Categories
Economics

[2579] Far higher potential output for Malaysia?

Both the GDP and the CPI numbers for Malaysia were released yesterday.

Real GDP growth grew by 5.4% in the second quarter from a year ago. Although I suspected that growth would be strong due to strong showing in the industrial production index, I found 5.4% as surprising still. It was too strong for whatever the production index was showing.

The strong growth, along with low unemployment rate, provides a puzzle when it is considered together with inflation trend. Inflation in Malaysia, both headline (1.4% in July from a year ago) and core (1.3%) inflations, has been decreasing since the beginning of the year. Typically, strong growth creates demand-pull inflation. That demand-pull inflation has been absent in the second quarter despite strong GDP showing.

Furthermore, the unemployment rate has been low and I tend to consider the current rate to be quite close to the idea of full employment.  The latest employment rate, which is for the month of May, is 3.0%. Previously, the rate hovered between 3.3% and 3.1%. Labor participation rate is also quite high given historical standard. The assumption of full employment implies the economy has been working close to its full potential. Any growth stronger than the potential will put upward pressure on prices.

Yet, inflation, especially core inflation, has been decreasing throughout the year.

This may suggest that the potential output is higher than the growth the Malaysian economy has been experiencing so far. It also suggests that the already low unemployment rate can go down further and that we are not really that close to full potential.

So, Malaysia can grow faster still, which is an exciting realization. I heard of the go-go 1990s. Maybe, it is time for the go-go 2010s in spite of everything. Let us just hope things will not go down in flame like it eventually did in the 90s.

Whatever it is, if growth so far has been unsustainable, then inflation should accelerate in the near future. If it is sustainable (i.e. actual growth is lower than potential), we should see only limited demand-pull inflation.

Finally, I previously projected the Malaysian economy to grow by 4.0% for the whole of 2012. I am looking like a fool now and will be looking to upgrade the growth rate soon. Nevertheless, I am ultimately skiddish about that upgrade. Although domestic demand, which grew by 12.0% year-on-year, has proven to be capable of cushioning the adverse impacts from weak exports, the global risk is still there. Trade has not collapsed but it can and if it does, an upgrade will be a very foolish thing to do.

Categories
History & heritage Photography Travels

[2578] 312 kilometers from Phnom Penh

If you want to visit the Angkor temple ruins, Siem Reap is your base. It is less than 20km away from the Angkor Wat and other magnificent temples to the north.

Some rights reserved. Creative Commons 3.0. By Attribution. By Hafiz Noor Shams

I spent nearly two weeks in Cambodia, spending the first week in Siem Reap in the north before visiting Phnom Penh via Battambang in the west. Yes, it was a big detour but it was worth it.

Siem Reap is a cute little town, close to the former capital of the Khmer empire, which is now in ruins. And yes, it is 312km away from Phnom Penh, the capital of Cambodia.

Siem Reap itself means “Siam defeated.” The Khmer capital was captured by Siam in the 15th century. That caused the Khmers to move its capital to Phnom Penh. In the 16th century, the Khmers liberated Siem Reap from Siam in a complete fashion. Hence the name.

Unfortunately for the Khmers, the Siamese were eventually victorious over the Khmer empire. Cambodia remained under Siamese rule until the French came in the 19th century.

Categories
Conflict & disaster Society

[2577] The cost of communism in Cambodia

Between 1975 and 1979, Cambodia came under the communist Khmer Rouge regime. The communist rule exerted considerable cost on the Cambodian society. Just how significant?

Never forget.

Data was obtained from the World Bank.

Categories
Economics History & heritage Photography Society Travels

[2576] Life and commerce in Siem Reap, Cambodia

I have always known about the atrocity of the Pol Pot and Khmer Rouge regime in Cambodia but before I traveled to Cambodia, that knowledge was superficial. I only began to learn more about the conflict when I found myself in Cambodia for two weeks recently. Being there almost made the knowledge into an emotional experience for me.

To fully understand the history, I think one has to read up Cambodian history since its late French colonial days. That is so because each event led to another and finally in 1975, the Khmer Rouge came to power. It was a reaction to yet another reaction but that fact does not justify what the Khmer Rouge did.

Apart from its political desire that also contributed to the massacre of the Cambodian people and those in the Khmer Rouge themselves later, its communist, understanding, forcefully changed the economy and the demography of Cambodia for the worse. It was disastrous, as it was disastrous with the Soviet Union and the People’s Republic of China.

The regime was not ashamed to centrally planned the economy, forcing all to work in the countryside as slaves and victims of communism. Without exaggeration in the case of Cambodia, communism kills. The cities were deserted so that the communists could realize a stupid ideal of “peasant economy”. Doctors, engineers and professionals were all forced to till the land in the countryside. The cities were left to those in power, and those whom were being tortured to satisfy the paranoia of the Khmer Rouge and ultimately, the circle of Pol Pot. The cities became ghost towns.

The Khmer Rouge regime fell in 1979. By that time I visited the country in 2012, what was a rich country has only begun to make its way in this world again.

Cambodia was a rich country. Its temple ruins are evident enough. Phnom Penh the capital has traces of its pre-Khmer Rouge glory.

Some of the Cambodians I talked to rued how Cambodia was richer than Vietnam before the Khmer Rouge period. Now, Vietman is ahead in so many ways. My traveling partner whom has been in Vietnam several times for an extended period, confirmed this. There are more buildings and vehicles in Vietnam than there are in Cambodia.

While that is so, traces of communism are being overwhelmed by its better nemesis.

In Siem Reap up north where most the temples of Angkor are, commerce, the voluntary exchange of goods and services by individuals, is everywhere.

Some rights reserved. Creative Commons 3.0. By Attribution. By Hafiz Noor Shams

Under communism of the Khmer Rouge, that was illegal. Under communism, there was no life.

Categories
Photography Travels

[2575] Between Battambang and Phnom Penh

I am suffering from withdrawal syndrome. Cambodia is a land of mysterious ruins, wide paddy field with cities tinged with colonial life. It gained independence from France in 1953, but Cambodia is still stuck in time. The country is miserably romantic in so many ways. If you have been there before, traveling across the country from Siem Reap in the north to Phnom Penh in the south, you will understand the feeling quickly.

Some rights reserved. Creative Commons 3.0. By Attribution. By Hafiz Noor Shams

This is somewhere in between Battambang, the second largest city in Cambodia, and Phnom Penh, the capital that still lives in colonial times. Being close to Tonle Sap, the biggest freshwater lake in Southeast Asia, the landscape is dominated by paddy field.

The hot blue day makes the country beautiful, but the reality is harsher. Poor farmers had waited from rain for days; their livelihood depended on rain, and there was not enough water to go around during my stay there.

In some places, life is both beautiful and hard. That is Cambodia.