Tag: bailout

Categories
Politics & government

[2750] Malaysia is bigger than Malaysia Airlines

Until AirAsia and the liberalization of the airline sector in the past decade or so, Malaysia Airlines was the only real option for most of us when it came to flying. It is easy to argue that for us Malaysians, flying meant Malaysia Airlines.

My first flight was with them. The feeling of sitting by the window floating among the clouds for the first time is unforgettable. The carrier was part of my growing up story as I found myself crossing the Pacific and back around the other side of the world, travelling to places that as a kid I thought would be impossible.

So, Malaysia Airlines does mean something to me. I feel there is a personal connection between me and the brand.

When disasters struck the airline, part of me felt lost. I was not alone in feeling so. I looked around and I saw an outpouring sympathy for the airline from many. On the internet, on television, over the radio and even at bus stops and shopping malls for weeks after the Ukraine crash, there were signs and images imploring us to keep Flight MH17 in mind.

But now that the rituals are mostly done and the intense emotional reactions have subsided, I think this is the best time to write what I have been thinking for some time: We are taking the sentimentality too far.

I feel so because I see people equating the well-being of Malaysia Airlines to Malaysia the country and expressing it so strongly. While this may suit the narrow intention of those who want to save the carrier, I think it demotes the idea of Malaysia the country to that of a petty commercial entity.

The equation sets a limit by necessarily defining Malaysia as a business, instead of an ideal society, whatever that may be. After a while, I no longer know what we Malaysians collectively want the country to be with all of our competing dreams and contradictions.

But I am certain the country would be a depressingly sad, meaningless place if the idea of Malaysia is confined to us measuring our worth with the profits we make, gauging our performance with self-limiting unimaginative indexes. Such culture would turn us into drones, ever chasing benchmarks which are meaningless outside of business. ”1 Malaysia” might be that, but Malaysia is more than that. There is much more to life than business.

An example of equating the airline to Malaysia comes from the prime minister himself when he delivered the Merdeka Day address. He used patriotism to justify the need to financially aid the troubled commercial airline, yet again. The platform he used is enough to prove the exploitation of patriotism as a persuasion device. He tried to build up a case to save the carrier. He said there was no other choice.

But he did not need to try very hard. On the ground, I feel the idea presents itself more blatantly and organically, implying that the carrier is a national icon, that it is Malaysia itself.

The crashes made it politically easy for the government to bail the airline out. There is little political opposition to the corporate exercise since to oppose meant irreverence to the victims of the crashes. Nobody with a heart wanted to be seen to be that insensitive. Those who did were shouted down.

So, Khazanah Nasional as the government’s agent gets all the support it needs to privatize Malaysia Airlines. The public is chattering about the details but the idea of saving the carrier itself is taken as necessary without much question. The majority seems to agree with the prime minister that there is no other choice.

Here is the other impact of the unfortunate equation. The idea that Malaysia Airlines is Malaysia automatically kills off the other choice: It is unthinkable not to save Malaysia Airlines, it is unthinkable not to save Malaysia. It limits the grasp of the mind. The loss of our faculties is the cost of the equation.

The equation is also an example of the merging of government and commercial interests. There have been other examples in the past but I find this one particularly disappointing because just several years ago, the prime minister promised to let the private sector drive the economy and reduce the government’s stake in various Malaysian corporations.

This is not the only broken promise around judging from the government’s recent enthusiastic use of the old Sedition Act.

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 September 5 2014.

Categories
Economics

[2636] Greek buyback program is not ideal

As part of the bailout agreement between Greece and the Troika, the Greek government has agreed to reduce its debt. This is the context behind the latest Greek buyback program, where the Greek government is looking to reduce EUR20 billion worth of debt. While I typically like debt reduction exercise by the public sector, I am unsure how this particular effort at this particular moment is ideal.

The main issue I have with the program is that Greece has no cash of its own. At least they do not have enough. On top of that, the government suffers from primary deficit and that means the government is unable to finance its operations. So, it is dependent on bailout money, provided by the reluctant Troika which includes European governments, which includes even the more reluctant Germany, the country that is really footing in the afterparty clean-up bill.

So, that is a bailout financed by public money of a different country.

The problem here is that the money will be used to buy back debt from private creditors. As you can see, it is a transfer of wealth from public coffers to private individuals and firms. There is something repulsive in doing so.

The factor that may mitigate that sentiment is that a majority of those private shareholders are Greek banks. In some sense, a large chunk of the bailout money used in the buyback program will help strengthen Greek banks and indirectly, the Greek economy. A majority of holders of Greek sovereign debts, apart from the Greek banks, are European of origin. So I suppose the buyback does help stabilize the European market too.

Anyway, while these private bondholders suffered a large haircut recently, the buyback program will mean that these holders will book in some profits according to the Wall Street Journal.[1]

Another factor is that because the offer is slightly above market price of those debts, the price of Greek sovereign debt has increased and that reduces its yield. In other words, that allows for cheaper financing for Greek government. But I do not think anybody will be crazy enough to buy Greek sovereign debt any time soon.

Regardless the mitigating factors, I prefer one thing more than the buyback: more debt haircut but this time on the public side.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
[1] — Greece’s debt agency launched a multibillion-euro offer to retire roughly half the debt the country owes to private creditors, part of the latest effort to trim a towering debt burden. Bond markets reacted positively after Greece signaled it would pay a slight premium to buy back that debt, but the higher price and the limited size of the offer raise questions about whether the country will be able to cut its debt as much as its European and international creditors hope. [Alkman Granitsas. Neelabh Chaturvedi. The Wall Street Journal. Greece offers to buy back debt. December 4 2012]

Categories
Economics

[2557] Did the LTRO fail?

So after the rumor of bailout, the official denial and later the external pressure, Spain has finally requested for a bail out from Europe. The bailout is expected to be utilized, in turn, to bail out Spanish banks. The money will come from either the EFSF or the ESM, whichever is politically expedient.

Even before the request, the Spanish government has already bailed out its fourth largest banks just recently.

I find the bailout in Spain as curious because it raises one question: whatever happened to the LTRO?

Aren’t the LTRO with money worth EUR1 trillion meant to bail out banks implicitly?

Did the LTRO fail to do what it was meant to do, which was to give European banks very cheap refinancing options over 3 years? Did Spanish banks not gain access to the LTRO? What did the Spanish banks do with the LTRO?

Categories
Economics Poetry

[2518] Pain wain

Austerity is a pain,
with you drawing the wain,
but that’s the only way,
after your jolly days.

Categories
Economics Politics & government

[2454] Oh, Papandreou the socialist, the coward, the opportunist

If I were a European taxpayer seeing my money being used to bailout a near-bankrupt socialist government due to outrageous spending while I live responsibly, I would be angry. Why should I be the guarantor of a profligate? But if I wanted the Eurozone to stay intact, I would bite the bullet and angrily pay for the bailout.

If I were a European taxpayer funding the bailout, I would be fuming mad with the Greek Prime Minister Georgios Papandreou’s referendum plan. After all the hassles and the blows punched to get the money, however insufficient it is for the whole of Eurozone, Papandreou hides behind the angry masses, trying to deflect blame from the Greek government to the benefactors of the bailout facility.

The Greek government is a bunch of coward socialists, refusing to own up for its mistake, too insignificant to be bold and solve it. Papandreou may say it is done in the name of democracy, but he forgets the adjective representative. He could easily do it but no. He is afraid of the political cost and so he adopts direct democracy and gambles the whole structure for his own convenience. He wants to refresh his mandate but he has his mandate already. This is about passing the buck.

Oh, he is Papandreou the socialist, the coward, the opportunist.

But I am not a European. Yet, I am very angry at the Greek government.

I hope Greece burn. Let Papandreau fiddles while Greece burns, as Nero did when Rome did. Let us see how bad the austerity plan compares to a complete bankruptcy. Let Greece be demoted to the third world. On with the natural experiment on the socialists.