Tidak boleh dinafikan dalam negara kita sekarang ini, ketara sangat bahawa terdapat dua golongan pemimpin.

Golongan pertama terdiri daripada yang mengharapkan supaya banjir tidak akan berlaku bulan hadapan tapi pada masa yang sama telah membuat perancangan serta langkah-langkah-langkah untuk menghadapi banjir sekiranya ia berlaku dan satu lagi dari golongan yang mengharapkan supaya banjir besar berlaku demi kepentingan politik mereka supaya mereka ada isu untuk dimainkan menjelang pada Pilihanraya umum yang ke-15 (PRU15).

Golongan pemimpin kedua ini terdiri daripada parti pembangkang, sedang mainkan isu banjir seolah-olah banjir pasti berlaku pada bulan hadapan diseluruh Negara dan kerajaan sebelum ini yang dipimpin oleh Perdana Menteri dari Umno seolah-olah tidak peduli lansung dengan rakyat yang mungkin akan menjadi mangsa banjir.

Pemimpin pembangkang tersebut mainkan isu banjir seolah-olah kerajaan akan memaksa orang keluar untuk mengundi walaupun kediaman serta pusat mengundi di tempat mereka dilanda banjir.

Pembangkang mainkan isu banjir seolah olah merekalah hero semasa berlakunya banjir pada masa masa yang lalu, seolah-olah setiap hujung tahun dari 2018 hingga 2021, mereka tidak pernah membuat apa-apa perancangan dan aktiviti lain pada tempoh tersebut.

Bercuti

Malah, ada yang pernah pergi bercuti bersama keluarga mereka semasa Negara kita dilanda banjir.

Adakah kerana adanya kemungkinan berlaku banjir maka semua aktiviti yang sepatutnya berjalan kita tangguhkan setiap tahun?

Adakah peperiksaan Sijil Pelajaran Malaysia yang diadakan setiap tahun pada bulan November perlu dicepatkan pada bulan Oktober?

Tidak pernahkah pemimpin pemimpin tersebut bercuti bawa keluarga mereka kesana dan kesini pada setiap hujung tahun?

Tidak pernahkah mereka mengadakan majlis kenduri kendara pada hujung tahun?

Adakah pemimpin pembangkang lupa bahawa banyak kawasan di Malaysia pernah dilanda banjir pada bulan-bulan yang lain selain daripada November dan Disember?

Mereka ini adalah hipokrit yang sudah tidak ada isu untuk terus menghasut rakyat.

Mereka nampaknya telah menjadi “opportunist” mengambil peluang menghasut mengenai isu banjir yang belum pun berlaku dan belum tentu akan berlaku sewaktu PRU15

Kalau betul-betul terjadi banjir sebelum PRU15 ini, merekalah orang yang paling gembira agaknya.

Hipokrit Tahap Maksima

Sepatutnya mereka sebagai pemimpin harus berfikiran positif. Setiap bakal calon atau yang sudah “confirm” menjadi calon di setiap kawasan Dewan Undangan Negeri (DUN) dan Parlimen diseluruh pelusuk Negara yang paling berisiko dilanda banjir sepatutnya sudah memulakan aktiviti-aktiviti proaktif mereka.

Malah, secara logiknya, sekiranya banjir berlaku disesetengah kawasan menjelang hari mengundi, sudah tentulah Yang Berhormat serta bakal-bakal Yang Berhormat setiap kawasan serta jentera-jentera mereka akan sentiasa nampak batang hidung untuk membantu dengan cepat!

Silap-silap jika rumah baru dimasuki air setinggi enam inci, mereka sudah tempah hotel untuk pengundi mereka!

Sudah-sudahlah memainkan isu banjir yang belum pun pasti berlaku. Sekiranya ia berlaku menjelang PRU, YDPA mempunyai kuasa untuk mengistiharkan kawasan-kawasan tertentu sebagai kawasan darurat banjir dan sudah tentulah mangsa mangsa banjir akan diutamakan.

Bak kata pepatah Inggeris, ‘we cross the bridge when we come to it’.

Yang penting, setiap orang baik pemimpin mahupun rakyat Malaysia bersedia menghadapi kemungkinan tersebut seperti masa masa lalu. — NMH

Pendapat di atas adalah pendapat peribadi penulis dan bukan semestinya pendapat NMH.

The post PENDAPAT | Ada Dua Jenis Pemimpin Di Negara Ini Sekarang first appeared on NMH.

Prior to the budget, I am one of Tengku Zafrul’s critics, particularly on his fiscal consolidation policy which to me is just an IMF template to control government spending. I was ready to criticise the budget.

But contrary to what I expected, the finance minister did just the opposite. He was bold to table a fat budget with an increase of more than 50 billion ringgit from the previous year.

One word to describe this Budget 2023 is WOW! It is a very well thought-out budget from the preparation which includes representation from various sectors of the economy and all walks of life. In another word, almost no one is left behind. From those giving birth, kindergarten students, youth, unemployed, senior citizen and both those who are still married with kids as well as single parents. As always, the physically disabled group was never forgotten.

Budget 2023 Creates A Vibrant Economy

The government appears to be very serious and proactive not only to create a vibrant economy from spending on various development projects which benefits large corporations but as well as medium and small enterprise up to each individual such as e-hailing drivers and food delivery riders through various incentives, training and financing. This is a very proactive budget for creating new jobs for almost everyone.

In other words, as long as we Malaysians are willing to work, there are means provided by the government to assist us, be it for an 18-year-old who just left school or a retiree who wants to make a comeback into the working class.

The question is, where is the government going to get the extra 50 billion ringgit to finance this budget? I guess it will be from the anticipated GDP growth which will provide a vibrant personal, corporates as well as sales tax. Secondly, I guess the government is also anticipating a big revenue from the newly introduced sales tax on online purchases and finally there is a possibility of the reintroduction of GST next year. Just a wild guess though.

Budget 2023 Criticism

The critics can say anything about this budget with labels such as “Election Budget” or whatever but truly it is a very comprehensive budget. The only reason the opposition is going to reject this budget is that they are the opposition. They have to oppose anything that the government suggests even though it can benefit the people.

So I encourage each individual, old and young, employed or not employed, married or single to go through the 102 pages of the budget speech and look for the opportunities that suit you.

Well done Tengku Zaful. Well done Ismail Sabri. Credit must be given where it’s due! — NMH

About the writer: Zam Yahaya was a Banking and Capital Market professional by training and a graduate in Accounting, Business & Islamic Finance and is a columnist with NMH. The points expressed in this article are that of the writer and do not necessarily represent the stand of NMH.

The post Election Budget? So What, As Long As We Benefit From It! first appeared on NMH.

According to the Department Of Statistics Malaysia, the inflation in June was 3.4% compared to 2.8% in May. On a monthly basis, the CPI rose only 0.6% from May to June 2022. Using these figures, the government boasted that our inflation rate is still among the lowest in the region.

However, logic dictates that the CPI (Consumer Price Index) is not an adequate measure of inflation. It is akin to looking at Google map from a few thousand feet above the ground. It tells certain things accurately of course such as distance and density, but it does not tell the terrain and other things.

If an army commander uses such information to plan an attack on his enemy in that area, they will surely face a lot of uncertainties and surprises and chances are, they will fumble.

If we look slightly deeper, we will find out that the increase in food items is 6.1% and 130 food items recorded an increase of more than 10%. Price of chicken increased by 17.2% in June compared to an increase of 13.4% in May. But we know that based on past experience, in such scenario, food on the table at restaurants and even hawker stalls will not increase by 10 to 15% but between 20 and 25%!

PTPTN Recipients Worst Hit

In dollars and cents, it means even a simple meal (probably with smaller chicken or fish) at university cafeterias or its surrounding eateries have been increasing from RM7 to RM8.50 or RM9.00. That is about RM2 per meal and assuming students need three meals a day, that will be extra RM6 a day or about RM200.00 a month.

I have spoken to a few students from a couple of universities over the weekend and they said the food prices at cafeteria and surrounding eateries have increased slowly & steadily the past few months. Responding to my enquiries, different students react differently.

Those who depend solely on PTPTN loans are the worst hit, having to cut down on their meals by taking lesser full meals, substituting with instant noodles, bread or cook on their own. Those who depend on PTPTN loans and additional support from parents means they have to ask for more pocket money now.

Those who have part time jobs or doing “small business” to earn a few hundred ringgit a month, have no problem coping with the higher cost of living.

Increase In Rent

As I mentioned in my last article, not only the business sector will be passing down the higher cost of business operation down to consumers, even consumers will pass it down to other consumers. For example, the price of room or apartment rental for students will definitely increase.

What has that got to do with a rise in food prices? Properties do not consume food, some will argue but house owners or the landlords do consume chicken and fish dont they? So when their costs of living increase, naturally they will pass it down to their tenants. In such scenario, the fixed income earner will be at the end of the chain having to absorb everything.

The government has a few resources on its own to manipulate the CPI, well, at least if they want to. The raw data used to calculate the CPI is not widely available to the public and as such make it almost impossible for the public to “audit” their findings.

Furthermore governments are known to add and change the components of the items in the “basket of goods” as well as changing the method of calculation from time to time, reason given is to arrive with more accurate results. It will be good for the public if government is more transparent and publishes the changes in price of all the items in the “CPI basket” every month. At the same time, the public at large will be able to provide beneficial real time inputs to government.

Not A True Picture

Again as I mentioned in my last article, government made policies on assumption that people are rational. In this case government always make assumption that consumer spending habit change as the price of goods rise. But what if price of certain goods in the “basket of CPI goods” rise and consumer substitute the products they have been using to another product that is not in the “basket”? It will not give the true picture on the ground, right?

The fact is, different country measures inflation differently as well as having different items on its CPI basket. In fact various segments of society measure inflation differently, not to mention differing demographics.

Take university students for example. To them if one meal was RM6 then but now is RM8, it means inflation is 25%. For those who are renting houses, an increase of rental from RM1,000.00 to RM1,200.00 per month means an inflation of 20% to them. Worst still if they are fixed income earners with an average salary hike of 7% per year.

And we want to tell them that our inflation rate is the lowest in the region? Tell them to be more resourceful, that’s more practical, isnt it? But politicians wont do that because such advice will be seen as “politically incorrect”.

So how will it be in the coming months? As everyone already knows by now that the high rate of inflation especially on food items was due to supply chain disruption resulting from the war in Ukraine which begins in late February this year.

External Factors

The situation doesn’t look good the last few days since Russia is talking about another cut in oil & gas supply to Europe. Barely hours upon signing the agreement with Ukraine brokered by Turkey to free the Odessa port for the very much needed grain export to Africa, Russia bombed the port with few missiles. Hopefully it will not affect the agreement.

Our Prime Minister announced a few allocations this week such as RM124 million to 590,000 families in Kelantan and an investment of RM2.3 billion to generate 4,200 jobs. According to the Prime Minister’s speech in Kelantan last Saturday, the government has provided additional subsidies of RM 77 million to
control price on essential items.

Is it enough? Obviously not, but it is better than nothing. But subsidies are just short to medium term solution. Government has to generate more revenue to provide more subsidies from time to time. But certainly cutting the salary of cabinet ministers is just a political suggestion or gimmick that is not going to change anything.

Unlike countries in Europe that are facing serious inflation due to political decision made by their respective government to impose sanctions on Russia which is now backfired, inflation in Malaysia is not a result of a wrong decision made by the government.

While it make senses for the people of UK, Spain, Italy, France & Germany to go on the streets to protest against the decision made by their respective governments, a protest here for the same reason will not be going to change anything, economically.

As the bulk of inflation was due to a rise in food items, the long-term solution is still a better food security plan than what we have now. We will talk about that in the coming week. – New Malaysia Herald

The post No, CPI Is Not The Ultimate Tool To Measure Inflation first appeared on NMH.

First of all, please be reminded that economics, where we are discussing inflation here, is not a pure science but a social science subject. In pure science you can predict and be certain of the outcome. For example, two molecules of hydrogen and one molecule of oxygen make H2O or water. That’s pure science.

In form 1 science, we learnt that when we heat up zinc in hydrochloric acid, it will produce hydrogen and when we put a small fire at the furnace to burn the outgoing hydrogen, it will produce a pop sound. You can repeat the process 100 times and the results will be the same. This is pure science.

In social science, you are dealing with human beings. You can slap ten guys and the response from each of them might not be the same. You can even slap one guy a few times and the response might not be the same each time.

Theory

Economic theories and applications are often made based on two assumptions. First, economists assume that people are rational. Secondly, it is based on a term called “ceteris paribus”, which means on assumption that all other factors remain the same.

In reality we know that nothing remains the same and people are not rational, at least in the way they spend. We know that the cheapest places to buy things are at hypermarkets and the most expensive place to buy things are from 24-hour convenient stores and petrol kiosks. Yet, not everyone goes to the hypermarket to get their things and still a lot of people go to convenient stores and petrol kiosks for their daily needs.

How do you explain people with a salary of RM 3,000.00 a month who spends half of that to pay for car instalment? So do you think an increase in interest rates, which in turn will increase the expected monthly instalment for new car loans will slow car sales?

How do you explain a person with a monthly income of RM 2,000.00, yet buys a RM300 T-Shirt?

No wonder economists always screw up in making policies.

Inflation

Now, let us look at the question above. Is raising interest rate effective in fighting inflation? Well, sometimes it does and sometimes it doesn’t, depending on the cause of inflation.

At least 45 countries around the world have raised their respective interest rates and I can’t name one that has been successful so far and that includes USA, United Kingdom and a few European countries. Today, the European Central Bank is going to raise its interest rate, first time in 11 years and this time not only to curb inflation, but to strengthen Eurodollar that has depreciated sharply since economic sanction was imposed on Russia.  In my opinion, they will fail yet again.

Why? We go back to the two assumptions that economists like to use when making predictions. People are rational and “ceteris paribus”. 

We know that the reason Europe and USA were hit with inflation was due to the sanctions they impose on Russia. As a result, Russia was not able to supply oil & gas to the Europeans at a normal capacity. Since Europe depends about 40% of their supply from Russia, such situation leads to energy crisis in Europe. That leads to inflation.

Do you think the European decision makers are rational in imposing the sanctions in the first place? Obviously not. Now the Russians are indirectly telling the European countries not to supply weapons and ammunitions to Ukraine or they will face the consequences of their gas supply being cut off completely.

How did the decision makers in Europe response to this? The German foreign minister said that “we are not going to budge to Russia’s demand” and suggest energy rationing instead, knowing very well that without Russian gas, not only will their citizens be frozen to death this coming winter, but their industries will be badly crippled. There are suggestions of going back to burning coal to power up their electricity plant, but that goes against their own policy of preserving the environment that they themselves have been championing.

The most rational thing to do is to stop supplying weapons and ammunition to Ukraine. Even today, in the 21^st century, people and decision makers are not rational, how come economists who wrote those textbooks more than 100 years ago think people were rational then? 

Now, we look at our own backyard, Malaysia. As expected, BNM has raised the interest rate again, the third time this year to counter inflation. From the textbook theory, when interest rate is high, it means savings rate will be high. So, people are expected to save and not spend. That is true if the savings rate is higher than the inflation rate. If you get 2.5% return from saving one year from now and have to pay extra 5% for goods during the same period due to inflation, what will you do? Save or buy goods?

Secondly, from the textbook theory, when interest rate is high that will make it difficult for the industries to borrow and will then lead to a slower production of goods and eventually slower spending. Well, that theory might work 30 to 50 years ago when credit is scarce. Now, credit is in abundance. High interest rate or not, banks need to survive and will continue to offer loans, and companies need to survive and will continue to take up loans that are widely available.

What about the higher financing cost? That will be significant if the raise was from 4% to 7%. But an interest rate hike from 2% to 2.5% will have almost no impact on corporate future financing demand. Finance people who prepare business financial projection for projects to source for financing understand this very well.

For example, the current lending rate is 4%. Do you think any finance manager will use 4% as their input in their project cash-flow projection even if BNM is not raising interest rate? No. An experience finance manager will always put a buffer of at least 2% higher than existing interest rate in their financial projection model.  So, if that is so, do you think an increase of 0.5% or even 1% in borrowing cost will stop these companies from borrowing?

What about huge companies with huge projects with existing borrowings? The answer is since the early nineties, Malaysian companies engaged in large long term projects have turned to Private Debt Securities with fixed rate mechanism from capital market instead of floating rates term loans from commercial banks to finance their business. So whatever happens to interest rate will not affect them with long term fixed borrowing cost.

So, who will suffer? The SME’s and personal sector of course. Those SME’s with existing term loans as well as individuals with housing loan. 

For SME’s, its quite simple for them, they will pass back the cost to consumers. For consumers, sometimes they can pass back the cost to other consumers. How? I give you one example. A restaurant operator bought a RM1,000,000 house 2 years ago with an installment of RM 7,000 a month. Now that the monthly installment has increased to RM8,000 per month for example, what do you think the restaurant operator will do? Increase the price on his menu list of course!

So do you think raising interest rate will be able to counter inflation? The answer is obvious. But the next question is, if 45 countries failed to solve inflation problem through monetary policies why did our country’s Finance Minister adopted the same policy?

I have no answer for that, but my guess is he has to do something worth his salt and in doing so, aping other countries especially the west and following textbook is the safest approach because even if you are wrong, you can blame those theories isn’t it?

About the writer: Zam Yahaya was a Banking and Capital Market professional by training and a graduate in Accounting, Business & Islamic Finance and is a columnist with NMH. The points expressed in this article are that of the writer and do not necessarily represent the stand of NMH.

The post Is Raising Interest Rate An Effective Tool To Fight Inflation? first appeared on NMH.

Everyone is talking about inflation. The most convenient way is to blame government policies.

True enough, we have been warned when the pandemic began in Feb 2020 that we will be facing this problem. Some were prepared and some were not.

For the last two years, our government was busy handling the pandemic problem and perhaps overlooked the post-pandemic issues that cropped up.

In talking about the economy among us – the economic agents – do put aside things you and I cannot control such as interest rates, exchange rates, GDP, aggregate demand and all those economic statistics and jargon.

That’s the vocabulary of useless economic policymakers who only talk and want to look smart but nothing happens.

Let us get real. Before we look into our domestic issues let’s look at what are the issues affecting our economy.

A serious inflation problem is hitting the whole world now. The US and Europe included, due to the war in Ukraine that started on 24 February 2022.

This leads to supply shock in petroleum, gas, wheat and fertilizers.

Effects Of The Russia-Ukraine War

Looking at what Lithuania had done to Russia, it looks like not only the war in Ukraine is going to prolong beyond 2022 but there is a high possibility that it will spread to Lithuania, Belarus, Poland or even between Taiwan and China as well as in the middle east.

We all know that the cost of household gas consumption in Europe has gone up 60% and the price of crude oil is also up. Inflation in the United Kingdom is now the highest in 40 years!

Soon the oil price at the pump, I mean RON 95 in Malaysia will increase. The price of wheat and animal stock feed will increase further.

All these will contribute to an increase in directly & indirectly products.

Most likely, we are heading towards a global recession. The question is whether it will be severe or mild.

As it is now most currencies except Russian Ruble have depreciated significantly against the USD. That means our imports of essential goods are more expensive since most trades are still conducted in USD.

Although correspondingly we will earn more on our exports but at the same time, it makes some of our exported goods less competitive in terms of price if importers have options.

So How Do We Deal With It?

What is funny, the US federal reserve adopted an interest rate hike to manage inflation.

Such a textbook approach does not work anymore. This will lead to more investors grabbing the US treasury bills which are still regarded as safe investments.

This leads to even more liquidity in their system. The more hilarious this is, our Central Bank “aped” that more by increasing our interest rate too, reason given is to fight inflation.

Do you think people will start saving money in the bank if savings rate and fixed deposit rates increased from 3% to 3.2%?

Come on! If interest rates were to increase from 5% to 7% perhaps it will work.

Such a move will only increase monthly commitment to service housing loans for the personal sector and increase the cost of servicing debts for the private sector.

All these will further put pressure on prices. In economic terms, reducing aggregate demand will not solve the inflation problem at all.

So how do we deal with it besides pressuring the government on policy making?

While waiting for policies to be drawn, implement and bear fruits, we need to help ourselves first.

Changing the government is not going to solve the problem and as we all know, the last time we did it, it made things worst.

In Malay, there is a saying, “Bagaikan Tikus Membaiki Labu” or remedy worst than disease.

As it is now Europe is learning to deal with an energy crisis and started to put its coal power plants into operation again.

What about us in Malaysia?

Inflation & Solutions

There are a few methods of dealing with it and most of us knew them already.

The question is, are we willing to do it effectively and change our lifestyle without reducing our quality of life?

Like it or not, some of the methods are to Increase output, reduce consumption and find alternatives.

Are we ready to increase output in terms of productivity to earn more to cope with the higher cost of living?

For the business community, it’s simply increasing the price of products and services. For fixed-income earners, it simply means there is pressure to increase wages.

Is our agriculture sector ready or geared towards more productivity, cost-effectively, meaning increasing production?

Are we willing to cut on our non-essential items such as sugar and wheat-related food intake? Are we willing to walk 500 meters to our nearest grocery store or our nearest LRT station instead of driving?

As it is now I have been using my bicycle for anything that is less than 5 km.

Have we found other cheaper alternatives to our daily protein needs besides chicken?

Since most salt-water fish are expensive, I have been taking catfish alternately with chicken lately.

In Kuala Lumpur, we still can get a plate of rice, catfish and vegetables for lunch and dinner for 8 Ringgit.

Or are we prepared to reduce our consumption of chicken and wheat for example?

Overweight

As it is now Malaysians are generally overweight, isn’t it?

The conclusion is, that inflation is inevitable. Screaming at the government every day is not going to change our life. Changing government has proven to be disastrous too. Well, at least the wrong government.

However, as I said in my earlier article, the fight must start with each individual. The first country that can get out of this situation is a country that has resilient people, not full of whiners.

After all, every one of us makes a nation. At least we are very fortunate compared to the Ukrainians, the young, the old and even women who have to carry weapons to defend their country against Russia as a result of wrong foreign policy.

At the same time, millions have fled the country begging for a new life in neighbouring countries.

Reports I read, sadly, they are not welcomed by locals. At least we are fortunate to have a climate of summer all year round compared to Europeans who are now worried about having to pay more to heat their homes in the coming winter.

Oh yah, having the outlook of a worst economic scenario in the coming months and knowing well even the most advanced economies in the world are raising their hands saying we can’t resolve the inflation issue soon, politically, is it wise for the current government to delay the general election? – New Malaysia Herald

About the writer: Zam Yahaya was a Banking and Capital Market professional by training and a graduate in Accounting, Business & Islamic Finance and is a columnist with NMH. The points expressed in this article are that of the writer and do not necessarily represent the stand of NMH.

The post Just Deal With It, Folks. Inflation Is Here To Stay first appeared on NMH.

From a textbook definition, the goals of economic management is to achieve full employment (in other words, zero unemployment) for its citizen, stability in price of goods especially essential items, a steady growth, redistribution of income and to achieve a healthy and stable balance of payment.

In reality, no country in the world has ever achieved half of these objectives at any given time. Last week I wrote about what is required for managing a strong and healthy economy. Today we see what is required when unemployment and inflation rear their heads.

Academically, full employment means there are still about 3 to 4% of unemployed within the population due to many reasons. Meaning that if the unemployment rate of a country is around 3 to 4%, it can be concluded that full employment is achieved. This is taking into consideration adult students, elderly people, the disabled, those unhealthy to work, housewives and so on. And the rate differs from one country to another due to demographics, culture and social structure.  For example, in a culture where women in general are expected to be housewives and raise the kids, unemployment rate of perhaps 5% is still considered full employment has been achieved.

In Malaysia, for example, if we record an unemployment rate of 4-5% (see chart below) but at the same time having millions of foreign workers doing the job that locals can do, are we considered full employment? The objective of the economic management is not to ensure everyone works but to ensure there is enough job for everyone.

Unemployment At Half A Million

The feedback I received from employers early this year is that even though the recorded unemployment were said to be close to half a million, many enterprises find it difficult to get workers for general jobs such as accounting clerks or shop assistants. We can imagine the difficulties in getting workers for specialised jobs.

Take “Mamak Restaurants” for example. Most Malaysians go to these restaurants mainly because they operate till late hours and for the fast service. Of late however, even the service at “Mamak Restaurants” is slow due to shortage of workers. Is the economy not providing enough jobs?

My regular cat-food shop owner has been complaining to me that he has been advertising to get a shop assistant with no experience and a minimum SPM qualification for RM2,000 a month. After more than a month he is still without a worker. A few came for interview and turned down the salary offered.  As at today, the advertisement banner in front of the shop is still hanging.

Where Are The Locals?

It’s the same thing for e-hailing business. There seems to be a serious shortage of drivers that leads to a hike in charges especially during peak hours. Where have all the drivers gone? Surely they have filled up other jobs. New food delivery businesses are facing shortage in riders too!

So shall we conclude that whatever our country’s unemployment figure is, the economy is providing enough jobs despite the dreaded pandemic that prolonged for more than a year.  In fact, new businesses and jobs were created due to the pandemic. I am sure you can name a few!

My point is, don’t get too overworked with economic figures and jargons. It can be misleading at times and there is no one parameter that suits every country. In fact even in Malaysia, figures of different states tell a different scenario. Economic figures such as unemployment and inflation rate are just guidelines that often not telling the actual situation on the ground.  It can at times be an understatement and at times overstatement.  In a resilient society, one may not be employed but is able to earn a living in many ways.

An Unavoidable Taboo

Now we move on to the second objective, which is about price stability. In brief, managing price stability is mainly managing inflation even though there are other things besides inflation that need to be managed such as wages for example. But the hot topic all the time is about inflation.

Everyone knows in general, what inflation is all about. It’s a taboo word and no one like it. From an academic point of view, inflation means a hike in prices especially essential goods. In certain countries, it is measured through a list of essential goods and services in one “basket” called consumer price index. Similar to the unemployment figures, zero inflation means a normal inflation of 3 to 4% is recorded. But again, in reality, the parameters may vary from one economy to another. 

Unlike employment whereby the economy is capable of providing enough jobs for everyone, inflation on the other hand cannot be avoided except for certain isolated cases such as the prolonged period of deflation in Japan. But that is a topic for another day.

Talking about inflation, prices of goods may inflate due to many factors. It can be due to internal factors of which could be controlled by the government through short-term measures as well as medium to long-term policy.

Internal factors include a hike in demand, a shortage of supply, an increase in overall purchasing power and so on. We cannot expect a robust growing economy, a full employment economy and a sudden hike in wages and at the same time prices to remain the same. In other words, inflation goes hand in hand with growth and purchasing power.

An example of external factor is foreign exchange rate. If we rely too much on imports for essential items, any slight weakening of our currency with the corresponding trading partners (our exporters) will result in a price hike. Therefore Singapore, which relies almost 100% of its essential items on imports, has to maintain a strong currency at all times. In other word, its inflation rate is closely related to even a slight change in its currency value.

Malaysia on the other hand has quite a balanced situation whereby our currency has to be managed so that it will not appreciate or depreciate in value abruptly since it will affect our import if it weakens too fast and will affect our export if it strengthens too fast. Therefore, contrary to misconception of some people, the function of our central bank is not always to strengthen our currency but to ensure its stability and protecting it from speculators and control it as much as it could to accommodate for trade purposes.

Short-term Measures

An example of external factor is the price of chicken in our country recently. The cost of producing chicken has increased due to price of chicken feed. Price of chicken feed increased due to shortage of its main component, which is corn and shortage of corns was due to the ongoing war in Ukraine that started about four months ago, among other things.

So this hike in price of chicken for example has no direct relation whether the economy is being managed well or not. Nevertheless, a medium to long-term policy is required such as food security policy has to be in place, learning from the ongoing war and the recent pandemic. As policies require time to plan, implement and achieve the results, certain governments are adopting a short-term measure.

In Malaysia for example, the short-term measure was to allow imports of chicken and a few other food items without strict control. But such measures cannot be implemented longer than it should since it will have a very negative impact on local producers. Since the price of chicken feed is at a level where producers will make a loss selling at a controlled price, they will stop producing eventually. The government on the other hand cannot provide subsidies to either the consumers nor the producers just to control the price of chicken since any expenditure that is not budgeted will put a constraint on the government’s coffer as well as constraining other sectors such as education or healthcare. Therefore, the government has decided to let the market determine the price and that leads to inflation since a hike in price of chicken leads to a hike in other daily consumption too!

Conclusion is, there is no country that is able to control inflation but at the same time trying to achieve both full employment and steady growth.  Economic policies and measures as described in a Malay proverb is like a “selimut pendek” or sleeping with a short blanket. If you cover the face, mosquitoes will bite your legs and if you cover the legs, the pesky insects will suck the blood on your face. At times, we have to curl ourselves to sleep with a short blanket. In economic terms, it explains that resources are scarce. If you use the available resources for a purpose, you will have to forgo another need.

For example, in a scenario where the government has RM50 million and has to choose between building a bridge and a school. If the government chooses to build a bridge, the opportunity cost for building the bridge is the school. In this case, the need of addressing the importance of building the school is simply being pushed forward.

It’s the same for any other long-term policies and short-term measures. Whatever decision made is simply sacrificing other economic or social needs. Therefore in reality, economic problems are not meant to be solved but a set of ongoing issues to be managed from time to time.   

What we should be worried of is not so much of an occasional high inflation but stagflation. We will discuss this next week while let us have a productive week ahead! – New Malaysia Herald

About the writer: Zam Yahaya was a Banking and Capital Market professional by training and a graduate in Accounting, Business & Islamic Finance and is a columnist with NMH. The points expressed in this article are that of the writer’s and do not necessarily represent the stand of NMH.

The post How To Manage The Economy With Unemployment & Inflation first appeared on NMH.

Of late, we have been hearing netizens complaining about the country’s economy not being in good shape. The reason and examples given were aplenty but the most common ones were a weak Ringgit compared to Singapore and US Dollar, inflation and high national debts. These are all some of the indicators of a weak economy but not always true. You can refer to the following articles: See here, here and here …

To understand economic growth we have to get back to basics. It works in all aspects and not just economy. Essentially, the four elements of economic growth are natural resources, human resources, capital and institutional factors. And of course the government economic policy on all these is important. But talking in detail about all these will be too academic. Let us look on the human factor. The factors involving you and me and what can we do on our part in achieving a strong and healthy economy.

Talking about economy, the most fundamental issue is productivity. And productivity refers to what we do everyday. Put aside government policies a while. No matter how much resources and capital we have, together with good policies, it still takes each of us to make it work. If we do nothing or do the wrong thing, we will not get the desired result.

We often talk about weak Ringgit lately as an indicator of a weak economy. But it is not always true. A weak currency can be driven by a lot of factors. Fundamentally a strong currency means there is a high demand on that currency. Which means we have to export more than we import. So what can you and I do about it? Consume less imported goods! Have we been doing it before we blame the government for having a weak Ringgit?

But in certain situations, too strong a currency means our price of our goods for export will not be attractive. For certain other reasons, some countries continuously devalue their currency from time to time to stay competitive. China and Indonesia for example, used to do that. But this is the topic I will elaborate another day. Today we talk about you and me.

Now let us move to the most fundamental thing. Productivity. No matter how good the government economic policy is, if we as individuals are not productive, the country will continue to suffer. If a government servant is working at the same pace after doing the same job for more than a year, it means we are not productive. Being unproductive incurs more cost to the government because your salary increases over time.

Why do you think some other countries can produce chicken, rice, vegetables and fruits at a cheaper cost than us? It is because they are more productive. Not only being efficient, but in methods and technology.

Lazy Citizens = Poor Economy

What about those in the private sector? Same thing. If you are still producing at the same speed doing the same job the last one year, it means you are not productive and you incur more cost to the company and the company makes less profit and in turn government will earn less tax. Worse still if you spend a couple of hours a day on social media during working hours complaining! Conclusion is, if the citizens are lazy, it’s bad for the economy.

Productivity is not always about output. It also involves each individual’s daily habits. In fact everything that we do everyday have a direct and indirect impact on the health of our country’s economy.

Let’s take our eating habit and lifestyle for example. Are we eating well and exercising adequately? Are we taking care of our health? Are you suffering from diabetes and high blood pressure as early as at 40? If yes, these contribute to the economy of the country.

If you are sick and goes to government hospital once a month for your medication, imagine how many billions government have to spend on a citizen like you? But if you and millions more with unhealthy eating habits and lifestyle doesn’t cost the government those billions every month, imagine how much resources can be put into good and productive use? Do you know how much the government has to spend if you were admitted for dengue for example? More than RM10,000!

Another example about lifestyle is our driving habit. Do you have any idea how much the government spend on each accident?

Finally for today, ask ourselves, are we economical with the resources we use everyday? Are we wasting petrol unnecessarily of which the government provides subsidy?

That’s all for today. I will touch on national debts and inflation next week. Have a nice productive week ahead. – New Malaysia Herald

About the writer: Zam Yahaya was a Banking and Capital Market professional by training and a graduate in Accounting, Business & Islamic Finance and is a columnist with NMH. The points expressed in this article are that of the writer’s and do not necessarily represent the stand of NMH.

The post What Does it Take For The Country To Have A Strong And Healthy Economy? first appeared on NMH.