Badawi's State Of Euphoria - Revisited

Hantu Laut

Should we worry about the state of the economy? Our government have assured us that this country would be spared from the global recession and we have the safeguards to ensure we wouldn't be caught with our pants down.Do you believe them? Is there something they know that we don't? Surprisingly, even the Governor of Bank Negara had confidently said that there wouldn't be a recession in Malaysia.

How much money have the government spent to prop up the ringgit and the stocks market? Without intervention the ringgit would have depreciated much more against the US dollar.All major currencies except the Japanese Yen have depreciated against the dollar.The ringgit had no reason to stay at its present level other than two possibilities..... our export receipts have increased tremendously where we convert US dollars to ringgit or more likely Bank Negara is spending our money to prop up the ringgit.The latter sounds more plausible.

Below are US dollar against ringgit and other major currencies for July/Nov 2008:

US$1.00 to:

British Pound - July 0.49 Nov 0.69 -40.8%
Australian Dollar - July 1.01 Nov 1.53 -51.4%
Euro - July 0.62 Nov 0.80 -35.5%
Ringgit - July 3.26 Nov 3.53 -8.3%
Singapore Dollar - July 1.36 Nov 1.49 -9.6%
Japanese Yen - July 107 Nov 99 +7.5%

From the above you can see that the ringgit is seemingly a strong currency, is it ? The ringgit had also appreciated against other major currencies not because of its own strength but more due to the depreciation of those currencies against the dollar.I expect the ringgit to find its own level when the intervention stopped.

The bull run on the dollar was mainly due to China propping it up to protect its huge foreign exchange reserve of US$1.5 trillion in dollars and gold.How long the exercise would prevail is hard to tell.

Below is an article I wrote in January 2008 on the contagious US recession.


Badawi's State Of Euphoria

Written by Hantu Laut

Wednesday, 30 January 2008

It’s whistling past the graveyard to think that Malaysia is going to escape a US downturn unscathed Prime Minister Abdullah Ahmad Badawi is probably wrong if he is as confident as he says he is that that Malaysia is positioned to avert any negative fallout from a threatened US recession by virtue of trade with the rest of Asean, which on its surface outweighs that of the US. Following the Davos conference in Switzerland, the prime minister pointed out that 86 percent of Malaysia's GDP is domestically generated and added: "This has become one of our economic strengths (as we are no longer acutely dependent on external trade), and these strengths have come from the policies that we have drawn up and implemented, which are far-sighted.” The speech and figures, probably prepared for him by the Ministry of International Trade and Industry, are hardly realistic. While the Malaysian economy has been robust over recent years, his boast that the country is immune from a US recession is incorrect. There are direct and indirect elements that can make a US recession contagious, not only to Malaysia and other countries in Asia. Using data from Malaysia’s state-owned External Trade Development Corporation (MATRADE), the US is still Malaysia’s biggest trading partner, with total trade of MR170.80 billion in fiscal year 2006. In 2006 Malaysia exported RM589 billion to all markets. Almost 77 percent came from manufactured products, 62 percent of that from electronic items. The small domestic market would not be able to consume excesses from a contracting export market. The major manufactured products for export, especially electronic and electrical products, are not suitable for domestic use. What are Malaysians going to do with a few billion dollars worth of unsold semiconductors, computer chips and other high-technology products? In the same year, export trade with Asean countries was RM154 billion. It is safe to assume that more than 60 percent of exports to Asean countries went to Singapore. Malaysia’s trade with Singapore was MR146.9 billion, making it the second largest trading partner after the U.S. With the exception of Thailand, trade with other Asean countries was insignificant. Lumping Singapore together with other Asean countries to show market diversification is self-deceiving and unjustified. Being the second largest trading partner and for the sake of clarity, Singapore should be classified individually. There also seems to be a great discrepancy between MATRADE figures and those given by an independent body SUITE101.com, which quoted Bridgesingapore.com, usembassy.com and the CIA World Factbook as its sources. The data shows Singapore's total trade with Malaysia in 2006 was US$77 billion. Taking an exchange rate at a constant US$1.00 - RM3.40, trade with Singapore was a whopping RM262 billion, not the RM146.9 billion MATRADE uses, making it the biggest trading partner, bigger than the US. Was the huge difference a result of under- and over-invoicing? It's difficult to say which figures were correct. This can only be established if the external trade corporation were to openly dispute the figures from the other sources. The majority of exports to Singapore are re-exported, with a big portion going to the US. In 2006, Singapore re-exported S$204 billion out of total exports of S$432 billion. Singapore exports have weakened over the past few months, signalling slower growth in 2008. Abdullah Badawi's assurance that trade with other Asean countries outweighs that with the US thus doesn't hold water. The biggest single entity in the Asean region is still Singapore, as has always been the case. It will continue to be Malaysia's biggest trade partner for a long time to come. A recession in the U.S would bring reduced volumes of purchases and falling prices which will subsequently affect Singapore's imports from Malaysia. Another motivating factor for Malaysian exporters to use Singapore is the practice of under-invoicing, in which certain amounts of export proceeds are retained in Singapore. (Many Malaysian exporters use this facility to keep some funds outside the country. Similar practices have been carried out by log exporters from Sabah and Sarawak, using Hong Kong as their base. With millions stashed overseas, some Malaysian companies from Sarawak have become the biggest loggers in the world, partly financed by the Malaysian Inland Revenue Department, in the form of tax evasion.).Read more......

UMNO Sabotaging Itself ?

Hantu Laut

Is there anyone in UMNO that is capable of making sense or are there internal forces within the party out to destroy it or they are just plain stupid not to see what they are doing could lead to their self-destruction.

Just a few days ago the Deputy Prime Minister Najib Tun Razak assured Malaysians that he would not return to the Mahathir's era type of administration and that he would bring about reforms in accordance with the people's aspiration.What he had just said must be a joke because the actions seemed to be pointing the other way.I honestly believe what's going on now is even worse than Mahathir's time.During Mahathir's time Chua Soi Lek would at worst get a tongue-lashing in private.

Well, damn me!, if I can understand the sensibility of dragging your partner to a police station for a chat over a trivial speech. About 'ketuanan Melayu' depicts a master and servant relationship.Read Tok Mommy's story here.

Anwar's dream of taking over the government is looking brighter now than before.Maybe, they should just handover the whole government to Anwar Ibrahim and spare UMNO the embarrassment of being badly mauled in the next general election.

A Thrashed Democracy

Hantu Laut

In 1984 I attended a business conference at Oxford University jointly organised by International Herald Tribune and Oxford Analytica.Discussions and dialogues were centered on the major economies of G7 countries and other emerging economies.My point of interest at that time was the emerging economies of South East Asian countries and the Middle East.

The Asean region was the fastest growing particularly Singapore,Malaysia and Thailand.The region was growing at an average of 7.5% annually.The other important aspect we were looking at, other than the economy, was political stability.For businesses wanting to invest in a foreign country, political stability and bottom line sit at the top of the list of priorities.

Surprisingly, strange as it may sound, the political situation in Thailand today was a correct prediction made at the time we had the conference, some twenty four years ago.

Below is part of the write-up on Thailand in the booklet given to participants of the conference:

"Thai politics are at a point of stalemate.Groups opposed to the continuing dominance of the army--the urban middle class and rural peasantry--are, if anything, more opposed to each other.

Thailand has the appearance of a systemically unstable state, and it is.But paradoxically, Thailand's chronic instability gives it a unique form of long term political stability--no matter how many times the regimes change, and there have been 14 coup attempts in the last 50 years, the ultimate effect, and the type of government, is invariably the same."

The recent civil disorder in Bangkok that pit protesters against the government shows how the urban business elites, the army, the police and elements in the palace were hand in glove to remove a democratically elected prime minister.

The police refused to take orders from the Prime Minister to deal with the protesters in accordance with the law, instead, allowed the People Alliance for Democracy (PAD) to break the law with impunity. The army, usually quick to react in a volatile situation only stood on the sidelines.The PAD protesters seized both airports in the city and virtually closed them down stranding hundreds of thousand of tourists.

The People Alliance for Democracy (PAD) which is predominantly urban and middle class have paralysed Thai politics and the government as part of their campaign to force the resignation of Prime Minister Somchai Wongsawat whom they accused of being a puppet of his brother in law and former Prime Minister Thaksin Shinawara who was forced to resign under allegations of corruption and abuse of power.Somchai and Thaksin draw their supports from the rural poor which gave both of them convincing victory at the polls.

The sit-in protests which lasted for more than a week which have paralysed the tourism industry finally came to an end with the court ordering the removal of Somchai as Prime Minister and some of his members of cabinet from the government.Somchai was banned from politics for 5 years and his party disbanded for reason of electoral fraud by an executive of the party.

The court had done a fine job of thrashing democracy by submitting to demands of a small group of business elites and the urban middle class and ignored the wishes of the majority, the rural poor.

The political chaos and protests were only confined to Bangkok while other parts of the country were not affected.

What next for Thailand? Will Somchai and his supporters respect the court decision or will there be even bigger political upheavel in the pipeline?

Somchai and Thaksin have strong grassroots in the rural areas.Would there be an agrarian revolution?

Note:For those who are interested to read the one on Malaysia click here.

Disposable Zaid Ibrahim

Hantu Laut

Malaysian politicians never stopped to amaze me, from the sublime to the ridiculous, some with amusing anecdotal concoction.

Former de facto Law Minister Zaid Ibrahim was sacked from UMNO for going against party's code of ethics.He attended DAP victory dinner in Penang and PKR's annual national congress.

The irony is Zaid said he didn't expect to be sacked.That certainly is not an honest true to God statement.The reason he went to the functions of the two opposition parties is because he wanted to be sacked and he knew he would be sacked.Not being an elected member (MP or ADUN) he is not an asset to UMNO and is highly disposable.He should know that better than any one else and stop pretending he is only going there to visit friends and expect to get a pat on the back from his party.

Yong Teck Lee of SAPP tried the same formula but Prime Minister Abdullah Badawi refused to sack his party from the BN because he has assets in the name of 2 MPs and 4 state assemblymen with him.He eventually pulled his party out of the BN and is now aligned with Anwar's Pakatan Rakyat.

In more developed society and matured democracies it is honourable to resign than being sacked but in Malaysia it seems to be the other way round, being sacked from a political party brings prestige and seen as something heroic.

I think it sucks, if it's against your principle and you called yourself a lawyer and a gentleman, don't leave in a huff, leave like a man, a gentleman.

Related articles:Sakmongkol AK47's Thank you Zaid Ibrahim