Categories
Economics Politics & government

[1093] Of RM46 billion vote of confidence? I have questions instead…

In the NST today:

KUALA LUMPUR: Malaysia is back on the global investment map. A record RM46 billion was invested in 1,077 approved manufacturing projects last year by local and foreign investors, a 48 per cent jump from the RM31 billion invested in 2005.

The keyword is “approved“. A more important question is, how much was actually committed?

The article is comparing approved investment in 2006 against actual investment in 2005. Why the article does not compare approved investment in 2006 with approved in 2005? Or, why the article does not compare actual investment in 2006 with actual investment in 2005?

Further, it is more likely that the figures are nominal figures. An honest analysis would use real figures for comparison purpose.

Let us compare oranges to oranges, apples to apples.

More from the article:

Domestic investments amounted to RM25.8 billion, making up 56.1 per cent of the total approved investments, compared with RM13.1 billion or 42.2 per cent in 2005.

I wonder, how much of the RM25.8 approved domestic investment are actually approved investment related to the government?

The answer should be compared against the outcome of Mundell-Fleming model.

Another question is, how does Malaysia perform against our neighbors? Regionally?

Finally, from Reuters (via):

KUALA LUMPUR (Reuters) – Malaysia’s media has been trumpeting good news about the economy, and that is stoking speculation of an early election this year.

Hmm….

Categories
Conflict & disaster Economics History & heritage Politics & government

[1089] Of the Scramble for Africa II

During the era of imperialism, European powers as well as a few others scoured the face of the Earth for territories. In Central Asia in the 19th century, the scour was called The Great Game. On the continent which the Nile flows, where the wildebeests roam the Serengeti, the Game had another name: the Scramble for Africa. Two centuries later, history is repeating itself in Africa as well as in Central Asia. Though the race does not come in the form it once took or with players that once played the game, it is a race nonetheless. Africa in particular has been the center of attention by both the United States of America and the People’s Republic of China.

For China, its economic growth requires so much fuel that it is embarking on a massive global search for precious resources to quench its thirst. In quest to secure sustainable growth, realizing that Africa is rich in natural resources, China is buying influence there by promising no-interest loan worth billion of dollar to improvised but resources-rich African nations:

Before arriving, he announced soft loans worth another $3 billion and a doubling of aid to Africa over the next three years.

[…]

This, probably more than anything else, is what makes Mr Hu popular with African governments. His largesse comes with no strings attached, unlike pesky Westerners who insist on anti-corruption drives or improving human-rights records in exchange for money. China’s hand-outs come without the tang of neo-colonial interference so disliked by many Africans.

This is on top various investments made by the Chinese across the continent. It is suffice to say that to Africa at the moment, China is Santa Claus.

In a way, Africa is the perfect target for China. The competition for natural resources might not be as fierce at it is in the Middle East and Central Asia. In the Mideast, there are United States as well as other powerful corporations that in some ways monopolize the world’s supply of fuel. With Iraq in shamble and Iran rattling saber with the US, risk is high.

In Central Asia, there is the ever-jealous Russia trying to reassert its influence on the former states of the Soviet Union. And of course, the United States is everywhere, worthy of the label superpower it claims to. In these two regions, I would use the word crowded to describe the situation. Africa on the contrary has so many places remain unexplored. So far, it is a free for all and China is leading the pack.

The spotlight on Chinese interest on Africa has attracted the world to both. I trust the US is especially suspicious of the Chinese activities in Africa. Further, the US is not new in Africa. Earlier, there was rumor that the US was indirectly involved in the recent conflict in Somalia:

The officials said the C.I.A. effort, run from the agency’s station in Nairobi, Kenya, had channeled hundreds of thousands of dollars over the past year to secular warlords inside Somalia with the aim, among other things, of capturing or killing a handful of suspected members of Al Qaeda believed to be hiding there.

And then, who could forget of CNOOC’s failed bid for Unocal back in August 2005?

To be fair, the US interest in Africa is not mainly due to Chinese presence. The US fears Islamist influence and indirectly, anti-US groups. This is in line with the US alleged role in Somalia. The issue on security has led the United States to establishing a new command center in Africa:

WASHINGTON: The Pentagon will establish a new military command to oversee its operations in Africa, President George W. Bush and Defense Secretary Robert Gates announced.

Creation of the U.S. Africa Command, which had been expected, will “strengthen our security cooperation with Africa and create new opportunities to bolster the capabilities of our partners in Africa,” Bush said Tuesday.

And of course, China and the US are not the only players of the race. Other countries, including Malaysia have already created substantial presence in Africa:

American sanctions have kept many companies from Europe and the United States out of Sudan, but firms from China, Malaysia, India, Kuwait and the United Arab Emirates are racing in. Direct foreign investment has shot up to $2.3 billion this year, from $128 million in 2000, all while the American government has tried to tighten the screws.

Competition will be fierce. In fact, Malaysian national oil and gas company has been kicked out of Chad. Suspiciously, that episode has proven to be profitable for the Chinese.

Nevertheless, while the last scramble brought most of Africa to its knees, I have a feeling that this race will be different. With all the investment coming in and increasing trade, something good is bound to happen. I am optimistic that Africa is looking forward to a better future. I am optimistic that the second scramble is the precursor to the prosperity globalization promises. There will be obstacles of course but this scramble is too precious to squander that I do not think the obstacles would stop Africa from gaining respect from the rest of the world.

Categories
Economics Environment

[1086] Of water shortage, ineffective threat and effective policy

I cannot help but let go a huge sigh when I read a headline entitled “Conserve or face rationing, public told” in The Star on February 8:

PETALING JAYA: Malaysians have been told to start conserving water now or brace themselves for water rationing if the expected hot and dry weather hits the country next month.

Selangor water concessionaire Syarikat Bekalan Air Selangor (Syabas) has sounded out to the state government that rationing was among the steps that would have to be taken if the situation takes a turn for the worse.

Right. Like people are going to listen; I doubt such warning could encourage people to conserve.

When I heard rationing as a possible solution, I rolled my eyes.

I have offered a better plan to survive water shortage, be it caused by El Niño or simple drought, long ago — prices should reflect water scarcity and be allowed to float according to water quantity. In short, with the anticipated water shortage, price must go up throughout the duration of the shortage. In a free market with no state intervention, price would have gone up by now, signally the possibility of shortage.

People will only conserve if something hits them in the head. A mere warning does not cut it but a price increase will do the trick.

I do not know about you but I prefer to pay more rather than not have water at all. Further, rationing is such a drag. Besides, for goodness’ sake, we are living in the 21st century and we are not in a war or something.

Categories
Economics

[1085] Of the US is no match for the NEP

Under pressure to secure a free trade deal with Malaysia, the US is bowing to Malaysian demands:

MALAYSIA and the US have agreed to take contentious issues “off the table” in their ongoing (free trade agreement) FTA negotiations, International Trade and Industry Minister Datuk Seri Rafidah Aziz said.

What are those contentious issues?

“On areas like government procurement, New Economic Policy and our policies on restructuring, it is no go and they understand that.

I have blogged earlier on how Malaysia has time as a leverage. I do think Malaysia is utilizing that leverage to the fullest. Standing on higher ground while the US negotiators are running out of time, I could imagine Malaysia dictating the terms in a room somewhere in Sabah.

Nevertheless, I wish both sides would be more transparent and forthcoming to public questions. While I have an idea what the US is looking for, I could only speculate what Malaysia is demanding from the US without a way to verify it.

Even in the report, the US list is clear:

The Karambunai discussions had included elimination of tariffs, equity conditions in education and telecommunications and distributive trade.

The Malaysian list, on the other hand:

Rafidah said Malaysia made requests to the US in terms of market opening which would benefit the private sector.

It is so vague that it could mean anything under the sun.

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

p/s — perhaps, I have underestimated the leverage Malaysia has. On Saturday, February 10 at The Star:

KOTA KINABALU: The March deadline is likely to pass without Malaysia and the United States striking a deal for a Free Trade Agreement (FTA).

US Assistant Trade Representative Barbara Weisel said it would be “very difficult” to conclude the talks within the deadline that the United States had set.

I hope we could get the FTA signed before it is too late. It is going to be tough to get an FTA after the expiry of Trade Promotion Authority because the Democrats are expressing economic nationalism stance.

Categories
Economics Environment Politics & government

[1084] Of new direction in climate change debate

The debate on whether the current climate change is caused by human activities has effectively ended with the publication of the IPCC Fourth Assessment Report in Paris earlier last Friday. The announcement by the most authoritative body on the science of climate change were preceded by calls of several large corporate players for a system to regulate carbon emissions, Exxon Mobil’s new stance on climate change and the 2007 State of the Union which expressed concern on climate change. Even several months or years before the publication of the latest Assessment Report, the momentum towards acceptance of human-induced climate change has been growing. ASEAN recently has agreed to a weak energy pact that perhaps gives lip service to climate change.

While the debate is over, whether or not the greens had unilateral declared such closure, a new debate has arisen and rightly, it is on how to move from here onwards. Even the once-skeptics have realigned their positions to accept the modern reality of climate change. Though their positions might not be aligned with the greens, the realization that the current climate change is caused by human beings is central.

There seems to be three schools of thought at the moment. One favors mitigation of the effects of climate change. Two, adaptation. Three, centrist.

Those that favor mitigation are advocating the most controversial policy of all — emissions reduction. Within this camp itself, there are many suggested ways to limit carbon but that most popular is emissions trading. Digressing, it is a sign that the market could solve environmental problems. Regardless, the politically charged question is how high should the limit be? How much cut should an economy make or take?

The Kyoto Protocol, the most famous of all emissions cutting schemes, demands Annex 1 (a dull jargon to roughly describe industrialized countries) parties to cut their collective greenhouse gases (there are six gases governed by the Kyoto Protocol, including carbon dioxide) emissions by 5% below the 1990 level within 2008 and 2012. There are a few ways to achieve that target: through Clean Development Mechanism, Annex 1 members could reduce their emissions commitment by aiding the others to undergo clean development like the introduction of clean energy or reforestation. The CDM by itself is a huge growing industry as it becomes clear that many Annex 1 members are having trouble adhere to Kyoto’s target. There are those that have suggested an even drastic cut while others, more modest. But Kyoto is the the benchmark.

An economist, William Nordhous garners influence among emissions cutting scheme. I came upon his work while I was attending an environmental economics class at Michigan. That class and Nordhous’ work helped me understand the economic rationale of mitigation policies. Nicholas Stern is another economist that is involved in the economic of climate change though his report has been criticized.

And then, of course, the question of who should bare the cut?

Previously, it was a question of why should be bear anything at all. So, as far as the greens are concerned, it is a step forward in the right direction.

The Bush administration has consistently reasoned that emission reduction measures are useless if the developing world does not share the burden of emissions reduction. While true, the developing world on the other hand argues that the majority of the emissions in the air were those produced by the developed world, which is also valid. It is because both have valid arguments and because of externality, this is an explosive political issue.

Those that favor adaptation are the ones whom believe adaptation is cheaper than mitigation. Adaptation includes realignment of economies according to the new prevailing climate pattern. For instance, migrating agricultural activities northward as it gets warming there.

And then, there are centrists that push for both.

In reality, adaptation is essential as a response. No. adaptation is inevitable. Therefore, the bigger question is should we try to mitigate the effect at all?

For me, effective policies will need to commit to mitigation actions while accepting the eventuality of adaptation policies.

For former climate change deniers which have accepted the cause of the current climate change but are reluctant to shoulder the undeniably huge burden, they scoff at mitigation effort and are content that we should simply adapt to whatever the climate brings us.

There is a subgroup that believes climate change is just one of many issues we as humanity have to face. To the group, led by Bjorn Lomborg, the author of The Skeptical Environmentalist, resources are better spent at other issues like poverty or disease fighting. Their point is, there is a trade-off.

And then, there are some that believe it is too late to act and thus, mitigation is the only way forward.

Regardless the positions, none of the new directions in the debates are based on denial of the human-induced climate change. And certainly, those that deny climate change is actually happening are currently practically unheard of, unlike, roughly, a decade ago.

More importantly, while the debate on causality is over, the larger debate has not. The larger debate is undergoing an evolution, moving from one stage to the next. The debate on climate change is more than alive and it will not be over any time soon.

In Malaysia however, while people are moving on to the next level, we are at the back, just about to join the departing crowd.