Category: Economics

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Economics

[1213] Of fight shortage by creating a larger shortage!

Last time, it was sugar shortage and the scapegoats were so-called smugglers and hoarders whereas the real problem was price ceiling. Now, we are having cooking oil shortage. The scapegoats this time? Guess who?

This is getting old. This problem keeps recurring because the root of the problem has not been deal it with; the root cause is the price ceiling. Have we not learned anything from the failure of central planning?

Free the market and the market would solve this shortage by itself.

But no. This time, to shove the problem under the carpet, the government plans to subsidize the production of cooking oil. Or rather, the government is forcing those on the production side to subsidize manufacturers of cooking oil:

KEPONG: The Government has sorted out the shortage of packet cooking oil after assuring the 300 refineries and 30 packers that they would be compensated for their losses.

Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said the refineries and packers had also promised to resume supply of the 1kg packet of oil and ensure retailers sell them at or below the ceiling price.

He said to compensate the refineries and packers, the ministry would impose cess on the 4,100 oil palm estates from June 1 until May 31, 2008.

It expects to collect RM661.2mil in taxes for this period. [Compensation to get 1kg oil packets back in shops. The Star. May 9 2007]

Yup sire. Increase the cost of producing palm oil. Impose large enough a tax, the government might even reduce global supply of palm oil!

Less supply for everybody. Brilliant!

Categories
Economics

[1203] Of ASEAN-EU FTA

After a stalled and disappointing Malaysia-US FTA negotiation, a better deal is coming our way. Today in Brunei, ASEAN and EU representatives met and agreed to start talking about a regional-wide FTA:

BANDAR SERI BEGAWAN, May 4 (Bernama) — The European Union (EU) today agreed to enter into free trade area (FTA) talks with the Association of South-East Asian Nations (Asean) despite its strong feeling on the absence of Myanmar’s democratic reforms.

Trade Commissioner, Peter Mandelson, told Bernama the 27-country EU’s stance on the junta-led Myanmar’s rights record has not changed although both blocs agreed that an FTA would provide for a comprehensive trade and investment liberalisation. [EU Puts Myanmar Aside, Proceeds FTA Talks With Asean. Bernama. May 4 2007]

While I am supportive of a bilateral FTA between Malaysia and the United States, multilateral FTAs such as the proposed ASEAN-EU are many times better than bilateral ones. A successful Doha Round would be best but pragmatism unfortunately forces us to choose less preferable paths toward greater prosperity and freedom.

I suspect that the EU would try to insert climate related issues into the proposed FTA. It would be interesting to see that.

Categories
Economics Environment Politics & government Science & technology

[1202] Of the final Summary for Policymakers is out

The Intergovernmental Panel on Climate Change meeting in Bangkok has finally released the final part of the Fourth Assessment Report. Download it here.

I have not had the chance to look at it but essentially, this report is about the mitigation of climate change.

Frankly, I am a little bit disappointed after reading initial reports about the Bangkok meetup and am becoming slightly bitter against the People’s Republic of China. In my worldview, China is fast becoming a villain within the context of climate change politics, joining the Bush and the Howard administrations.

Just as what the European Union expressed earlier, developing countries, be it China, India, Brazil or even Malaysia, can no longer justify their inaction through the inaction of others, namely the United States and Australia. Their inaction makes them free riders.

Further, this is essentially a repeated prisoners’ dilemma model and it is important to punish all uncooperative free riders. In such model, tit-and-tat is the most efficient strategy to encourage cooperation to achieve mutual maximum benefit while respecting private rights.

Categories
Economics Politics & government

[1198] Of wind of change in Ijok? Stop making hasty conclusion please

In the blogosphere, words have it that there is a wind of change in Ijok — the Chinese are voting against the government. Screenshots is talking a lot about it as well as local media. I have to disagree on their analysis though, unless my calculation is wrong. I did some test statistics and I do not see how one could assert what they assert.

Let us see the pattern at Batang Berjuntai, a Chinese area.

According to Screenshots, the results are:
2004: BN 761; PKR 306
2007: BN 605; PKR 624

We shall do some computation for 2004 first. Assuming there were only two candidates in 2004 as well as ignoring spoilt votes, the standard error for it is roughly 1.01%. For 2007, the standard error is approximately 0.99%.

Therefore, the standard error for voting in Batang Berjuntai based on the two years is about 1.42%. And nope. To find the standard error of the voting pattern, we do not take the average.

Now, in 2004, the difference between the two party is 37.48% out of total votes garnered by both. In 2007, it is 20.57%. That means the difference between the two elections between the two parties is -16.91%.

I suspect the difference is meaningless. So, my null hypothesis is this: the difference is really 0.00%. The alternative hypothesis is that the difference is real, i.e. not zero. Doing a z-test, -16.91% minus 0.00% is -16.91%. Divide that by the standard error of 1.42%. and one will get -0.12 for z. This means my hypothesis is located only 0.12 standard error away from the mean, i.e. strong case for the null hypothesis which translates to no real change. Hence, my skepticism of the allegation of a swing.

In Pekan Ijok however, the alternative hypothesis seems to hold.

The bottom line is that the signal is mixed and inconclusive. The best way to make an authoritative conclusion is to know each and every person’s vote. Or at least, a sample with clear link to ethnicity. Without that comprehensive knowledge, it would be best to stand guard instead of making hasty conclusion. Patting oneself at the back does not achieve anything. Congratulating oneself for “truthiness” is laughable.

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

p/s — A more sensible explanation by Ong that goes beyond race and religion, in the comment section:

The incessant reference to Chinese voters swinging to opposition is certainly missing the point that the voters in so called chinese areas are really urban voters -eg Ijok toan has only 67% chinese. Similarly the malay and Indian areas are really small holders and estate voters respectively. Seen in this way the hike in agriculture prices are definitely playing a role to win voters to BN/Status Quo. At the same time corruption in government contracts, beraucratism etc are increasingly putting off the urban voters.

People, please go beyond race and religion. It is tiring listening to the same old tune over and over again. Are we so ingrained in communal politics that only race and religion could make sense of everything?

Categories
Economics

[1186] Of the invisible hand conspires to diversify Malaysian export

The mainstream media is celebrating the strengthening of the Malaysian ringgit against the United States dollar. Through the glory days when a dollar cost roughly only 2.5 Malaysian ringgit is something that many long for, I find the jovial mood caused by stronger ringgit is something awkward. I am in the opinion that the media, through the tight leash put on by the government, is manipulating laypersons’ sentiment. These laypersons unfortunately have little economic education and do not understand what stronger ringgit mean. I have discovered that nationalists with little economic background tend to cite a stronger ringgit as a proof of sunny day. But perhaps, the strong ringgit against the dollar might signal stabler sunny days in the long run.

I have mentioned earlier that stronger ringgit relative to the US dollar would hurt Malaysian export to the US; a large portion of Malaysian export goes to the US. This is on top of the slowing electronics demand in the US. With the USD growing weaker, US citizens would consume more of local product and less of imported goods.

The ringgit is growing stronger compared to the dollar. Analysts are betting the ringgit to hit 3.4 for a dollar in the coming months and yet, still convinced the the ringgit is undervalued almost two years after the ringgit was unpegged from 3.8 to a dollar. Yet, against other currency, the ringgit is remarkably weak.

Malaysia is heavily dependent on the US economy. For this very reason, I expect Malaysia to experience economic slowdown this year, in tandem with the trend — albeit increasingly confusing trend at the moment — in the US. This dependency is caused by us putting our eggs in a basket. If a slowdown is to occur as expected, the important lesson Malaysia needs to learn to diversify.

Indeed, with stronger ringgit against the dollar but weak against almost everything else, the invisible hand is conspiring to push Malaysian export towards diversification. Slower export to the US would be cushion by greater export to elsewhere. New and more baskets are available out there.

Weak currency encourages the local export component to grow while stronger currency encourages the import component. Rationally, given everything else the same, one would expect Malaysian export to start looking into other markets where the ringgit is weak. Some of those places are Australia, India, the United Kingdom and the European Union.

With diversification, we would cushion ourselves from the harsh realities that others face, making globalization a little bit easier to shallow.