Malaysia's Runaway Money

Malaysia's Disastrous Capital Flight

Asia Sentinel







Money leaves the country on an unprecedented scale

Churches are not the only thing to have been going up in flames in Malaysia. Take a look at the nation's foreign exchange reserves. They fell by close to 25 percent during 2009 according to investment bank UBS even though the country continued to run a huge surplus on the current account of its balance of payments.

Says UBS: "Question: which Asian country had the biggest FX losses in 2009?" The answer is Malaysia and by a very large margin; we estimate that official reserves fell by well more than one quarter on a valuation-adjusted basis". It describes the situation as "bizarre" and contrasts Malaysia with other countries with large current account surpluses – Thailand, China, Taiwan, Singapore, and Hong Kong – which have seen their reserves increase – as should be expected.

In short there has been an exodus of money from Malaysia on a scale which surpasses that which occurred during the Asian crisis. Nor is this just a mirage. The decline is also reflected in a sudden decline in base money supply – even while, thanks to Bank Negara, broader M2 has continued to grow modestly.

Who is responsible for this massive outflow? And where has it gone? The questions cannot be answered from the data and probably will not be by a government that knows its own state-controlled enterprises, headed by Petronas, may probably be responsible for part of it. The more certain reason however is the outflow of local private capital has been taking place on an unprecedented scale in response to political instability, massive official corruption and discrimination against non-Malays.

This capital bloodletting has as yet attracted little attention because Malaysia's foreign debt levels had declined dramatically since the Asian crisis and its reserves reached very healthy levels. So the outflow has not disturbed the financial markets, and Bank Negara has easily been able to keep interest rates low and the currency strong.

But unlike 1998, when the exodus of hot foreign money was a major contributor to the crisis, foreigners cannot be blamed. There is little speculative interest in the ringgit and the Malaysian bourse has rather fallen off the map as far as foreign institutional money is concerned. The BRICs, India, China, Russia, Brazil have taken the merging market lead once dominated by Southeast Asia.

Nor is there much evidence that the Middle East money which was supposed to be flowing into Muslim Malaysia, into holiday apartments or Johor's massive Iskandar development zone, has been much in evidence. Malaysia's one recent success, the development of its sukuk (Islamic bond) market may have caused more capital outflow than inflow. At any rate any overall net inflow of foreign capital whether into bonds, equities, factories or real estate has been dwarfed by the exodus of Malaysian money.

The latter is reflected in the weakness of private sector investment, which now trails public investment. Indeed it explains why the economy remains weak despite very healthy prices for most of Malaysia's commodity exports. The nation has been running a current account surplus of more than 10 percent of gross domestic product for the past decade and hit about 17 percent of GDP in the year just ended. Initially this surplus was needed to pay down debt accumulated during the mid-1990s Mahathir boom years and to rebuild foreign exchange reserves to healthy levels.

But subsequently it became simply a consequence of the weakness of private investment. Domestic investors were discouraged by the corrupt and warped system and foreigners moved to China and elsewhere. GDP growth has become ever reliant on government stimulus – again racially biased in its allocation -- financed by a persistently large budget deficit. Read more.

Zorro Unmasked Fooled By RPK

Hantu Laut

So, now you know RPK is a man of many talents.

Compare the two photographs.

The one above appeared in Zorro Unmasked's blog purportedly sent by RPK and the one below?


From comments in Zorro's blog his fans truly believe that RPK is overseas and enjoying life to the fullest.So do the police, taken for a jolly good ride.

That kind of sums up where he is.

So, who doctored this photo and all the other photos to throw a red herring on his whereabouts?

Is RPK still in Malaysia? Food for thought.

For all you know he could be hiding in the closet at home and the police didn't know it.

Don't Bark If You Can't Bite

Hantu Laut

Am I left wing,right wing or just sitting in the middle? Is the left going to be better and Malaysia would truly be an egalitarian society? Or would it be worse? Who can tell? My faith is still with the right but things could change.

Well, I am still keeping faith in my religion and my Allah, despite being told, it has been hijacked by my Catholic brothers.For the past five years I have been to church more than five times to pay respect to demises of dear friends. Was I confused, did it in any way forsook my iman (belief)?

No! most Muslims have immensely strong iman.Lina Joy is a needle in a haystack.It's, probably, love that blinded her.Love,sometimes, transgresses all reasoning.Is she the catapult of what gone wrong today?

I must admit as much as I support the BN concept, sometimes, the sheer stupidity of some of those in the party left you in a state of shock and your mouth gaping.

It says much about the deep sense of insecurity in the minds of some of UMNO members.Instead of defusing the already highly volatile situation, some, like this bigot here, with his fatuous comment, decided to add fuel to the fire.

There seems to be no common stand taken by the party.The leadership says one thing but lower down the rank the insubordination is most revealing.It's time Najib takes heed and uses his whip hand.He appears not in sync with the rank and file.

This is the time you actually become nostalgic of the Mahathir's era.He would have nipped it in the bud.Who cares if he throws all the bigots from both sides in the slammer as long as peace be with us.

I have always been a proponent of the ISA, if it is used properly and now is the time most opportune to use it.

Hishammuddin. Please! Don't bark if you can't bite!

Also read:Wolf At The Door's " Taking Akhram To Town"

Reprise:Where Have All The Chinese Gone?

Hantu Laut

Sakmongkol AK47 has his take on how Malay parents view education vis-a-vis the Chinese parents and the deteriorating standard of education in the country.

The most profound that I found in his article is when he says "One type of parent undertakes the task of educating his children as a personal responsibility; the other type transfers that responsibility to the state".

Most bumiputras, even the filthy rich ones, would apply for government scholarship for their children depriving off some of the less fortunate students of the opportunity.

Ask some of the well-connected, the politicans or even ministers how many of their children's overseas education were wholly financed by them.

It is most despicable that if one is rich and can afford to pay for the children higher education to rob the opportunity off poorer students who are more deserving to receive that financial assistance. Even, if you have the privilege and entitled to apply, it should be a matter of conscience that you should not.

Like Sakmongkol, I am a product of the British education system when we were still a colony and the same system continued for another 14 years or so after formation of Malaysia.

Those days, under the GCE 'O' Level, we need only take minimum of 6 or 7 subjects (if I am not mistaken) and maximum of 9.After independence and for many years the Ministry Of Education which formulate education policy think most Malaysian students have above average IQ and give them a choice of as many as up to 21 subjects to choose from.It's no mean feat, that you hear of students taking as many as 12 to 16 subjects just to put themselves high in the eligibility for scholarship.

This 100% exam-based system has its draw back and dire consequence.You get some students who are good at passing examinations but eventually turned out to be academically mediocre.

The government has recently reviewed the system and reduced the number of subjects student could take by imposing penalty, that the student pay for the subject taken beyond the maximum allowed.

It's true the Chinese put much more effort and emphasis on education and Chinese parents are prepared to make personal sacrifices in order to fulfill their children's educational needs.

A Chinese family running a hawker's stall have better chance of putting their children through university at their own cost than say their bumiputra counterpart.Not only parents, but the whole community that can afford to spare some money would donate to their schools.Wealthy Chinese would make substantial donations and contributions to Chinese schools to enhance its standard and teaching facilities.

On the other hand, the bumiputra community has lost its culture of gotong-royong, almost everything from building schools, suraus and mosques have become the responsibility of the government.Not that the government shouldn't be doing it but shouldn't there be mosques built purely from donations from the Muslim community as a mark of pride and achievement.

When the Arab,Indian and Pakistani Muslims first came to this part of the world and decided to stay they built many mosques from donations collected from the Muslim community.Even a Malay woman have built a mosque.The Hajjah Fatimah Mosque in Singapore was built by a Malay lady from Malacca married to a Bugis prince.She donated her land to build the mosque.She inherited her husband business after he died and as an astute businesswoman her business prospered that made her very wealthy.Her only daughter married Syed Ahmad Alsagoff, the son of the famous Arab trader Syed Abdul Rahman Alsagoff.The mosque is now a national monument.

The Kapitan Keling Mosque in Penang and Malacca were built by Indian Muslim traders.

Arab traders in Singapore, the Alsagoffs, the Alkaffs and the Aljunieds have all contributed generously to schools,hospitals and building of mosques and sponsoring religious events.Many Arabs and Indians Muslims are now completely assimilated and had become Malays but have lost the philanthropism

I think we bumiputras have lost our sense of direction, giving materialism the front row and the depths of our soul a back seat.The rich and filthy and their spouses and children strutting in their Birkin bags,Gucci bags and bragged about their stables of posh cars and all with money falling down from the sky.

Here's Sakmongkol's "Where have all the Chinese gone?