Categories
Economics

[2333] A story that is likelier better than deposits battle narrative

I had some trouble reading an article on the front page of the business section of The Star dated today. The headline “Battle for deposits” roars to tell the world that Malaysian banks are in the battlefield sword in hand fighting for deposits, especially for current accounts.[1] I find the whole idea somehow unconvincing. I could not quite finger it but there was something definitely missing from the picture. I wanted to roar back and so I gave it a thought. And I think I have got it.

The article reasons that with the overnight policy rate increasing, these deposits offer cheap source of financing for banks. It sounds fine until one asks, why are the owners of funds putting their cash in low yielding accounts? Hmm…

That is a far more interesting issue at hand than the alleged battle for deposits. I will come back to this.

But first, I did some calculation after mining the relevant data from BNM just to satisfy this weird curiosity of mine. Compare the graphics produced by The Star…

…with this longer period time series that I produced using the same data:

As you can see, the rate 11% is rather typical for the past 10 years for deposits in current accounts. Annual growth rate between 2001 and 2010 is close to 13%. So I am wondering if the proof of 11% offered is any proof at all.

Maybe, there is a battle for deposits. Maybe, there is less wealth around and so these banks have to work harder than usual, thus the battle for deposits. Maybe but I am skeptical of it. Even if it is true, like I said, there is a more interesting issue at hand.

Another point that does not run parallel with the deposits war story is the drop in savings deposit growth rate. The average annual growth rate for savings deposits is 8%. If 11% annual growth rate of deposits in current accounts that is really around average paints the picture of a battle, what about 3% rate for savings that is well below average?

I have a more interesting and a likely more consistent story to tell.

I think the whole issue is a symptom of economic recovery. It might be an affirmation of economic recovery.

The continuing growth of deposits in current accounts suggests that there are more transactions going on. The drop in savings deposit suggests that individuals and companies might be using the money or putting it somewhere else with better returns rather than keeping it relatively idle. Companies might have purchased more supplies for sales or invested more, while individuals might have gone spending somewhere. More spending, less saving.

What adds to the plausibility of the story is that in 2008, growth rate of deposits in current accounts slowed. The recent financial crisis began in 2007 while the full realization that we were in trouble only became clear in 2008. That hit confidence and many began to hoard money. That meant harder business environment and less transactions. Since current accounts are typically used for business transactions, deposits in current accounts should not grow too big, or should even shrink. Look at the growth rate in 2008: 6% compared to 23% the year before and 11% the year after.

Here are a few things that may strengthen the story further. One, increasing sales and investment figures for companies. Two, increasing private consumption for individuals. Three, higher velocity of money.

Anybody wants to check that? I am going to bed.

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

[1] — PETALING JAYA: Banks are engaged in a war for deposits, especially for current accounts, in their drive to build up low-cost deposits as a means of cheaper funding.

“Demand deposits (current account), which were relatively much cheaper than fixed and savings deposits, had been marking a strong year-on-year (y-o-y) growth of about 11% from 2008 to 2010,” RAM Ratings head of financial institution ratings Promod Dass told StarBiz.

”This clearly indicates the drive among banks to build up low-cost deposits for access to cheaper cost of funds. This active strategy of promoting current accounts usually involves corporate clients who utilise the service for their businesses,” he said.

According to Dass, this was in line with the increasing overnight policy rate (OPR) where the average deposit rate had risen since 2009. [Battle for deposits. Sharidan M. Ali. The Star. March 14 2011]

Categories
Conflict & disaster Environment

[2332] Sendai and Fukushima are not in Malaysia

Malaysia intends to have an operational nuclear power plant by 2021. Multiple individuals and groups oppose the plan. The opposition is based on multiple legitimate concerns. I believe the biggest fear is the chances of a nuclear meltdown. Chernobyl and the Three Mile Island accident are two examples popularly cited to rationalize the fear.  The latest incident around Sendai that included the shutdown of several plants and an explosion in Fukushima is becoming the third example.

It is wrongly becoming a third example.

While the explosion might have led to a meltdown — the latest news reported that the situation is under control now — the explosion itself was caused by a very strong earthquake that is unheard of in Malaysia.

Really, earthquakes in Malaysia hardly deserve the term. Tremors fits the characteristic better and those tremors hardly cause any damage to buildings, if it does at all.

The very limited possibility — out of this world chances — of Malaysia experiencing similar earthquakes that Japan is used to, and especially to the magnitude that Japan suffered several days ago, negates the nuclear incident in Fukushima from becoming a valid case to back anti-nuclear power position in Malaysia. There are many others examples to cite from, but Sendai is just not one of them.

Sendai and Fukushima are just not a precautionary tale for Malaysia. Anyone who thinks so deserves to be accused of being unfamiliar with Malaysia. To make a parallel out of the incident is to ignore local circumstances, which are essentially different to that of Japan’s.

Categories
Photography Travels

[2331] A lonely road in Versailles

This is somewhere in the Gardens of Versailles.

On the right beyond the wall is the residence of Marie Antoinette, the Queen of France whom lost her head to the guillotine.

Categories
Liberty Society

[2330] The police force and the military must remain separated

The roles of the police and the armed forces are different. One enforces the law while the other stands on guard against the enemy of the state. The difference in functions and in challenges both faces necessitate the two to be separated. When two security forces are combined, the power of the military expands. With that, there is a fear that the military might see everything that it faces as enemy of the state. The military becomes paranoid and then acts upon the policing power that it has. That is a step towards military rule.

I am raising this issue because I have read in the news recently that the police is cooperating with the military in fighting crime. In the Parliament yesterday, the Minister of Home Affairs confirms the news report.[1] He said that the Ministry was having strategic cooperation with several entities including the military. The cooperation includes the use of military camps for training and recruitment of police officers and joint patrol.

Whether this militarizes the police force is arguable, but what is certain is that it will expand the influence of the military in our society.

The goal of reducing crime rate in the country is laudable. The goal however does not justify all means. The rule of laws must still be adhered to. Rights must be respected, including those belonging to criminals. The goal also does not justify the erosion of separation between the police and the armed force.

The two must remain separated.

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

[1] — Kementerian Dalam Negeri sedang dan akan mengadakan kerjasama strategik dengan pihak lain antaranya seperti Angkatan Tentera Malaysia yang telah dilaksanakan bagi menangani jenayah seperti penggunaan kem-kem tentera untuk melatih dan merekrut anggota polis, mengadakan rondaan-rondaan secara bersama dan menyerap bekas personel tentera dalam perkhidmatan polis. [Page 3. Hansard. March 9 2011.]

Categories
Society

[2329] Just one ticket, please

I have been to a number of cities with superb rail networks before but I hardly took any notice of them. I simply took the convenience that came along with them for granted. I have come to conclude that any good big city will always have a good rail network servicing the city and its suburbs. The fact that a city has one is not something that quickly impresses me anymore.

While I was wandering the streets of Paris, the issue of the planned mass rail transit system in Kuala Lumpur began to dominate Malaysian headlines. Paris is famous for many things and one of those things is its dense rail network called the Metro. With the MRT in mind, I began to compare the Metro to the existing rail network in Kuala Lumpur.

It is probably unfair to make that comparison. The French capital began building its system nearly a century earlier than Kuala Lumpur did. The French had a lot of time to build and to perfect their network while Kuala Lumpur is still building its network. Nevertheless, there are things Kuala Lumpur can learn from Paris.

One of them is definitely how the lines are integrated, given how badly the network in Kuala Lumpur performs in this respect. Prime examples of lack of integration are the monorail line at KL Sentral, the light rail transit stations at Masjid Jamek and the distance between the Bukit Nanas monorail station and the Dang Wangi station on the Kelana Jaya LRT line.

The planned MRT is poised to repeat these past mistakes. One station belonging to the MRT line is not going to be constructed at KL Sentral but somewhere near to the transportation hub of the city. The distance between the hub and the planned MRT station appears to be farther than the distance between the hub and the nearby monorail station.

The need to travel the distance to change trains is an annoyance for commuters but sometimes it is understandably unavoidable. The issue of cost, land ownership or other innocent constraints may prevent perfect integration between lines. In Paris, there are places where one has to walk for a considerable distance to change trains.

The ticketing system in Paris fortunately makes the action less of a chore. Whatever the train line a commuter needs to take, he or she simply needs to buy the ticket once. There is no need to buy a different ticket for a different line. That means there is no need to queue at the counter or machine multiple times. It also means a commuter need not pass through a ticket verification barrier one time too many.

In Kuala Lumpur, different lines have their own tickets. The need to purchase multiple tickets because one needs to change trains causes long queues. Add to that the fact that these machines in Kuala Lumpur tend to accept exact change only, never mind that some of these machines tend to be offline typically; riding the trains can be an extremely stressful experience.

There is of course the Touch ”˜N Go and other cards that partially address the problem of lack of ticket integration across all the intracity lines.

Yet, not everybody can afford to store considerable credit in those cards and even if affordability is not an issue, not everybody wants to use it. Many times, individuals need to ride the intra-city train infrequently. That makes these cards a relatively expensive investment for a person in a country where a lot of individuals earn less than RM2,000 per month.

My suggestion for the new MRT line and together with the LRT network is this: if the intracity lines cannot be integrated physically with verification barriers placed everywhere, at least integrate its ticketing systems. Since the LRT is under Syarikat Prasarana Negara and so too the MRT eventually, surely such an integration will not be too hard to do.

And yes, please make those machines a little bit more flexible in accepting bills.

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

First published in The Malaysian Insider on March 2 2011.