Please ignore this. This is a test.
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The 2021 first quarter GDP for Malaysia will be out next week. As usual, before we go into the details, let us play some games.
How fast do you think did the Malaysian economy expand in 1Q21 from a year ago?
- Faster than 10.0% (0%, 0 Votes)
- 7.6%-10.0% (0%, 0 Votes)
- 5.1%-7.5% (0%, 0 Votes)
- 2.6%-5.0% (36%, 5 Votes)
- 0.1%-2.5% (50%, 7 Votes)
- 0% or slower (14%, 2 Votes)
Total Voters: 14
Loading ...January, February and March industrial figures grew 1.2%, 1.5% and 9.3% year-on-year respectively. That is a 3.9% industrial expansion for the whole quarter. With industrial production representing approximately a third of the 2020 economy, this is a good sign.
This is especially so when services (60% of the 2020 economy) contracted slightly in the first quarter, falling 0.3% from a year ago.[1] This is likely caused by the second lockdown imposed by the government in January and February 2021. But I do not think that small contraction should not bring down the overall growth (and I do not think agricultural output will be too bad that it would bring the whole GDP growth down).
But we are in danger of getting distracted by growth number. We have been distracted earlier and the belief in V-shape recovery is a proof of that. Now, we are paying the price in the form of bad government response, and bad planning.
Instead of whether the first quarter (or the second quarter for that matter) would grow, there are two benchmarks we should focus on as far as the top line recovery is concerned:
- When will the GDP level (not growth) return to pre-pandemic level? This level should be the fourth quarter of 2019, and the answer will determine whether we have somewhat recovered.
- When will the GDP level (not growth) match the level it would have been if the 2020 recession did not happen? The answer to this question will tell us the long-term damage the economy has suffered.
Additionally, the real bad news is that, recovery has been uneven and its pace is flagging. March 2021 unemployment rate is stuck at 4.7%, after spiking to 5.3% back in May last year. The reason for the stubbornly high unemployment rate is that people are returning to the labor market, except that the economy is not creating jobs fast enough. Definitely, some jobs have been eliminated permanently.
Bottom line is, even if there is growth in the first quarter, I would not label it recovery just yet. In this situation, I rather not pay Genting Casino a visit. I prefer to err on the side of caution.
[1] — I made a noobish careless mistake here. I mistook quarter-on-quarter number for year-on-year. The year-on-year was much worse, and if I had realized it, I would have expected a contraction for the first quarter. Apologies.
Discussions on affirmative action in Malaysia have never gone away but interest in it has increased in recent weeks. The first exciting interest in the topic was Hwok-Aun Lee’s book Affirmative Action in Malaysia and South Africa: Preference for Parity. I have not got my hands on the book (I hope to buy it soon), but I listened in to one of Lee’s webinar on the book and the subject earlier this year. Most recently, is Nazir Razak stating the New Economic Policy—Malaysia’s affirmative action—no longer works.
My thinking of affirmative action has softened over the year. Softened in the sense that while in the past I think I could be labeled as anti-NEP, I have adopted a show-me-the-result position. In fact, I have concluded there has to be a balance between economic and social imperatives. As a relevant side note, I am writing a book (a never-ending project) and in a segment of it, I outlined why I thought NEP might have a role in created a shared identity in Malaysia (perhaps Bangsa Malaysia as a shorthand for this) for a short while in the 1990s. It was a decade or two-long process coupled with rapid industrialization and globalization, that was unraveled during the late-1990s Asian Financial Crisis and later, China’s entrance into the global marketplace. My current thinking is that, though NEP-styled affirmative action worked in the 1970s and the 1980s (dare I say the 1990s despite its official expiry?) situation in the 2020s have changed dramatically that the way Malaysia does it affirmative action need to be rethought. It requires a rethinking because NEP did not work in isolation during the years and the factors (high growth and absence of China) that made NEP work are no longer present today.
Last week, I somehow got pulled into a Clubhouse discussion about NEP where Nazir Razak stood on a soapbox. Near the end, riding on an acquittance’s train of thought, if I remember correctly, Malaysia needs to invest in its public services more. I would like to clarify and expand that idea further.
If affirmative action is to end, then I think it is imperative that public service be expanded further. This is not to say the public service expansion and affirmative action are mutually exclusive. But it is probably good to understand that most beneficiaries of affirmative action probably rely on public service more than others. Removing affirmative action would likely require expansion in other parts of government in order to maintain the beneficiaries’ general welfare.
Here, the maintenance of general welfare is importance for social stability, which in turn is crucial to creating the environment for long-term economic growth, which itself is important to the maintenance of welfare. It is a loop.
By public service, I refer specifically to public education and public health system. By expansion, I mean by making it more accessible cheaply at a higher quality and while this may sound fluffy, I think the best proxy to this is government spending in these areas.
And Malaysia lags in terms of public spending in these two areas when compared to other countries. I have written a short advocacy paper on this matter under REFSA earlier and you can access it here.
A brief look at the World Bank database containing data from most countries will show that Malaysia is a middling when it comes to government spending in education relative to its GDP, while under-spends in public health services.
Malaysia’s government spending on education and health relative to nominal GDP
Malaysia’s 2018 government spending on health was 1.9% of GDP and this compares badly with upper-middle income countries’ average of 3.2%.[1] Malaysia does better in public education, spending 4.7% of GDP in 2017, versus upper-middle income average of 4.1% in the same year (year 2017 and 2018 are chosen because those are the latest year available for year-to-year comparison between Malaysia and upper-middle income average).[2]
So, if ever affirmative action, or NEP in whatever form it persists now, is to be dismantled, I feel is it crucial to boost public spending in government services. Boost spending alone, of course, is not enough. How you spend it matters too.
[1] — Domestic general government health expenditure (% of GDP). Open Data. World Bank. Accessed April 7 2021.
[2] — Government expenditure on education, total (% of GDP). Open Data. World Bank. Accessed April 7 2021.
All recessions have its losers and to claim so is to state the obvious. It is more interesting to know who the losers are. Data from the Department of Statistics shows that the biggest losers in this recession are the young.
From the chart below, it is quite clear the job market for 35 years old and younger is doing badly relative to the market for older cohorts:
The chart is drawn by comparing total employment by age for each quarter relative to a pre-pandemic benchmark. In this case the benchmark is the final quarter of 2019, the last quarter before the pandemic. To illustrate:
- there were 31,800 fewer employed persons among 15-24 years olds in the first quarter of 2020, relative to the last quarter of 2019
- there were 202,600 fewer employed persons among 15-24 years olds in the second quarter of 2020, relative to the last quarter of 2019
So, if the number goes down, then it is bad because it shows fewer people are employed relative to the benchmark. If the number goes up, then it is good because it shows more people employed.
The data is from the Quarterly Report of Labour Force Survey. The 2020 fourth quarter report, which is the latest report, was released on February 8 2020.
Increased underemployment among younger cohorts
The change in total employment does not indicate change in employment quality. Here, I am referring to underemployment. Once again, the young are the most badly affected:
Unlike in the first chart, an increase here suggests more people working less than 30 hours per week, which could be considered as a definition of underemployment (there are other underemployment definitions). They work less than 30 hours because they are likely unable to work fulltime. Therefore, an increase in this chart points to a worsening situation.
This is relevant because a person is considered employed in official statistics if he or she works for at least an hour per week. As you can see, it is a loose definition. During normal times, it is alright to use it because it works. But the situation we are in are quite abnormal and it challenges our traditional definitions.
In 2017, political scientist Thomas Pepinsky claimed that life in authoritarian states was mostly boring and tolerable (that is tolerated by the people). He cited Malaysia where life was quite normal, despite it being an undemocratic country and mildly authoritarian. But his audience were not Malaysians, but Americans, many of whom found themselves in opposition to Trump and his illiberalism.
Pepinsky argued authoritarian states did not necessarily mean “jackbooted thugs, all-powerful elites acting with impunity, poverty and desperate hardship for everyone else, strict controls on political expression and mobilization, and a dictator who spends his time ordering the murder or disappearance of his opponents using an effective and wholly compliant security apparatus.” Life on the ground in such a state could be indifferentiable from a democracy of comparable economic development.
He was not defending authoritarianism. Instead he was warning that authoritarianism arrived more subtly that most people realized. It does not come with a bang. He wrote:
It is possible to read what I’ve written here as a defense of authoritarianism, or as a dismissal of democracy. But my message is the exact opposite. The fantasy of authoritarianism distracts Americans from the mundane ways in which the mechanisms of political competition and checks and balances can erode. Democracy has not survived because the alternatives are acutely horrible, and if it ends, it will not end in a bang. [Thomas Pepinsky. Life in authoritarian states is mostly boring and tolerable. Vox. January 9 2017]
Forward 4 years later, Malaysia has lost its democracy and we are now ruled by a dictator.
When Prime Minister Muhyiddin Yassin and his allies in 2020 wrested power from the victors of the 2018 Malaysian General Election without going through any election, his action arguably was still done within the gray ambit of democratic practices. Gray because of the 2009 mistake that began in Perak legitimizes an obscure process of selecting a government over the usual transparent process of letting the contenders prove their support in the Dewan Rakyat. The same untransparent process contributes to or exacerbates the political instability that we suffer today.
Muhyiddin’s government was never stable from the get-go. Now when it became clear he did not have the majority needed to remain in government, he carried out a self-coup through the declaration of emergency. The excuse was the COVID-19 pandemic but we know he was just pulling the wool over our eyes. As if giving more power to a government that mismanaged the pandemic was a good idea. More will die sadly. In a better situation, we would be replacing this incompetent Cabinet with one of better caliber.
That self-coup has firmly placed this government into the realm of authoritarianism. The Prime Minister is the Dictator of Malaysia. There is no democratic mandate to speak of anymore. There is only the will of the Dictator Muhyiddin Yassin.
And that happens without loud protestation.
The pandemic is to blame no doubt. Perhaps the economic devastation worsened by this government’s complete incompetency is sapping energy away from the population. Perhaps they are tired of the failure of the Pakatan Harapan and their allies in opposition to do what was right back in November during the tabling of the 2021 Budget. The failure and disillusion breed ambivalence. Everybody is tired of the national political chaos.
All that leads to us tolerating authoritarianism. This is more so when the Dictator defends his self-coup by stating life will go on as normal, however disingenuous that sounds. The Dictator is telling us authoritarianism is tolerable.
Such a disappointment.