They say history repeats itself. Wikipedia in fact as a page calls historic recurrence describing the phenomenon.

I have been thinking how this is relevant to this age of hyperconnectedness with information overload that is increasingly becoming beyond the capacity of human beings to analyze and verify. We already have the too long don’t read culture that permeates everywhere. When I was working at a unit inside the Financial Times, we were told to write a piece no longer than a thousand words and ideally, 500. I found that a constant challenge, with all the nuances that needed to be explained to audience without the prerequisite backgrounder.

A majority of people simply do not have the stamina to read long, whatever the reason. And social media does not accommodate nuances very well, whatever the reason. This failure to provide room for context does not do justice to truth, and instead creates room for misunderstanding or disinformation.

This is a challenge for a libertarian like me who believes in free speech but at the same time finding myself exasperated seeing rampart disinformation spread not only directly by humans, but also bots.

In terms of communication, increasingly, there is a move towards graphics. In the past, at least I feel so, graphics were merely an assistive tool. Charts for instance enhance the experience of reading complex proses. It is never easy to read, for instance, the real gross domestic product rose 4.9% year-on-year in the second quarter of 2019 over whatever percent growtn in consumption and import, or the consumer price index increased by 1.1% from a year ago, which was an acceleration from 0.7% year-on-year inflation in the previous month. Each word is contextualized and requires preexisting knowledge. A person unfamiliar with the lingoes would be lost in the sea of letters: level versus flow, base versus base, the second derivative versus the third derivative all happening simultaneously that even the best of us will make mistakes. Math clarifies these things to some levels, but charts will clarify it all the way to the bottom for all through simplification.

Charts can be dumb too, But when it is dumb, it is easy to see quickly with the necessary basic skills, unlike complex verbose proses requiring additional brain power.

And charts are only a subset of graphics. Or infographics… whatever that redundant phrase means these days.

But graphics are becoming more than that now. Rather than an augmenting tool, I feel it is becoming the tool in disseminating information regardless of its truth. This is especially so on social media with respect to political messaging.

So, in the age of information overload that discourages reading and killing nuance, graphics are king.

This reminds me of the days of old when murals in Christian churches, friezes like bas-reliefs, and paintings were the main means of communication at a time when the population was largely illiterate. I remember clearly a famous scene from the Hindu story of the Churning of the Milky Ocean carved on the wall of one of Angkor Wat’s long corridors. The wall would show the Devas and the Asuras of pulling a long large snake acting as a rope wrapped around a mountain churning the Ocean of Milk. I could understand the bas-relief by just looking at it, though to have the full picture, I would have to read the story through text, or have someone taught me the legend.

Perhaps there is a parallel here if we contextualize illiteracy given itself time. In the modern era, illiteracy is turning into the lack of discipline to read textual nuance, while in the past illiteracy was the inability to read text.

The solution to both are graphics, or visual representation of an idea.

When I say history repeats itself, I mean we are down going back to visual representation as a means of popular communication. The then and now contexts of returning back to visual representation maybe different, but it is a repeat of past trend nonetheless.

I have a value judgment to make here on top of this. Perhaps the historic recurrence is damning in the sense that despite our massive advancement and improvement in mass education, we are becoming more stupid collectively. Technological progress in terms of information is becoming so advanced that we cannot cope with it. Relative to the frontier of information, we are being left behind so far as information becomes more massive and impossible to process by us individually without the aid of any machine.

In the past, we individually perhaps could catch up with the frontier of information even as the frontier was expanding. We could get darn close to it if we wanted. We could be polymaths.

However today, the frontier is expanding faster than we can ever hope to catch-up. We are made stupid by our own success. And visual representation is a tool to address our regression that we have to rely on it once again.

The gig economy can be many things but within the realm of ridesharing, I see it primarily as a shock absorber in the labor market. That means ridesharing is a temporary fall back plan if you have trouble in the formal market or in between jobs.

Here is an example of ridesharing as a shock absorber: if someone lost an income through job loss, he or she would not suffer 100% immediately because he or she could go to ridesharing without much cost. This shock absorber can be a minor alternative to unemployment benefits, except it comes as no cost to the government.

Because of this, I prefer to have flexibility in the ridesharing sector. Regulations could reduce the flexibility and reduce the effectively of the ridesharing sector as a shock absorber.

Yet it is quite clear that there is a need for labor protection. Regulations do have a role, especially since there is an asymmetry of bargaining power between those driving and the owner of the platform, driving by technology. In the case of food delivery, which is also a part of the gig economy, Foodpanda has market power over its food delivery workers and that market power was only matched with its deliverers’ union-like organizing successes.

When it comes to ridesharing, it does seem current regulations are reducing such flexibility and hurting the role of the sector as a labor market shock absorber. This inflexibility is caused by the need to register with the government if a person wants to participate in the ridesharing economy by driving.

Grab certainly blamed the new ridesharing regulations for reduced number of drivers on the road. This seems to be backed by complaints made by passengers over longer waiting time and higher fares. I personally I have suffered longer waiting time and higher fares, compared to before the regulations came into place. Talking to former drivers have also convinced that there are those who chose to cease becoming participants in the ridesharing sector. These point towards greater barrier to entry and hence, reduced flexibility.

I think as a compromise between the need for regulations and flexibility, perhaps there should be a two-tiers regulation:

  • For those earning below a certain threshold per month over x months, they could be exempted (partially?) from registration.
  • For those surpassing that threshold, they should be covered by current regulations fully .

The threshold is there to differentiate those doing ridesharing as a part time job and those doing it full time (or simply heavy participate of the gig economy). The shock absorber factor is more relevant to the part-timers than to the full-timers.

Admittedly, this will make implementation more complex and open the grounds for some non-compliance. There will be grey areas but I think in making the gig economy as a shock absorber, we should be tolerant of such non-compliance within some margins.

Implementation issues aside, theoretically this should be improve the role of ridesharing as a shock absorber in the labor market. It allows part-timers to join the gig economy without much cost, and making ridesharing sector as a temporary fallback.

September was not a pretty month for Malaysian exports.

Exports for the month fell 6.8% from a year ago. When seasonally-adjusted, it still dropped 3.6% month-on-month. The decline was definitely caused by lower export volume, which points towards weaker global demand. But we know this already: trade war is bad for Malaysia. Once it gets bad enough, no trade diversion will be good enough to fight off reduction in global trade volume.

But what is more interesting to me is the import data and by proxy, domestic demand. September imports rose 2.4% year-on-year. Seasonally-adjusted imports were also marginally up. Imports are a proxy of domestic demand and import growth suggests a growing domestic demand. This is a good news.

There had been concerns over the health of domestic demand recently. Why? Because imports had been falling badly starting from June until August, while seasonally-adjusted figures had been giving mixed signals. From here alone, it was difficult to decide whether the June-August import decline was due to weakened domestic demand or just due to high base effect created by tax-free period. As a backgrounder, the GST was zerorized beginning June 1 and was finally replaced by the SST on September 1.

The September 2019 numbers have now given us the answer: it was largely due to the tax-free period and the high base effect it created.

If the June-August import decline was truly largely about weakened domestic demand, that decline would have persisted into September. But it did not. In fact, there was a significant break: capital, intermediate and consumption imports all had big jumps in September. This is typical of base effect that riddles year-on-year calculation every time there are big changes.

Imports are not the only proxy to domestic demand of course. Inflation is doing just fine.

It was a hobby of sort of mine to attend public forums (fora?) a long time ago when I had time to kill. The late 2000s was a period of flourishing of civil society, and there were plenty of forums going on all around KL, from the most mundane to the most seditious.

At one of them, I remember a lawmaker admitting to exaggerating while making political claims, though he claimed not by much. He reasoned such exaggeration was meant to jolt people into action. A dry statement of fact alone would not inspire, with many surrendering to nonchalance on big issues.

I do see many exaggerations out there today. One of them is about how Vietnam is overtaking Malaysia.

Such event is a possibility. After all, history is filled with instances of countries falling from grace. Myanmar was once among the richest colonial economies in Southeast Asia and today, it is far behind multiple other countries that used to do worse. Malaya used to be at par with South Korea in terms of economic wellbeing but now, Malaysia is far behind the East Asian country, though we are doing not so bad.

But reasonable projections based on existing economic growth, population growth and several other factors point towards how Vietnam-overtaking-Malaysia scenario is possible but unlikely. Already having one of the oldest demography in the region – specifically 31 years old versus Malaysia’s 29 – with nominal GDP per capita at a quarter that of Malaysia, it is highly likely Vietnam would take quite some time with great difficulty to converge with Malaysia’s level, much less pass it.

I think Vietnam belongs to the same group as Thailand (and China): countries that will grow old first before they grow rich. The situation in Thailand is far worse: median age is 39 years old with nominal GDP per capita about seven tenths of Malaysia. Both Vietnam and Thailand are handicapped by with a quickly ageing population, leaving them with not much time for hastened growth. This is orthodox growth economics of course. Behind many of the leading growth models, beyond capital accumulation, tech progress and human capital, is population growth. Unfavorable demography usually leads to slower growth.

But again, it is not impossible for Vietnam to overtake Malaysia. Low likelihood, but still possible. There could be one event or two disrupting Malaysia’s and Vietnam’s growth path. It is hard to predict those events from happening compared to growth projection based on current scenario. But this is where exaggeration can help: it brings up fresh possibilities to take us out of our boring model forming our reasonable basis. It spices things up, opening up room for creative scenario planning.

Lim Teck Ghee claimed that Pakatan Harapan was “an unmitigated disaster for reform from whichever aspect or way you look at” at a public forum. He listed down his disappointments to back it up. “Education, governance, race relations, religious relations, the debacles of Icerd, Zakir Naik, the Melayu Dignity Congress and more. The list of political disappointments and failures keeps growing.”

Yes, there have been disappointments and I share them too. But I am never that naïve to believe all changes will take place from Day One, especially given the way Pakatan Harapan achieved the mandate to rule in the last general election. It is inevitable for democratic compromises to take place frequently, no matter how much one wants to stand one’s ground. This is not a technocratic dictatorship. It is a democracy, and increasingly less flawed at that.

But calling Pakatan Harapan as an unmitigated disaster, I would argue strongly, is an exaggeration given the reforms that have been carried out so far.

I can list those reforms. My favorite is the wider implementation of open tender throughout the public sector: democratic compromise has led to even contracts reserved for Bumiputras being given out via open tender and no longer given out directly most of the times. There are exceptions, but I feel many of them can be explained well. Indeed, for a monster organization unused to open tender system, implementation problems were aplenty and starting totally afresh was not always possible. But by and large, there are more and more adoption of open tender, creating a new culture that makes everybody afraid of dishing out direct contracts. Remember, just less than two years ago, nobody in the public sector would bat an eyelid for giving out direct contract. Direct negotiation was the norm.

Other examples of executed reform include fairer broadband internet market, more independent Parliament with all of its new Select Committees, more independent anti-corruption commission, freer press and even in education, the move away from exams towards a more liberal education.

And there are many more coming our way with good progress made: greater transparency in the public sector in the form of the shift towards accrual accounting and the establishment of the Independent Police Complaints and Misconduct Commission (IPCMC) within the 5-year mandate.

Almost none of the reforms that have happened or expected to happen would take place under the previous administration riddled with corruption led by a shockingly and outrageously dishonest leader, trapping the country’s institutions in a sticky thick morass that would scare any institutionalist away. To me, a disaster would have been a complete no-change scenario.

There clearly has been substantial change since May 9 2018. Only a blind man would deny that.

I cannot know his true intention, but from the perspective I have shared, perhaps Lim Teck Ghee’s exaggeration is needed to jolt us out into action. There are disappointments. And that means we have to work harder to overcome all those barriers to change.

Pakatan Harapan voters had high hopes – they still have great hopes – that Pakatan Harapan would achieve great things and completely change Malaysia for the better. Pakatan Harapan is better than Barisan Nasional, but Pakatan has no choice but to do better to match those great expectations.

As technology progresses with information becoming richer and more accessible, it is easier and easier to do targeted policy. Governments, especially those with conservative economic leanings compromising with democratic pressures, love targeting because in theory, it is cheaper and it avoids wastage. In fact, going back to basic microeconomics, it might even eliminate deadweight loss. I also love targeting, up to a point.

But just because we are able to do targeted policy does not mean we should do it. There are other considerations to be taken into account.

Targeting can create social stigma and that can be damaging in other ways. It does so through signaling, which means it lets other people know that a person is being targeted for some policy. This is something policymakers need to be mindful of, beyond the dollars and cents.

In a society where social status does matter, assistance could lower a person social status.

This is why government cash assistance program via automatic bank transfer is good, among other things. It keeps transactions private, and therefore gives no signaling to other people. So, it has minimal effect on social status if any.

But not all assistance policy can be private. Many do necessarily give out signaling affecting social status. The Free Breakfast Program for students to be introduced by the Ministry of Education in 2020 is one of such un-private assistance policy.

As a result, a program like the FBP cannot be targeted. This is especially so when it comes to kids who may take signaling from targeting wrongly, leading to bullying and social estrangement. At schools, we need to make learning as easy as possible, not harder for whatever reasons. Giving free breakfast for certain groups, which are the neediest, send signals to other better-off students that the beneficiaries are of a certain social class.

Schools at the elementary level are grounds for inculcating values. Some of the values we should inculcate is egalitarianism. And this makes signaling something to be thought of in designing policy relevant to the education system.

Our country is already divided in so many dimensions. We probably do not want to impress on our younglings of social divisions through yet another dimension. Targeting at this cost is not worth it.

In our specific FBP case, a blanket policy is better than a targeted policy. It muzzles the signalling, and fights the creation of social stigma that is the seed for future division in our society.

There are hard positions in our society. It is the product of years of abuse and mistrust, and it will not go away anytime soon. One small issue that rekindles our prejudice in the smallest of ways would ignite a culture war sucking almost everybody in the most unproductive manner.

Some culture wars are worth the fight. Our society does need a can opener to open up its canned mind, especially so when too many of us are so coddled inside our small world to the point that wrongs go unchecked and eventually become a right. It has become so bad that many are beginning to be scared of doing the right thing, just because such action would hurt the feeling of immature persons on the internet armed with incomplete or even downright inaccurate information. Explicitly racist behavior should be called out. Some things just have to be done lest we slide to an equilibrium that is so unbearable that migration would be the only way out.

But a lot of the culture wars we are fighting today are unnecessary.

One example is the teaching of Malay calligraphy-Jawi in school. The Jawi controversy besetting us recently reveals what we have known for the longest time: we live in a sensitive society – sensitive is only a euphemism that would not take much to decipher. We do not need such controversy to tell us that. The whole episode came to surface through an oversight within the government. The course was set several years back. Too few people noticed it that it developed its own procedural momentum that in the end forced all of us into a situation where no one could paddle back, without incurring significant political cost.

This reminds me of a scene from the movie War Game where the artificial intelligence holding the trigger to a nuclear holocaust, after going through all simulations, concluded that the only way to win is not to play the game.

Too bad that we have no time machine to use, no restore point to return. To abuse slightly the meaning of the Malay idiom, terlajak perahu boleh diundur, terlajak kata buruk padahnya.

Another example is the conversion bill in Selangor. We know religion and child conversion are subjects our overall society unable to deal with coolly. So, we all should approach it with care. Yet, the Selangor state government thought pushing the controversial bill through was the wisest course of action. Not only that, once we were given the chance to pull the brake halting our vehicle resting dangerously close by the cliff, the state government instead insisted on playing the game that nobody would win. Has it got this bad that the game has to be played anyway?

Our society is damaged and this is not the most incisive observation of the day. The last election gives all of us a chance to repair it, and be better. This government is reforming our institutions that for so long abused have been for personal gains. The trust deficit is still there. That is a huge barrier to fight.

I truly believe for Malaysia to get to the next level of development, we need to improve our institutions. We do not need more big malls, more tall buildings.

And those institutions are not merely government institutions like the parliament, the police, the judiciary and anything of the like. It is also about our social capital, that is trust among ourselves.

Culture wars, especially the unnecessary and avoidable ones, do not build trust. Instead, it erodes it and makes bridge-building harder.

Yet, we all are too eager to fight it. And to one-up the others online (adversaries who we likely have never met in real life, or even human bots), we type the harshest words and switch on our scorched earth mode to burn everything that moves.

And god, there are so many other things to do. Yet, here we are with our culture. All heat, no light.

It is that time of the quarter again. The second quarter 2019 GDP will be released by the Department of Statistics next week, on August 16 2019.

How fast do you think did the Malaysian economy expand in 2Q19 from a year ago?

  • Slower than 3.6% (14%, 3 Votes)
  • 3.6% - 4.0% (18%, 4 Votes)
  • 4.1% - 4.5% (32%, 7 Votes)
  • 4.6% - 5.0% (27%, 6 Votes)
  • 5.1% - 5.5% (9%, 2 Votes)
  • Faster than 5.5% (0%, 0 Votes)

Total Voters: 22

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Malaysia’s 2Q19 industrial production growth so far has been stronger than it was in the first quarter. For illustration, April and May factory output expanded 4.0% year-on-year each. In contrast, the 1Q19 industrial production grew by 2.7% year-on-year only. The June industrial production has not been released, but it would have to be really bad before it would bring the 2Q19 growth below 1Q19 rate. There is however a minor possibility given how bad June export growth was.

Yet even with the June exports, exports for the whole 2Q19 did better than in the previous quarter.

Meanwhile, Bank Negara’s public data shows government expenditure growth is stable, with 2Q19 spending growth being about the same as it was in the previous quarter.

Another data set from the central bank does not look pretty though. Loans growth is slow. In 2Q19, total loans in the banking system grew 4.4% year-on-year, versus 7.2% in 1Q19. But there is a noticeable base effect here, possibly due to companies rushing to get their loans prior to the election. Just to highlight the importance of base effect, in month-on-month terms, loans grew 2.4% in April 2018, when the average loans growth in the January 2017-March 2018 was only 0.6% month-on-month. Loans growth is a proxy of private consumption but given the base effect, it is a difficult proxy to use for this quarter.

This is especially so when other proxies of private consumption are doing well. For instance, 2Q19 consumption imports grew 8.0% year-on-year, versus only 1.0% in 1Q19. Retail and wholesale trade statistics are also doing reasonably okay. The rate cut in May 2019 would also boost demand. The labor market is also stable.

Talking about base effect, we also have to remember that in June 2018, consumers in Malaysia faced no consumption tax. That would be a negative to consumption growth from year-on-year perspective.

Nevertheless, I am expecting a high 4%. It could even surpass 5% if Malaysia is lucky enough. Yes, I am optimistic of the second quarter, unlike for the first quarter statistics.

The shifts from SST to GST, and back to SST were controversial. There were debates on its effects on inflation and living costs. While the GST introduction led to a one-time rise in price level and that, I think, has not been widely disputed, the effect of SST reintroduction on price level has been more contentious. Pro-government camp would would claim that SST reintroduction did bring prices down, while the opposition would disagree, and citing various examples where prices went up (both real and made-up instances).

Did SST bring prices down?

The answer, on aggregate, is yes. Here is the main chart central to my argument. This chart shows core price level.

In April 2015 when the GST was introduced, prices went up by 1.19% month-on-month (after adjusting for seasonality). And in June-September 2018 when the SST was reintroduced, prices fell by 1.32% month-on-month (also after adjusting for seasonality).

Now, the long explanation.

Core prices instead headline prices

There are various factors affecting prices. It can be difficult to extract and isolate each factor out. But the official core inflation series does a relatively good job filtering out various factors, most notably items with volatile prices affected by seasonality. This cancels the noise (enough) that we can see price effects of tax regime changes.

Using core prices as our starting point, did the SST bring prices down?

Month-on-month versus year-on-year

The answer, again is yes… from month-on-month perspective.

This section is a bit dry and digresses into discussion on measurement. You might want to skip this as skipping it would not hurt the “yes” explanation by too much. If you are not skipping, let us move on with the agenda.

Month-on-month is a better way to observe things than year-on-year. This is because there are multiple significant supply-induced for the past few years. For instance, because of the SST which was reintroduced in September 2018, we would have to wait until September 2019 until its effects on prices disappear from year-on-year perspective. These changes make year-on-year unreliable as a change measurement. If we insist on using year-on-year as a measurement for policy purpose, we will risk making the wrong call based on a massive structural break, never mind the 12-month recognition lag.

Year-on-year does control for seasonality, unlike month-on-month and that is its strength. But it is not great at handling (structural) breaks in series. And as far as consumer prices are concerned, Malaysia has experienced too many breaks at least since 2015 when the GST was implemented. The last big break was in February 2019 when petrol and diesel prices were capped at its current ceiling. I expect one or two more major breaks in the next 12 months.

This is why there is a need to move from year-on-year to seasonally-adjusted month-on-month (or quarter-on-quarter whenever relevant) measurement. Seasonally-adjusted month-on-month addresses problems of structural breaks and seasonality, which makes it better than year-on-year by a mile.

Additionally, changes in a series could be seen immediately through month-on-month. This significantly removes the problem with recognition and policy lags.

Our familiarity with year-on-year and stubbornness to move away from it is part of the reason why too many people panicked over “deflation” earlier this year, when in fact, it was just a mathematical artefact arising from a massive structural break, or two, or three.

Effect of shift to GST in April 2015

Now that is out of the way, we can start directly discuss about how GST changed the price level.

The raw month-to-month price change in April 2015 was 1.28% (below is just the month-to-month change for the chart above).

But how do we know whether the 1.28% was fully due to GST?

That is a difficult question, really. But because it is core prices, significant amount of items susceptible to large volatile changes are out of the picture. Food items and fuel are out. Yet, there is still a problem. Our problem is that the core CPI is not seasonally-adjusted (as far as I understand it). In order to control for seasonality, we need to look at March-April change in other years and use that as a correction factor.

Here, we get into another problem, the official core series does not go to far back. Publicly, core series begins in 2015.

Nevertheless while keeping that in mind, April price change in 2016, 2018 and 2019 were either 0.08%, or 0.09% (in April 2017, prices rose 0.26%. I do not know why, and I am too tired to find out. So I am going to close my eyes and consider it as a outlier and pray hard. Please do not shoot me). To control for seasonality, we take the 1.28% and subtract 0.09% (the April average change in 2016, 2018 and 2019) from it. Through this, we can claim that the April price change due to GST—as far as core prices and the seasonality I have accounted for concerned—is 1.19%.

In short, GST quite possibly raised core price level by 1.19% month-on-month. Yes, GST did raise price level.

Effect of shift to SST in June-September 2018

Now, this part is not so straightforward because the transition from GST to SST lasted for 4 months. In 2015, there was an immediate transition from SST in March to GST in April. But in 2018, the GST was effectively abolished in June 2018 and was replaced with a 3-month tax-free period. The SST only came in September 2018.

As a result, direct comparison between the SST-GST shift (April 2015 core CPI), and GST-SST shift (September 2018 core CPI) could not be made. There are at least two reasons:

  1. First, in June 2018 when the GST was abolished, core price level dropped 1.43%. And it was a drop from GST regime to no tax period. This number does not help us answer our original question, which is whether SST brought prices down.
  2. Second, when the SST was reintroduced in September, core price level rose by 0.60%. This also does not help answer the question.

So, how could we make it comparable?

This chart shows the problem, and the adjustment required from price level perspective to make a fair comparison (blue is actual, red is adjusted).

The adjustment is: calculate the difference between May 2018 core price level (GST prices) with September price level (SST price level), while ignoring the free-tax period completely. Do this and we would get a price drop of 0.59%.

This is how it looks like in month-on-month changes (blue is actual, red is adjusted).

However, just like the SST-GST shift, we need to control for seasonality. And the average May-September change for 2015, 2016 and 2017 is 0.73%. The variance is not that big: for transparency, it was 0.72%, 0.79% and 0.68% rise for 2015, 2016 and 2017 respectively.

Controlling for seasonality, that means the GST to SST shirt brought core price level down 1.32% (that is -0.59% plus -0.73%).

Conclusion: SST brought core price level down

As a summary, after accounting from seasonality:

  1. SST-GST shift raised core price level by 1.19%
  2. GST-SST shift cut core price level by 1.32%

Some comment on the results: I had expected the SST-GST and the GST-SST shifts to bring prices up and down by about the percentage point. Right now, there is a difference because I think there are still some important factors that have not been controlled. It is possible that one of them could be forex rate.

Caveat and other business

There is a important clarification here. These results do not mean core prices in September 2018 when the SST was reintroduced were lower than core prices in May 2015. Between May 2015 and September 2018, headline and core prices rose for a variety of reasons. Rather, the two changes in 2015 and 2018 were one-time changes, or structural break in core price series. You could see this from the price level charts above.

This brings us to inflation. The remarkable thing is, at least from the naked eyes, inflation (in the sense of general rise in prices) remains largely the same throughout the changes. Another way to say is that, the slopes of the lines (GST and SST) are about the same. What happened was a shift in price level, which is what this whole post shows.

And finally, I want to show you this chart.

The black-shaded area was caused by GST (specifically, GST at 6% minus GST at 4% – GST at 4% has been cited as the equivalent of SST around 2014-2015). If GST were never introduced, core price level would likely have be lower by that shaded area.

I do have strong policy preference, and that preference originates from my ideological leanings. But the preference only sets the default position, or more accurately, the initial stance. I am willing to be swayed by data and models but then again, over the years, I have learned data and models can be bent so much even with the best assumptions, it can be interpreted in various ways that make the numbers never quite as objective as it is made out to be. In the end, it is the context of the numbers that is important, not the numbers themselves. Numbers alone can be meaningless in social science, and economics.

I have become less ideological over the years, especially after the 2008 global financial crisis, and my policy preference is driven more and more by empirics. But after a year in the public sector, I find my preference has not quite been assaulted by empirical results. Rather, it has been a lesson on compromise and second or even third-best solutions.

Second-best solution is arrived at when the ideal solution is not possible given some constraints. The best solution is technically possible in the sense that it is technologically or economically possible. However, the challenges from the political or social aspects make it difficult to achieve fully.

For instance, I prefer to have the ECRL be cancelled outright. It does not seem very economically viable, and there are cheaper ways to encourage connectivity across the country while developing the areas outside of the peninsular economic centers. But the need to be careful with China, especially at a time when the global economy is at risk of heightened protectionism with Malaysia dragged into an unwanted trade dispute, means my policy preference is out of reach.

And it is not merely a theoretical concern. After all, China did employ unfair trade practices on the Philippines just to punish the latter over totally unrelated issues involving the overlapping claims in the Spratlys and the Paracels several years back. China can be a big bully, as any big power can be, and Malaysia being a small open economy should not test that proposition by too much. We have been successful in pushing for our case with China, but one has to wonder where is that line that we should not cross.

That is one example of having to land on a second-best solution, with an external consideration.

But more often than not, the challenges are internal in nature.

In a democracy where consensus is absent, the available solutions are frequently second best. There are so many stakeholders to take care, making compromises a must.

Just today, a senior civil servant asked how do I feel about working in the public sector, and how does it compare against the private sector. I answered that professionally, working in the public sector was tougher than in the private sector. In the former, there were so many parties to manage and to satisfy, whereas in the private sector, one could doggedly pursue an agenda, or even bulldozed it all the way through. In a way, achieving the ideal solution is easier outside of government than inside of it.

However, that does not mean the public sector is redundant. Many things do require the public sector to work and cannot be done through the private sector alone. It is the reality of a non-anarchist world, which is true almost everywhere in this world.

This can be linked back to the manifesto of Pakatan Harapan.

The Institute for Democracy and Economics Affairs, a think tank I somewhat have a relation with, today criticized the government for being overambitious with its election manifesto, and for the government’s weak resolve in delivering its promises.[1]

I would say that the manifesto is an example of the ideal solution, and the current situation is a second-best solution.

And this does not yet account for the fact that even the manifesto is a work of compromise, and that a manifesto as an ideal is supposed to be bold (in a good way, not the Brexit shambolic way). Furthermore, many supporters of the government work on having reasonable compromise. I for one is not 100% in agreement with the manifesto. But the urgent need for reforms after years of proliferating brazen grand corruption meant compromise had to be made to achieve a goal of cleaning the country. Second-best solution was what we had, because the ideal was not achievable.

Hafiz Noor Shams. Some rights reservedHafiz Noor Shams. Some rights reservedHafiz Noor Shams. Some rights reserved

But coming back to the criticism leveled by the think tank on the government lacking sufficient resolve to deliver institutional reforms, I think I can come out and say such reforms are still coming and it is not clear whether on its own context that it would be demoted from the ideal to the second best solution. Besides, it is not as if there was no reform at all. All too often, people forget the significant reforms that are already staring them in the eyes, be it the separation of powers between the prime minister and the finance minister, wider application of open tender, greater transparency and freer media.

There are challenges even in the areas I have cited where reforms have happened. But wide-ranging reforms require time, especially in a robust democracy. Mock the line all you want, but you know it is true.

The important thing is that, we must persist. Democracy simply does not end at the ballot box. It is more than just going out to vote. A fancy deck does not a reform make, too.

Hafiz Noor Shams. Some rights reservedHafiz Noor Shams. Some rights reservedHafiz Noor Shams. Some rights reserved

[1] — The government has set a list of unrealistic goals and showcased a lack political will to fulfil other achievable promises made in the Buku Harapan GE14 election manifesto, according to the Institute of Democracy and Economic Affairs (Ideas). Ideas research director Laurence Todd (photo, above) said the think-tank’s ongoing Projek Pantau monitoring of 244 selected sub-promises found little progress made to about 30 percent of the “unrealistic goals” set in areas of education, institutional reforms and the economy. [Alyaa Alhadjri. Report card on Harapan shows ‘unrealistic goals’ in manifesto. Malaysiakini. June 28 2019]

As a libertarian, hate speech is always a difficult subject to touch on. It is difficult to determine how far should free speech go until a line has to be drawn.

The pure libertarian position is very tolerant of all kinds of speech, and even hate speech. So tolerant that it goes so far away towards the horizon that for a peaceful society with high social capital, there exists a boundary much, much closer and well short of the libertarian realm of the unacceptable. Here, there is a conflict between inherent right and the ideal of coexistence. Without context, an answer is difficult to reach and even if it is reached, a libertarian is unlikely will be content with it. But living in a peaceful society will always call for a compromise, and that is the price we all have to pay in some way.

But when a person makes an explicit physical threat against another person or group of identifiable people, then the libertarian answer is quite easy: it is wrong and action has to be taken to make sure that such threats will not be realized. This is because of the non-aggression axiom (I know, I know. The axiom is problematic. Nevertheless…). The use or threat of force against a person is coercion and coercion is a big no-no in the libertarian understanding on how the world should work.

And so, I am not particularly impressed when what seems to be a group of fascists complained that a follower of their ideology, and the person himself, has had his right to free speech or free press robbed after a bookstore decided to stop selling his book that encourages others to murder certain people who they do not agree with.[1]

In the first place however, the store is a private entity. The bookstore owner can do as he damn well pleases.

The author later complained that the pull out proved that there were people afraid of him. Rightly, so. He is after all calling for murder. One must be so dull in the mind to think such opinion is an astounding revelation and people should not be afraid. If somebody made a credible threat against me, I would go to the police for protection and take the necessary precaution against that threat (and possibly, even preemptive measures). One does not need to be libertarian to act such a way. It is human nature.

In the end, there is only one violation of right in this episode and it is the physical threat made by the fascist. That alone from libertarian perspective makes it sufficient for police action to be taken against him.

In any case, a fascist’s world is one where a libertarian cannot live free. When a fascist cries for freedom, such a claim should always be viewed with supreme skepticism.

Hafiz Noor Shams. Some rights reservedHafiz Noor Shams. Some rights reservedHafiz Noor Shams. Some rights reserved

[1] — A bookstore has dropped two books by author Helmi Effendy over his social media comments on killing Malay “traitors.”

“Effective immediately, we will not be selling any books by Helmi Effendy at Kedai Fixi or on We support freedom of speech, but not threats or ‘prayers’ for people to be killed,” Buku Fixi said in a statement today.

Helmi is the founder of right-wing publication The Patriots.


“May the Night of Broken Glass become a reality in Malaysia. The Night of the Long Knives will kill Malay leaders and voters who have betrayed their religion and race,” he said in his post.


In a Facebook post today, the author lashed out at the move, claiming that his books have been “banned.” There is no government ban on the books, however.

“I don’t care. I don’t give a f***. I take it that when Buku Fixi takes my books off their shelves, it means someone out there is very very afraid of me,” he said. [Store drops books over author’s call to kill ‘Malay traitors’. Malaysiakini. May 29 2019]

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