Categories
Economics WDYT

[2946] Guess the 3Q21 Malaysian GDP growth

Let us go straight to it:

How fast do you think did the Malaysian economy expand in 3Q21 from a year ago?

  • Faster than 5.0% (0%, 0 Votes)
  • 2.5%-5.0% (29%, 2 Votes)
  • 0.1%-2.5% (29%, 2 Votes)
  • -2.5 to 0.0% (29%, 2 Votes)
  • Slower than -2.5% (14%, 1 Votes)

Total Voters: 7

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With lockdown imposed throughout the third quarter and more—done to address the government’s mismanagement of the pandemic—economic growth is unlikely to be strong, if there is growth at all. Reuters’s poll has GDP falling 1.3% year-on-year. Bloomberg’s panel is more pessimistic by putting it at 1.9% contraction.

Supporting statistics are out there. Industrial production contracted in the quarter. Unemploment is still significantly high versus prior to the pandemic. More people are joining the job market and getting employed, but the rate that is happening is just not fast enough.

I do not know what to read from the inflation data anymore. It is mixed with supply-driven issues. Along with massive base effect, it makes the whole measurement less useful for assessing demand. There is core yes, but I don’t know.

One good news is the import growth, particularly retained imports were okay, signalling recovery momentum for private consumption during the quarter and going forward. In contrast, exports did not grow as fast, don’t expect much support from the trade front. Still trade issues with all its supply chain complication might not reflect the health of demand in the first place. That is yet another complication in assessing demand.

But the more important thing is, most relevant to people on the streets, the worst is probably behind us. Vaccination rates are high and further lockdown seems unlikely, unless somehow the vaccines suddenly stop working, or the Malacca election gets mismanaged like how Sabah was. That means, the fourth quarter would likely be much stronger (fingers crossed).

Yet another important point is that, we are very unlikely to return to pre-pandemic peak of 2019 this year. 2022, almost certainly but we are definitely behind the pre-pandemic growth trend. I blame Budget 2021 for that, due to the government’s misplaced priorities.

Categories
Books & printed materials Pop culture Sci-fi

[2945] Watching Foundation

Amid the Dune hype, it is easy to miss the other classic sci-fi hitting the screen. A different screen in a different format, but screen nonetheless. Isaac Asimov’s Foundation has been adapted for Apple TV+ streaming service with 8 of 10 episodes aired. I myself found out about it after browsing Facebook.

I read Foundation a long time ago as a teenager, and the idea of psychohistory was so attractive that I was bought into its universe so deeply. I know Star Wars before Foundation, but I understand Trantor, the capital planet of the Empire in Foundation, first before Coruscant, the capital of the Empire in Star Wars.

I was not the only one loving Foundation obviously. I could not. I remember reading in an interview where Paul Krugman said he went into economics because of Foundation; the predictive power of psychohistory does have a hint of economics in it. Lots of probabilities, and possibly econometrics.

But that was a long time ago, and I admit, I do not remember all the details. My reading list meanwhile has moved on from science fiction to stuff grounded more on reality. There is only one unread sci-fi on my shelf waiting to be opened: Cixin Liu’s The Three Body Problem (okay, there is also Forward the Foundation, but I was told, it is an unjust prequel to the original trilogy).

So, I thought I must be getting old and utterly forgetful when I watched the first episode of Apple’s Foundation. While Hari Seldon was there, the details did not feel right. The Genetic Dynasty? Could I have missed something that big? The pace of the series, as I kept on watching the rest of the series, felt too fast to what I remembered it. In the novels, hundreds of years would pass. In the series, less than a human lifetime.

As it turns out, my memory is fully intact. A little internet refresher reminds me of the Foundation I know. Further research reveals that the series diverges away from the novel, adding new elements and throwing away some.

I know people who are angry at this. The deviation from the novel feels blasphemous. Foundation feels like a holy book, and the series defiles it.

At first, I felt the same way, but really, at risk of being cancelled, I enjoy the series. I really do (and I really like Jared Harris, the man playing Hari Seldon, from his Sherlock Holmes days).

And clearly this is not the first time an original work has been reimagined. Star Wars, under Disney, did that when they threw out of the window all of original storylines told by the Thrawn Trilogy and more. Marvel, under Disney too, definitely changed the background to some of its major characters. Star Trek rebooted its whole universe, rather unsuccessfully if I might add.

So, as blasphemous as it might be, the act of fiddling the original story, I have been desensitized to the idea. A retelling could be as fulfilling as the reading the original.

After all, we are living in an age where actual history is being reassessed and retold in different lights. Old understandings are being overturned. Revisionism aplenty.

Not be quite a parallel, but it seems like a zeitgeist of our time.

Categories
Economics

[2944] Run higher deficit, let the economy recover first

We are not out of the woods yet.

Yet, already there are individuals wanting to shift attention away from the economy towards government finance. The latest of these individuals are Najib Razak, who has the guts to talk about new taxes in the next two years when he is not paying his, with amount that would rival some of the taxes he proposes:

“I propose a temporary Covid-19 recovery tax package for two years. This, for example, will include a windfall tax, luxury condominiums development tax, stamp duty on transactions, inheritance tax, stock market trading tax, and higher personal income tax on high-income individuals.

“After two years, we can end this temporary tax.”

He also suggested that the government tax tech giants that have a presence in Malaysia, such as Amazon, Netflix, YouTube, Google, and Facebook, which have raked in a lot of profit, but have never been taxed here.

He said this should not impact consumers, and instead be levied on the companies’ profit margin. [Azril Annuar. Tax the rich: Najib proposes 2-year temporary recovery tax. The Vibes. September 15 2021]

While taxes in general will have to come, we cannot impose it as soon as possible and then pretend it will not jeopardize recovery the Malaysian economy is experiencing. Recovery so far has been weak. It has been so bad that the government are now celebrating base effect. Such is the quality of our leaders today.

From the look of it, 2021 GDP will likely still be smaller than the one in 2019. This just shows the incompleteness of our ongoing recovery. Unemployment is another measure to worry about, with the latest rate (July 2021) remains stubbornly high at 4.8%, well above of the 3.2%-3.4% range recorded during the pre-pandemic year of 2019. The incoherent management of the pandemic has exerted additional costs to the economy.

Here, we still need to prioritize the overall economy over government finance. While both are important and both are linked, the government has more room to run a loose fiscal policy more than families as well as small and medium-sized businesses. As I have mentioned before, the only barriers to greater borrowing are legal restrictions and there is nothing ‘economics’ about those legal restrictions. Furthermore, borrowing costs are low, with yields on 10-year MGS at 3.30%.

For this reason, it is better for the government to keep their hands off those onerous tax levers and instead run higher deficit ratio (or stay at the current ratio). Allow the economy to grow first. Let the economy recover properly before pushing of any kind of taxes. Once the economy comes, the taxes will also come too.

Only once the economy has returned to its pre-crisis level and trend can we begin to introduce new taxes. In the meantime, while the economy is still below pre-crisis conditions, other non-punitive measures should be introduced first.

Tin identification number (TIN) is one of those measures that will improve transparency in the market without imposing new tax burden to the economy. TIN would require all persons and entities be assigned a unique identifier, which must be appended to any transaction (like the opening of account, transfer of money, purchase of large assets like homes and cars). This will allow the tracing of money better. A little bit like the VAT/GST, but without the tax. Once the system is stabilized, data from TIN could be used to better design new taxes that are needed, including some of the taxes Najib mentioned. Things like wealth tax for instance need data on data on wealth in Malaysia is horrible. TIN can improve data collection by leaps and bounds, which will assist in designing a good tax.

TIN was in the works under Pakatan Harapan as part of their reform program (unfortunately, it was opposed by Muhyiddin in 2019 over concern the opposition would attack the move as a new tax. That was not the only reform that was sabotage by multiple people, which hobbled the overall institution reform efforts). One good news is that there is a good chance the TIN would finally be instituted beginning next year, based on signals given out by the Ministry of Finance.

I would like to reiterate that sequencing is important, and Najib ignores that factor.

The timing and sequencing inappropriateness are not the only concerns here. The other is its temporary nature of the proposal. Najib wants those taxes to last only two years. This is detrimental to longer term attempt at reforming the taxation regime.

Unlike Najib, I am in favor of having a 10-year or 15-year tax reform program, which makes permanent some of the taxes Najib mentions. Easy measure like TIN would happen within 2-3 years. Making the income tax more progressive is another easy move that could happen within 5 years, for instance. This longer-term plan solves several problems (underfunding of public sector, the need for off-budget financing, low taxbase, unfair treatment between labor and capital income, the growing digital economy relative to brick-and-mortar model, etc) more permanently while taking into account the state of the economy.

Having temporary tax measures as soon as possible ignores the state of the economy, and does not address some of the fiscal (and economic) challenges faced by the government.

Categories
Books & printed materials Fiction

[2943] From Afghanistan to Algeria

These days, I generally prefer reading non-fiction to expand my knowledge. So far, it has been mostly history, mixed with a little bit of politics and economics. And it has been Malaysiana-heavy. So, I thought I needed a break from this and picked up some fictions for a change.

I recently finished reading two of them. One was The Art of Losing by Alice Zeniter, which is set in Algeria and France. The other is Khaled Hosseini’s The Kite Runner, set in Afghanistan, Pakistan and the United States. Both have the protagonists having lost their country to armed conflicts, and ended up as refugees in foreign but adopted lands.

I enjoyed them. And I thought I learned a little bit about Algeria and Afghanistan.

After completing almost every chapter, I found myself consulting Google Map and Wikipedia trying to comprehend the context sets by the both authors in their respective work. In The Art of Losing, I was attracted to paragraphs of Hamid the little boy remembering Algeria as Algiers, the white city on the coast of the Mediterranean despite only passing by the capital and having not living there, ever. He and his family were fleeing the country, and hectically catching a boat in order to cross the sea to get to France. That was the last time he saw Algeria.

Zeniter’s description of Algiers made me curious. A white city by the Mediterranean. That made me read more about it and searched for pictures of the city from the sea. On Google Map with its 3D feature, Algiers looks as described: a city of layers of white 3-4-5 storey buildings lining up the Algerian coast. And I did not realize the northern part of Algeria was quite green. When I thought of northern Africa, I could only think of mountains and deserts. I had extrapolated wrongly.

There is a scene in The Kite Runner where Hassan and his father were escaping Taliban-ruled Afghanistan. They were smuggled out of the country in a truck through the famed Khyber Pass. They needed to reach Peshawar in Pakistan that lies on the eastern end of the pass. I watched a couple of Youtube videos to understand the geography of the pass and comprehend the difficulty of the journey.

I have never been to either country, although I think I have flown above Afghanistan before en route to Europe several times. From what I could make from high up in the sky, the Afghan terrain is absolutely rugged.

But between Algeria and Afghanistan, I know the latter more. I was in the United States when the September 11 Attacks occurred, and Afghanistan was a constant feature in American politics for much of my time in Michigan. The Kite Runner makes reference to the US invasion and occupation of the country. More than that, the characters in the Kite Runners celebrated the fall of the Taliban:

That December, Pashtuns, Tajiks, Uzbeks, and Hazaras gathered in Bonn and, under the watchful eye of the UN, began the process that might someday end over twenty years of unhappiness in their watan. [Khaled Hosseini. The Kite Runner. Page 316. 2004]

People have been telling me The Kite Runner is an emotional book. Some cried. I did not, but I felt some sadness upon reading the sentence above, knowing the Taliban has returned, twenty years later. I personally feel the US leaving Afghanistan is a mistake. But never mind.

Algeria is more of a mystery to me. I know where it is located: sandwiched between Tunisia and Morocco. know the capital, and I know it is a Muslim country. I recognize its national flag. I may know a little bit about general classical history involving the Romans. But little else. Ask me about modern Algerian history and I will draw a blank. I have an Algerian French friend that I have not met for a long time, but I was not about to bombard her with questions. So, I read additional material online about modern Algeria, about the FLN that fought for Algerian independence and other relevant topics.

I have a copy of Tournament of Shadows by Karl Ernest Meyer and Shareen Blair Brysac sitting on my book shelf. The book would tell me about Afghanistan much more than The Kite Runner could. But the non-fiction is 700-page long, and has been left unread and untouched for more than 5 years. Moreover, I do have a long list of other books I want to read. So, until the day I start reading that thick book, The Kite Runner (and The Art of Losing) will do.

Are the two poor substitutes to non-fiction as far as learning goes? Maybe, but I enjoyed them thoroughly.

Categories
Books & printed materials Personal

[2942] How’s your book?

The most common question I get these days is, “how’s your book?”

I think it is done. It is at the really, really tail end as far as writing is concerned. I have been re-reading it several times to keep myself happy with the arguments I made. Yes, there are several more feedback to come, and forever reading papers and books to convince myself of the stuff I wrote. But really, I don’t think I will make big changes to the document anymore.

Still, I keep editing it. I have lost track how many rounds of edit from front to back I have done. I keep telling myself, I am editing the manuscript closely to make it perfect. For this latest round, I am editing the penultimate chapter.

But maybe, I am forever editing it because I do not want it to end. After 5 or 6 years working on it, it has become a routine I am comfortable with. I do not want to break the routine.

Such a perverse incentive.