Categories
Economics WDYT

[2876] Guess the 3Q18 Malaysian GDP growth

The Department of Statistics will release the third quarter GDP figures on November 17. To celebrate…

How fast do you think did the Malaysian economy expand in 3Q18 from a year ago?

  • Below 3% (11%, 1 Votes)
  • 3.0%-3.9% (22%, 2 Votes)
  • 4.0%-4.5% (22%, 2 Votes)
  • 4.6%-5.0% (33%, 3 Votes)
  • 5.1%-5.5% (11%, 1 Votes)
  • 5.6%-6.0% (0%, 0 Votes)
  • More than 6.0% (0%, 0 Votes)

Total Voters: 9

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Before you play the game yet again, here is some background.

The 2Q2018 GDP grew slowly at 4.5% YoY, largely due to an unexpected major gas supply disruption in west Malaysia. The relatively weak growth was enough for many economists to lower their expectations for Malaysia’s 2018 growth rate. The necessary repairs will take time and supply disruption will likely last until early next year. This can be seen from the industrial production index, where the mining component has been declining since May, diverging away from the other components.

And then of course, there was a change in government, which had affected public procurement policy, with major cleaning-up exercise relating to overpriced megaprojects. There had been some public spending slowdown due to the need to recalibrate everything towards a more transparent system, which means the use of open tender throughout the government system. But things are picking up again. More importantly, there had not been any austerity despite loose talks to the contrary. The recent budget should be proof enough.

Meanwhile, strong consumption expansion had hit the trade balance by a bit: for the third quarter, trade surplus did shrink by 4.1% YoY. But with the sales & service tax back online in September, the surplus ballooned RM15.3 billion as imports dropped amid rising exports.

But the unexpected economic stimulus the economy received in the form of 3-month tax holiday from June until August should more than balance out the supply shocks. Consumption should be expanding stronger than it did in it did in the second quarter, which was already growing at an above average rate of 8.0% YoY.

Categories
Economics

[2875] There is no austerity in Malaysia

The term austerity is gaining currency in some Malaysian circles. The press and several brokers have mentioned it to describe what they think the Malaysian government is doing in light of various renegotiation or cancellation of megaprojects.

Austerity is a sexy term to pull in some eyeballs but really, I think the term has been used rather loosely to a point that it is inaccurate enough and starts to lose its meaning.

So what is austerity? How do we define austerity?

The first pass-definition should be an overall cut in absolute government spending. In other words, austerity happens when the government runs contractionary fiscal policy. A slowdown in government spending growth itself is insufficient to qualify as austerity. It has to be a cut in spending itself.

The refining factor to work with the first-pass definition is a significant tax hike that discourages spending and contributes to economic contraction. For those with knowledge in macroeconomics, I am thinking of a simple shift to the left in the IS curve in the IS-LM framework, which results in economic contraction.

Yet another refining definition is if these two contractionary policies – reduced government spending, higher tax or both – happen during a period of economic contraction. In tighter language, austerity is when fiscal policy works pro-cyclically during a downturn.

In Malaysia so far, that has not happened. Neither fiscal policy and the economy are in contractionary mode. Public data shows January-August government spending increased by 6.1% this year versus the same period last year. For the May-August period, government spending rose 1.1% YoY. From GDP perspective, public investment and spending rose in the first half of 2018 versus the first half of 2017. Meanwhile, the economy expanded 5.8% and 4.9% in both nominal and real terms in the first half of 2018 versus the same period last year.

And we must not forget, Malaysians received a significant tax cut in the form of 3-month tax holiday and the replacement of value-added consumption tax GST with the less burdensome production tax SST.

Meanwhile, the government has made public statements that Malaysia is not embarking on any austerity program, although it has committed itself to cleaning up its accounts due to years of off-budget abuses and opaque dealings.

Under this situation of continuing economic growth, public spending expansion and the absence of a tax hike, I think it is clear there is no austerity in place.

The truth is, many of the renegotiation and cancellation do not lead to absolute cuts. Rather, the changes are there to make way for other spending that are aimed to be more productive than, for instance, merely servicing overpriced debt for financially and economically unsustainable megaprojects negotiated incompetently by the previous corrupt government.

What is happening is a reallocation of resources. Not absolute cuts. Definitely not austerity.

Categories
Economics WDYT

[2873] Guess the 2Q18 Malaysian GDP growth

I have been extremely busy and I have just realized the last time I updated this blog was just slightly more than 3 months ago.

I still want to keep this going, except this time, no real commentary. But the second quarter was quite a quarter, externally and especially domestically. These events had added significant short-term uncertainty that might have affected growth.

How fast do you think did the Malaysian economy expand in 2Q18 from a year ago?

  • Below 3% (8%, 1 Votes)
  • 3.0%-3.9% (8%, 1 Votes)
  • 4.0%-4.5% (23%, 3 Votes)
  • 4.6%-5.0% (38%, 5 Votes)
  • 5.1%-5.5% (15%, 2 Votes)
  • 5.6%-6.0% (8%, 1 Votes)
  • More than 6.0% (0%, 0 Votes)

Total Voters: 13

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Categories
Economics Politics & government Society

[2872] Lasting change needs more work, more time and wider support

We have the right to celebrate May 9. It is after all the first time in Malaysian history change at the very top happened. For years we were only chipping at the edge. Progress felt irrelevant. But now, here it is. Change.

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Yet, not all or even most of the changes Malaysia needs will be instituted quickly. It will take time and work for these changes to happen. There will be residual resistance to change and perhaps using the adjective residual understates the problem at hand. After more than six decades of Perikatan/Barisan Nasional in power – seven decades if you go all the way to the first Malayan general election in 1955 – there is a kind of deep state the new Pakatan Harapan government will need to win over and even fight.

There will be disappointments, and Pakatan supporters and sympathizers will accuse the new government of betrayal and hypocrisy.

But before any of us levels those accusations, we must understand that the government will have to pick their battles. Some will be won. Some will be lost. Pakatan and their supporters will need to be smart in which battles they want to win.

More importantly, before throwing those accusations in the future, we need to understand the long arc of history all of us have to deal with. Malaysia’s deep multifaceted history – with dimensions of race, religion, Peninsula-Borneo, federal-states, urban-rural, national origins, class, gender, etc – is the proper context to judge the new government in the next few years. No action could be judged in isolation.

And the future is just as important as the past in understanding this new Malaysia and the new government.

Our demography and culture are changing at glacial pace. It is slow but the inertia is massive: our society is set to become less diverse in a meaningful way. By 2050 the Bumiputras will form 70% of total population from about 60% in 2014. So would be the Muslims. The Malay population share will rise to 60% from 50% in the same period.

At the same time, we will be an aged society by 2050, from our low median age of 28-29 years old and low dependency ratio.

I fear the two demographic shifts could make our society less open and less progressive in our values. It is not the Malays and the Muslims per se that I fear. It is the increasingly monolithic nature of our society, and hence, the possible intolerance of differences. I fear that future where the Malaysian mind would narrow to a point that leaving is the only reasonable option for too many people.

This is the reason why the 2018 election was the last chance to change in time. The trends are pushing against us, especially against the liberals. It is not simply an election rhetoric. It is a real long-term concern about the fate of Malaysia. This is why I feel spoiling your votes or not voting is unwise: the advocates of the tactics (who wanted some kind of change) are ignorant of history and blind to demographic changes.

It was also the last chance to change because substantive changes that Malaysia needs could not be made by the same side that benefited from the closing of the Malaysian mind. Najib Razak tried it in 2009-2013 and he failed. All his attempts were in the end reduced to mere silo economic targets that stood alone outside of multifaceted Malaysian contexts, making them utterly dissatisfying as a vision. So dissatisfying that we had to go back to the 1990s to move forward.

And substantive change will need more support from Malaysians. While the Pakatan victory is the first step, we have to remember Pakatan won only plurality in popular votes, not majority. Lasting change would require Pakatan to get more Malaysians on board.

Categories
Economics Photography Society

[2868] The last Banton boatmakers

I consider myself lucky. I have gotten enough education opportunities to ride on the benefits of globalization and technological changes. So big are the benefits I have reaped that I think I could travel around the world tomorrow if I wanted to without worrying too much about my financial obligations back home. If I lost my job somehow, I could afford to enjoy my unemployment as a short holiday and more importantly, I could get another good job in Malaysia or elsewhere with the skills, the connection and qualification I have. My social capital and wealth are great enough to tide me through such difficulties.

But the same modernization can be unkind to others. Not everybody benefits from such changes. Some are unequipped to ride the waves with the same education paths available to me. Worse, the wave could smash and sink whatever raft they are on. That fact sometimes makes me feel guilty of living the life I live now.

The last time that guilt hit me hard was when I found myself on the side of the Irrawaddy in Mandalay several years back. I remember walking by a shanty town where homes were haphazardly built along the river, with no access to clean water. There was no sanitation. The people lived in wooden homes on stilts with pigsty below. Trash of various kinds could be found everywhere and some children no older than ten would play happily among flies, fleas and maggots, contend with their small world simply for not knowing any better. I have seen how poverty looks like before but the kind in that Mandalay village is by far the worst kind I have ever witnessed.

I felt guilty just for being luckier than them, just for doing much, much better than them economically.

That feeling re-emerged recently as I travelled through southern Thailand for work. The Deep South as the Thais call it is a Malay heartland, just as how northern Malaysia is. The people on both sides of the border, more so on the east coast, have cultural ties restricted by the logic of modern states.

Somewhere by the beach in northern Narathiwat, the province that borders Kelantan to the south and Pattani to the north, is a village called Naim. There is a traditional Malay boatmaker aged in his 50s working hard to meet his orders. The only additional hands he gets are his son’s aged 20.

Ten or twenty years ago, he claims there were about 20 boatmakers on the same beach. Today, he and his son are the only ones left. So few are the traditional builders throughout southern Thailand that he is busy for the next four years meeting whatever demand that exists. It takes about four months to finish a boat, and by that account, he should have 12 boats to build.

The traditional boats he produces are magnificent. Made out of wood, they are 20-30 meters long. He uses modern tools to saw off wooden plank, before shaping and carving them. During my visit to his workshop, he and his son were working on the bottom most part of the boat, which had holes drilled into the sides and wooden studs jutting out of it.


The final stage of boatmaking involves painting the boat in bright contrasting colors, making the intricate pattern drawn on its body impossible to miss on land and in the sea. I would later visit Pattani located farther north and I found similar boats floating on the river that cuts through the city. An former MP for Narathiwat told me even the painters are a dying breed.

The modern economy has made traditional boat building an unlucrative business. It takes about BHT300,000 to make a boat, with the labor share of the cost being very small. Obtaining capital to finance the boat is also very difficult and the boatmaker complained nobody has helped him to keep the trade alive.

He also told me nobody wanted to become an apprentice anymore because of great sacrifices required. Apprentices are usually, or more accurately were, taken in young. Doing so today would mean missing out school days and missing out school would mean limiting one’s economic opportunity to escape poverty and rise up the social ladder. And the people in the village are largely poor living in their wooden homes and riding their motorcycles. Many live in wooden shacks in fact that could be mistaken as having been abandoned. One could get modern education and try to integrate with the modern changing economy, or risk one’s life making traditional boat for local fishermen, who themselves likely unable to compete with larger boats with deep sea capability, at a time when fishing stock is depleting regionally.

Boat building is a heritage of this part of the world. And he and his son are among the last of Narathiwat boatmakers. They are the last of traditional boatmakers on Banton beach.

And the same economic setup I am benefiting is killing that beautiful boatmaking culture. The importance of modern education is taking labor away from this trade, a trade that is a public good.