, in January dropped from MYR2.26 per liter to MYR1.91 in December. Diesel went down 30 sen to MYR1.93 per liter in the same period. In January 2014, RON95 was MYR2.10 per liter.

At this rate, Malaysia might be seeing actual deflation this month. In February, both RON95 and diesel went down further to MYR1.70 per liter. The drop in yearly terms in February 2015 is greater than that seen in January because in February 2014, RON95 was MYR2.10 still. In January 2015, it fell 9% YoY. In February 2015, it decreased 19% YoY.

In fact, on monthly terms, we are already in deflation. This is not your monthly, seasonal price fluctuation that people usually ignore and say, ah, it is nothing. This is a clear deflation.

Is this deflation something to worry about?

No. I do not think so.

Deflation these days connotes bad news. Japan and Europe are trying hard to avoid deflation. In Singapore, deflation played a role in convincing the monetary authority there to loosen up its forex policy, which is their monetary policy. And the last time Malaysia had a deflation, it was during the 2009 recession.

But not all deflation are the same.

In Japan and Europe and Singapore today, and Malaysia in 2009, deflation came about from reduced economic activities. There was less demand and so, price pressure was weak and that pulled prices down. It was demand-driven. In fact, we really are worrying about demand rather than price itself. Price changes – inflation or deflation – are usually a symptom of something else.

Unlike in 2009, the (possible) February deflation would be supply-driven. The weakening in prices has been supply-driven in the sense that technological improvement – all the talk about shale mining that is turning the US into the world’s largest oil producer – has created oil glut in the market.

I do not worry because this is the same pressure that forced computer prices down over the decades. It is a kind of pressure that makes a typical person feels richer because he or she could now buy something else with the same amount of money and still afford the same quantity of fuel or more. Or save them. I do not see a price-wage spiraling down out of control here. The price deflation does not make them feel poorer because the deflation does not come about from them losing them job or suffering a pay cut. There are news of some retrenchment in the oil and gas sector but the size is small so far, as far as I know and besides, the sector is not the biggest contributor to the Malaysian economy. Indeed, the biggest sector, electronics, is having swell of a time and being ignored by the press.

I also do not worry about deflation because fuel is not something a typical consumer can live without for too long. Deflation can be disastrous to the economy in the sense that people would stop buying or postpone their purchases until prices fall further to stabilize at some low prices. But with fuel, I do not think you can do that to the point it would adversely affect growth. Fuel is an essential good and you just have to use them, especially in a society that is so dependent on combustion-type vehicles. If you do wait out, then you might not be able to drive or get to somewhere at all. You just need them and you will keep buying it even when you know prices are falling.

More importantly, the postponement of purchase is dangerous to growth especially when consumers do not know when prices would bottom out. So, they keep holding back and then not making purchases at all. This can be particularly devastating for fixed assets like homes and durable goods. In the case fuel prices, it does appear prices have bottomed out, especially since the prices used for the determination of petrol prices in Malaysia is lagged by a month, as I have explained previously. If global crude prices hold at the current level at about $60 per barrel compared to $45 in mid-January, it is very likely that retail petrol prices will be higher in March next month. So, a February deflation will be temporary. This also means people would line up at the gas stations at the end of this month preempting the loophole that comes with Malaysia’s imperfect dirty float system. So, instead of being encouraged to postpone purchases, they will hoard them instead.

Before I end, I am not saying there is no problem with demand. I still worry that consumption growth is slowing despite the surprisingly strong expansion last quarter. But the possible deflation in February is very much driven by the supply-side, and not demand.

So, do not worry about the deflation.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
p/s — I am tempted to say yet another reason why I was not worried about deflation, but decided the argument is problematic. That argument goes: core inflation is still more than 50 basis points above headline inflation. Since core inflation is more reflective of demand, and since it strips fuel away and therefore free from supply-driven inflation/deflation seen in January, it suggests demand is going well. But I checked the data from 2008-2009 and core inflation was somewhat healthy despite the fact there was a recession. This probably shows core inflation is an imperfect measurement of demand change.

I am putting it at the postscript to catalog my own thoughts on the matter and revisit it later.

The number 50 is psychologically special to almost everybody. Notwithstanding the debate about the age of Malaysia, whether it was 50 years old or 44 in 2007, we too had a huge celebration for our golden anniversary. Down south this year, Singapore is approaching its 50th anniversary as an independent state.

The Singaporean anniversary is less ambiguous than Malaysia’s. There are fewer ominous existential questions being thrown around unlike in Malaysia when from time to time, we hear secessionist sentiments coming out from Sabah.

There is a myth in Malaysia that Singapore seceded from our federation. In truth, it was Tunku Abdul Rahman who pushed the island-city out with a vote in Parliament in Kuala Lumpur sealing the decision.

Unilateral secession is impossible legally. Furthermore, Singapore itself did not want to leave and this was very clear through Lee Kuan Yew’s writings. Jeffrey Kitingan, unfortunately, recently repeated the secessionist myth as he pandered to Sabahan nationalists for his own political fortune by saying secession is a state right, showing again and again that history can be forgotten and worse, twisted to fit the preferred narrative.

That is not the only myth: some Malaysians still think there are 14 states in the federation somehow forgetting that Singapore is no more a member state. It is as if the vestiges of the Malaysian Singapore still linger and that these Malaysians have yet to come to terms with the 1965 separation.

The fourteenth stripe and the fourteenth point in the Federal Star of the Jalur Gemilang now have been redefined to represent the federal government and the three territories, instead of Singapore as was previously. Our coat of arms no longer has the Singaporean red and white crescent and star underneath the four colors of the old Federated Malay States. In its place is the red hibiscus, what seems to be the forgotten Malaysian national flower.

Regardless of the myths, Singapore and Malaysia did go separate ways and that has been the source of contention between the two. The issues range from water supply and train land in the heart of Singapore to ownership of rocky outcrops in the middle of the sea. Some have been resolved amicably but the general rivalry persists even as the Causeway ties have improved since the almost irrationally nationalistic days of Mahathir Mohamad and Lee Kuan Yew.

One can speculate what would have happened if Singapore had remained within the federation. This question has been raised as Singaporeans reflect on their 50 years of independence but I think the more interesting one is whether there would be a time when Singapore would rejoin Malaysia.

As much as I believe international borders with its passport and visa requirements are suffocating in this modern world, I think that is a very distant possibility. Malaysia is unprepared for Singapore just as we were not prepared for a Malaysian Malaysia in 1963. I do not believe the pro-Bumiputra policy will go away even if power does change from Barisan Nasional to Pakatan Rakyat in Putrajaya. The Bumiputras are the majority in Malaysia and there will always be pressure to appease them. It is the uncomfortable truth of electoral politics that makes idealists sigh.

Just look at the squabbling in Pakatan between PAS and DAP that has degenerated to race and religion. You can also read Datuk Seri Anwar Ibrahim’s speeches and wonder what exactly he is saying about hudud, for instance, out of fears angering either the liberals or the more conservative Muslim majority.

Meanwhile in Barisan, the slightest hint of liberalization is being fiercely opposed by the conservative sides in Umno. When discussing the Transpacific Partnership agreement, one of the top objections to the negotiation is how it would affect the Bumiputra, and really, the Malay, business community. Prime Minister Najib Razak is already facing a civil war within his party for the liberalization he did and other less admirable factors that include the mismanagement of the country.

Ultimately, there is a common theme across Barisan and Pakatan and that means it is more of a systemic Malaysian issue. Adding Singapore into the equation would not help and could even make it worse.

Singaporean diplomat Bilahari Kausikan recently said in a speech, it is “impossible for us to ever be part of Malaysia again unless Malaysia abandons its basic organizing principle.” That principle will not go away any time soon.

But we have Asean and in many ways both Malaysia and Singapore are already integrating. Both citizens can travel across the border without much hassle, if you discount the congestion at the Causeway. Some Singaporeans are already living in Malaysia as the government is promoting Nusajaya and Johor Baru, to put it bluntly, as the suburbs of the world-city Singapore.

And the Asean Economic Community due for implementation this year would deepen integration between the two, which is already one of the most ― I would think it is the most ― integrated national economies in the region.

Realistically the AEC would take time but the trajectory is clear. That I think is a reasonable future for both Malaysia and Singapore: a closer confederation of South-east Asian states.

So, we do not need Singapore in Malaysia. We just need to have both countries to be active in Asean.

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 February 14 2015.

The Malaysian GDP figures released yesterday suggest there was indeed a pre-GST spending spree.

Private consumption growth was phenomenal especially if you consider the fact that previous quarterly growth figures have been slowly dropping gradually over the past year from 8% year-on-year to all the way down to mid-6% in the third quarter of 2014. The latest consumption figure grew 7.8% year-on-year, which is crazy. It is so red hot that if the overall situation had not been so gloomy, Bank Negara would surely have panicked and raised its rates by another 25 basis points. This is quite a surprise even if you had believed the pre-GST spending spree hypothesis.

As a result, 2014 growth was at 6%, which is higher than most (well, all) economists watching Malaysia had projected.

But the central bank would not hike rate because the feeling is that the jump is temporary. I think it would last into this quarter before growth takes on a drowsy mode. The GST should depress consumption growth from April onwards. This is the danger. If consumption could jump so high pre-GST, how low would it get post-GST?

That is a scary thought.

This also gives more proof that consumers do expect prices to increase post-GST. I should add ceteris paribus, I guess, because the low retail fuel prices could make the net effect somewhat a wash. As for the recent electricity tariff cut, do not bother. I did a simulation and it hardly changed my headline projection.

Regardless of expectations, I am unsure there would be an actual net price hike. Last year, somebody told me the authorities expected (ranging from the Department of Statistics to the Treasury) inflation would hit 6% with GST, after months of official drive by the mainstream press that inflation would rise. Then it fell to about 4%. (You could understand why most banks are projecting about 4% inflation previously. They took the government’s guidance to heart) Now? I was informed the government expected it to be about 2%, mostly because of fuel prices. My own projection is about 3.3% YoY monthly average where I assume the GST will hit the economy in full force without any exception-zero rated stuff, but I keep several projections in the spirit of scenario analysis with the lowest at about 1.5% YoY where I pretend GST is the spoon in The Matrix.

My confidence in my models is  at an all time low and I have resigned to the fact that we will only know it in June or July when the Department of Statistics will release the April-May inflation figures. The crazy demand fluctuation, the retail fuel flotation and the GST make projections go everywhere.

I think the general consensus is that there will be a spending spree before the GST, which will be implemented on April 1. The idea is that a lot of consumers would expect price hikes of various degrees on or after April Fools’ Day. So, people would rush on to capitalize on current cheaper prices. This is much like how each time the government slashed petrol subsidies and hiked petrol prices previously, private vehicles would line up at the gas stations as consumers try to save the tiniest bits that they could.

I used to agree with that idea despite holding that the effects of GST would not be the same across all goods. A hike sounds likely for new homes but for some others, it does sound like a price reduction. In fact, I am unsure about a lot of stuff.

But in the end, it is expectations that affect current behavior and not actual future prices. The expectations might be wrong, but it will be wrong on the day consumers see the actual price, not before. So until then, expectations would still drive the spending spree. But of course, I am forming an expectation about people’s expectations, which can be problematic.

I am unsure about that spending spree now because I saw a piece of data from a survey at my workplace. I cannot reveal it because it is proprietary data. I would probably get into trouble for this (haha) but the result is quite different from my earlier expectation. I think all I can say is that more respondents expected to spend less instead of more before the GST!

The implications can be big. If you believe the consensus story, growth would be relatively strong in the first quarter and weak for the rest of the year. They spend first and spend less later.

Now, the survey result sounds like a straight up Ricardian equivalence, or at least close to it where consumers save to fund their near future spending (Ricardian is actually more than this but the saving story is similar). So, if the survey is right, there will be no spike in spending this quarter. Maybe even a slump.

People are asking me if the Malaysian government’s new 3.2% deficit ratio target is achievable.  I have read in the news that several politicians are skeptical about the target. I do not remember who said that but I feel the sentiment is shared by many.

But the only way to really answer this objectively is to run a sensitivity analysis.

It is relatively easy to do a sensitivity analysis and I have done one last week under the assumption of no expenditure cut. That one shows how the deficit ratio would react if the government had not changed its budget under a range of NGDP and revenue assumptions. I think it somewhat presents the realistic worst-case scenario. The government said its fiscal deficit would have gone up to 3.9% of GDP in 2015 without any expenditure cut. I think that would come close to my expectation (4.0%-4.1%), which is based on no revenue growth (not unreasonable) and at about 4%-5% NGDP growth. I am not reproducing the table here because I do not want to confuse the readers. If you are interested in that sensitivity analysis, you should revisit the post.

But that sensitivity analysis does not indicate whether the new 3.2% target is realistic. To answer that, it requires a bit more moving parts added into it. One additional dimension is required to be exact.

I am doing that here by showing 3 cases of revenue change under a range of NGDP and expenditure assumptions (note the not-so-small difference from the above model). To cut through the graphics, I think the 3.2% fiscal deficit ratio target is achievable if revenue grows by about 2% (I said about because I am too lazy to run a differential equation).

Before that, some legends for the three charts at the bottom. The yellow-highlighted cells describe the would-be situations if the expenditure was not cut (yes, it is a funny coincidence that the government had planned to increase its expenditure by 3.2% from 2014 in the original budget). The red-highlighted cells show the deficit ratio under the January 20 revised budget expenditure figures (Under revised budget, expenditure would still grow 1.2%. So, please do not call this austerity).

Here is the deficit ratio if 2015 revenue does not change from last year. Achieving 3.2% target seems impossible under this scenario (I wrote impossible because it would require a very strong NGDP growth at a time the GDP deflator appearing weak. If government revenue is flat this year, then my projection for the deficit would be about 3.6%):

No revenue change

Things would look a bit better if the government revenue would grow by 1% this year, but it would miss the deficit target still as 9% NGDP growth is beyond our reach, given current constraints:

Revenue growth 1%

Under 2% revenue growth case, the 3.2% deficit ratio looks achievable:

Revenue increases 2%

So, after reading through this, do you think the 3.2% deficit is achievable?

Ultimately, your answer must rely on revenue and NGDP growth. I think the reasonable NGDP growth assumption is about 4%-5%. As for revenue, I am unsure at the moment. There are just too many moving parts that require further investigation but the original budget had it grown at 4.5%. It will definitely be lower than that this year.

Hearing voices announcing something over the loudspeakers in public spaces makes me uncomfortable. It gives me the feeling that somebody is watching me and worse, the unknown person is giving me an order. The automatic reaction by the libertarian in me is to question and resist, even if the announcement makes sense.

Most announcements in KL Sentral, Kuala Lumpur’s Grand Union Station with its wide atrium, are harmless. Please let the passengers on-board get off the train first. Please watch your belongings. Please watch your step.

Judging by how some people refuse to wait for others to get out of the train before getting in, it feels like I am not the only trying to resist the announcement…

But from time to time it gets a little suspicious. Come join us for the F1 racing this weekend in Sepang! Drink this coffee.

No, I do not want to watch the F1 under the tropical sun. No, I do not like your coffee.

Yes, they are advertorials telling you to buy something that you do not need.

One time in a train car, a “refresher” would spray a scent of a particular brand of quick canned coffee into the enclosed air. There was no way for me to run, except getting out of the train. The advertisement campaign assaulted not only my eardrums but my olfactory organ too.

I learned to identify which train cars were installed with the horrible refresher and refused to ride on it, preferring to wait for better smelling train sets. It was not hard to know which was which. Oh, that is the car with the horrible smell of coffee. Oh, that is the coffee Wonda train car! I will let the train go for a better smelling one.

The PA system does have it uses. Sometimes, when the trains break down, the announcement helps. But at other times, all the gentle reminders – in London, I think it is “Mind the gap”; in New York, “Stand clear of the closing door, please” or was it in California with its BART? I do not remember; in Paris, well, the Parisian Metro is unique with its chime “na-na-na-na” – are definitely a hint of paternalism. It is a kind of soft paternalism that almost everybody ignores but at its heart is that suffocating authoritarian worldview.

The cavernous badly lit KL Sentral exacerbates, as with any cavernous building would, the sensation with that slight echo that follows the initial sound wave.

Growing up Malaysia, I quickly associate loudspeakers and echoes with Islam. The calls to prayer, the azan, are familiar and with so many mosques around, it can be maddeningly incomprehensible and downright annoying. In this country, expressing dissatisfaction against the competition between mosques for the loudest azan prize can bring trouble as the overly sensitive conservatives ignore comprehension of the azan recital in favor of noise. The louder the azans, the sermons, speeches and readings, the louder will the echoes be.

The echoes give the idea that god the supreme being is speaking to you. This is not just me feeling it and writing crap theory. Switch on the TV or the radio when an Islamic program is up in the air and you can hear how the editors use the echo effect whenever a verse from the Koran is read. In a more adventurous unorthodox Islamic program – I think it was Imam Muda where judges look for the best “Islamic idol” (just like the American Idol!) – an echo would accompany the contestants when he or she read a Koranic verse. So, there is something holy about the echoes.

My travels across Southeast Asia have made me realized the role of echoes in depicting something as holy is not limited just to Islam. I stayed for a week in an alley in Mandalay, Myanmar. At the top of the short alley is the Ein Daw Yar Pagoda. The Buddhist chanting I heard every morning and in the evening through its PA system was, forgive me for the neologism, echorized. It sounded like a prerecorded mantra chanting. I could hear the word amitaba through the artificial echo and among the unrecognizable words. And there was also echo in traditional Christian chanting from the mediaeval times as they sang in their tall cathedrals.

Religion, either god himself (herself for the feminist?) or the institution is an authority, I suppose sociologically, rightly or wrongly. The echo is a signifier of holy authority.

Holy and authority. Those are two of my favorite things.

And so I come back to KL Sentral with its banal announcements along with its echoes.

The libertarian is clenching a fist, but with only four fingers closed.

The Prime Minister announced the government’s plan to slacken its 2015 deficit target from 3.0% of GDP to 3.2%. While it is an easier target, it is still a cut from the expected 3.5% last year. I think we can relax it further but the revision is in line with my sentiment although not fully. There are several measures which I disagree, especially after the PM mentioned the phrase “import substitution” but I will not go into that.

The budget revision involves a number of expenditure cuts and other, I guess, less orthodox measures.

But what if there was no cut to expenditure?

I have made a simple calculation showing how the deficit ratio would react based on changes in the NGDP and government revenue. The original 2015 budget had the NGDP growing at 9% while revenue increasing at 4.5% from 2014, as I have highlighted in yellow below.


I suppose I could add a range of expenditure cuts too, but a 3-dimensional table or chart makes my head spins without the proper software at hand.

Also, I think it is good to use those figures and compare it with historical ones, just for the context:


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