A Different Perspective

Peruvian economist Hernando de Soto has an unconventional perspective on the causes of the Great Recession (excerpts):

The Destruction of Economic Facts

During the second half of the 19th century, the world's biggest economies endured a series of brutal recessions. At the time, most forms of reliable economic knowledge were organized within feudal, patrimonial, and tribal relationships. If you wanted to know who owned land or owed a debt, it was a fact recorded locally—and most likely shielded from outsiders...

Competition Act: Monopolies Everywhere

From this weekend’s news:

The Competition Act and Anti-Profiteering Act to change the way business is conducted

THE Competition Act 2010 and the Price Control and Anti-Profiteering Acts 2010 will completely change the way business is conducted in Malaysia if fully implemented as expected by next year as they help pave the way for greater innovation and service to consumers at competitive prices.

The Competition Act 2010 took over 15 years to be implemented in Malaysia due to legacy issues such as industrial policies and protectionism given to selected industries such as the construction and transportation.

Gold Fever

Articles like this really get my goat (if you’ll pardon the pun). From the Sunday Star (excerpts):

Gold fever rages on

The practice of investing in gold is slowly gaining momentum in Malaysia.

THERE'S a lot of talk about gold these days. More Malaysians are investing in the precious metal and even criminals seem to have caught on to the gold bug…

…Over the last year, the price of gold has risen approximately 23%; and in the last three years it has risen 98%. While unrest in the Middle East and the situation in Japan are cited for record gold prices in recent months, shaky financial systems are the main reasons why the price of gold has been shooting up over the years.

Inflation And The Cost Of Living

I was asked by reader Faisal Nazrin Zainuddin to comment on this article in the Malaysian Insider:

Malaysians plagued by poor purchasing power

Analysts say the undervalued ringgit distorts the country’s purchasing power for imported goods. — Reuters file pic

KUALA LUMPUR, April 19 — Malaysians who find themselves affording less than their contemporaries overseas have distorted and inefficient markets, lack of competition, low wages and a weak ringgit to thank for their poor purchasing power, which in the case of KL, is only 34 per cent that of New York. Despite government assurances stating that inflation is under control, Malaysians are becoming increasingly restive over the cost of goods in relation to wages, especially those who are able to compare the corresponding price-to-wage ratios in developed economies.

Malaysians who have experienced working and living abroad often experience sticker shock when they come back and see prices in KL.

This is actually one of a trio of articles on the same subject (find the others here and here).

Lessons In Financial Literacy

I’ve been a convert to the idea of promoting financial literacy at the earliest level of education. It’s such a critical life skill yet very few have any knowledge of it, particularly in light of the consumerist society the modern world is turning into.

Now, Prof Frances Wooley explains why financial literacy alone isn’t enough (excerpt):

Don't eat the marshmallow

Canadians are increasingly indebted. 31% of us struggle to make our bills and payments. We're pretty clueless when it comes to retirement - just 40% have a good idea how money we need to save in order to maintain our standard of living in retirement...

...I regard the the whole financial literacy exercise with some cynicism. As Canada has reasonably adequate government-funded income support programs for seniors, governments have a strong interest in ensuring that Canadians have enough savings that they do not need to rely upon those supports.

Moreover, financial literacy campaigns frame excessive debt or insufficient savings as a financial problem - expenditures exceed income. Yet, as the the familiar circular flow diagram shows, financial flows are simply a reflection of real flows…

…Framed in real terms, excessive debt and insufficient savings becomes either a problem of "too much stuff" or inadequate incomes: the value of goods and services coming into the household exceeds the value of that household's labour and capital.

February 2011 Employment Report

The volatility of employment numbers continues to bemuse me. Maybe if I watch it long enough, the numbers will start to behave and make sense.

To wit: February employment and labour force numbers showed a drop (which I thought might happen), but it was much, much smaller than I expected. More confusingly, the net result was a crash in the unemployment rate:

March 2011 Consumer Price Index

I’m going to try to catch up with the latest releases by this weekend, and the posts will be scheduled in advance so you don’t have to visit more than once or twice a day .

Based on the latest CPI report, inflation took a pause in March (log annual and monthly changes; 2000=100):

Apologies For The Service Interruption…

Here I go again…I’ve just come back from a near-week’s outstation duty. It was hectic and stressful, but fairly rewarding, and the best I got out of it was a couple of seconds appearance on RTM1 (ticking down my 15 minutes of fame ).

With luck, work commitments will start to ease after this so stay tuned for a more normal pace of blogging starting next week!

February 2011 Industrial Production

I’m playing catch up again, so I’m skipping some update posts this month (monetary conditions for one). The February IPI report came out two days ago, and while the headline numbers aren’t too impressive we have to factor in the short month and the impact of CNY (log annual and monthly changes; seasonally adjusted; 2000=100):

Sneaking Around Invest Malaysia

Funnily enough, I didn’t get to attend any of the headlining events at the annual Invest Malaysia event yesterday (the PM’s keynote, Pemandu CEO Idris Jala). In fact, this is one event I’ve rarely attended – the audience is primarily analysts, fund managers and the media, and the message is generally tailored to foreigners. I can only recall one other time I’d been there, and that was over a decade ago.

This year, ironically, I got roped in not as a participant but as a presenter. Don’t bother trying to look me up though, we weren’t on the official program – it was a private presentation to a small group of fund managers from China. As I understand it, EPF did the same thing for this group earlier in the day.

I did my damnedest to “sell” Malaysia; not hard with all the foreign interest these days. The timing could of course have been better, the market being what it is right now. But I think that we’re really seeing foreign portfolio investors start taking the Malaysian market more seriously.

Whether that’s good or bad is of course another question.

I’m Back!! A Korean Digression

If you’re wondering on my silence over the past couple of weeks, I’ve been on a trip to Korea as part of the business delegation following the PM.

We were on very short notice for the trip, which necessitated some pretty frantic preparations. Nor was there time at all for sight seeing of any kind – I don’t think I moved more than a block from the hotel the whole time except for a short trip to the Korean Chamber of Commerce and Industry and obviously the airport. I barely saw my hotel room except to sleep.

Having said that, it was a pretty interesting trip – I made a lot of useful contacts, and learned a great deal.

I can’t talk about more than what was publicly revealed, but the trip did involve the creation of a Malaysia-Korea Business Council (on our part) and a Korea Malaysia Business Council (on the Korean side):

The role of these two bodies is to facilitate discussions on business matters between the private sector, beyond the existing government to government framework. The end goal is to basically double trade between the two countries by 2015, which is pretty ambitious even with the ASEAN-Korea FTA, considering it took a full ten years for it to double previously.

Korea is already Malaysia’s sixth largest trade partner and obviously has much to offer in terms of technical and engineering expertise. So what’s in it for the Koreans? Basically, a cheaper production base (not much of an advantage, I’d grant, compared to the alternatives), raw material availability (big one, this), and as a hub for the ASEAN region. We don’t have much of a domestic market yet, and it’s pretty much a toss-up whether all the incentives, regulations and other factors really matter to them.

So even though the PM came back with RM5 billion in investment commitments, long term we’ll have to show we’re a better bet than say Indonesia, where the Koreans have been investing in a big way and don’t mind saying so.

I’ll be writing more about this off and on (about a couple of times a year), as I’m rather deeply involved with this. So stay tuned.