Malaysia can be deliberate the success story in terms of mercantile development. It successfully remade itself from being the backwater undeveloped manage to buy to the middle income country. It managed to do which by transforming the apparatus formed manage to buy into the production manage to buy as well as was additionally equates to to reposition itself by attracting most of the world's Foreign Direct Investments during the 1970s as well as 1980s.
Transfer of technology as well as additionally modern managerial skills which have been brought about by the Multinational Corporations (MNC) additionally helped build up the pool of learned labours which in indispensable in the mercantile mutation in the after years. Due to the mutation as well as repositioning of the manage to buy it additionally altered the importance of sure sectors of the manage to buy which is shown in both the composition of the exports as well as imports.
Our exports have been right away consists of electrical as well as electronics 35%, palm oil 15%, inorganic substance products 9%, LNG 7% as well as the rest have been done up of timber, assorted made products as well as etc. Our imports have been mainly done up of machinery as well as ride apparatus 60%, made products 12%, fuel - 10% as well as chemical - 9 %.
The engaging thing to note about Malaysia's imports is which the bulk of it have been done up of'Capital Goods'and not consumer items such as food, beverages as well as etc. When the nation imports some-more collateral products than anything else it shows which this nation is upon the right l! ane to a 'sustainable developing'economy since these collateral products such as machineries as well as ride apparatus will be used to furthered the prolongation of made products as well as as the outcome helped promote mercantile growth.
Government watering the wages?
Below you present to you severaldevelopment as well as income metricsof the Malaysian Economy which you hope to assistance you assimilate where the income gone as well as additionally since our'income distribution'is not catching up with the system. We hope you can bear with us as it is utterly statistical as well as boring.
The macroeconomic metrics you used have been the following:
Later you will additionally uncover the incapacity of income to catch up with general price turn of products as well as services or inflation which is totalled by the CPI. Hopefully it will additionally assistance us to answer the following theme onwhether the authorities have been watering the worker's wages?
Why the Income lagged GDP Growth?
As distant as you know there have been not most papers created upon this theme as well as reasons being the lack of seductiveness or simply not reported in the mainstream media to equivocate any troubles with the energy to be. Anyway you present to you 2 charts upon the salary in production as well as additionally the GDP expansion of Malaysia as the basi! s for th e comparison. Wages in production is selected since the production section employs the most people in Malaysia.
The following is the draft upon the Manufacturing salary to GDP which you plot regulating data from the upon top of salary as well as GDP charts. It clearly shows which the worker's share of the GDP has positively been dropping since 1999. So where have the bulk of the superfluous GDP went?
Certainly not us as well as you folks! The categorical culprits have been the Government as well as the unscrupulous cronies as well as capitalists. With the projected FBMKLCI gain expansion of 8.0 as well as 8.4% for 2013 as well as 2014 respectively, patently things have been looking great for the corporates ahead. With an normal gain expansion rate of 8% for the past integrate of years whilst the comparative measure of Wages/GDP disappearing it is obvious which those illegitimate capitalists have been capping the enlarge in salary so as to maximize their profits. Since Malaysia's competitive turn has been declining, the theme is how those companies have been equates to to keep recording augmenting profits?
Green Belt assistance creates scarcity
One reason will be theeffects of inflationand the alternative being the existence of so called'Green Belt'industries. The term Green Belt originated in London during the 1930s where there the periphery of land surrounding the city was accorded this status. Property developments have been discouraged in this area by difficult regulations so as to emanate what you call's! carcity' in economics. The categorical reason is to carry out the volume of housing in this area so which skill prices as well as rents will regularly be tall since there have been not most choices or alternatives to choose from. Another reason is to carry out the volume of people living in the city so which the city will be free from congestion, pollution as well as alternative social problems which have been compared with increasing population. In Malaysia you have the chronicle of the Green Belt in Kuala Lumpur. It is located in the Bukit Bintang area as well as additionally well known asThe Golden Triangle. Rentals in this area have been equates to to match those in alternative vital cities around the universe similar to Singapore, Taiwan, New York as well as so on.
Coming behind to the discussion upon Green Belt companies which have been equates to to gain their strengths from scarcities which arises inside of their Industries. Due to the inlet of granting licenses in Malaysia, it capacitate most companies virtually operate in the monopolistic manner. Economists call this type of behaviour'Rent Seeking'which is usual in Malaysia. Due to their Green Belt standing similar to which commands scarcity, there have been equates to to charge aloft price to consumers during their whims as well as fancy. Take the Cable TV commercial operation as an example, there is usually ONE association which has the license to operate this business. Due to nonesuch as well as being the monopoly, consumers have been left with one choice take it or leave it. When they lifted their prices final year subscribers have no choice though to succumb to their whims.
Similarly in the energy era commercial operation licenses have been given to the so called IPPs (independent energy producers) to beget physical phenomenon which in turn sole behind during the most aloft price to the inhabitant application association (TNB). These IPPs have been equates to to enjoy Green Bel! t standi ng as there have been ensured which the barriers of entrance have been tall as well as TNB will have to buy whatever volume of physical phenomenon which have been generated. As the outcome these companies have been assured of big enlarge every year. Other companies which enjoyed Green Belt standing have been PLUS Highway, Petronas, Indah Water, Bernas, FOMEMA as well as most more. These companies have been equates to to lift prices though attracting most foe from competitors due to their strength from scarcity.
Malaysia's Government Debt/GDP had been stabilizing around the meant of 43 % up compartment 2009. However since the year 2010 it had shot up to 55.4 % as well as had been superfluous upon top of the 50 % since then. This is attributed to the RM 67 billion which is lifted during the 2009 duration in reply to the 2008 Global Financial predicament which was used as the impulse package.
This remarkable upsurge coincides with the increasing in the Government spending which is reflected by the record necessity of -7.4 % of GDP in 2010. The following draft shows the gradual enlarge in the Government spending which usually accelerates in recent years. Having the Debt/GDP of 52 % doesn't meant you have been in the joy section since when Ireland as well as Portugal defaulted their Debt/GDP is reduction than 70%. Further to this you cannot review to Japan whose Debt/GDP is 211 % as of Nov 2012. We will explain shortly since Japan's manage to buy will not default even with such tall turn of debts.
Government Pump Priming the Economy
Pump decoration refers to efforts by the Government to inflate the manage to buy by initiating policies which will assistance expand the manage to buy as well as as the outcome the activity. It is no tip which ! most Gov ernments in the universe today have been artificially boosting their manage to buy possibly by critical their currencies, creating traffic barriers or simply embark upon an expansionary financial process in sequence to grasp full employment. The universe manage to buy is now confronting an extremely challenging time ahead as most Western economies have been constrictive as well as what will occur subsequent will be the inevitable'Currency Wars'. By this you meant earlier or after any as well as every nation will have to contest with any alternative by devaluating their currencies so as to have their exports cheaper which will assistance emanate jobs. Side effects of banking wars have been Global Central Banks will enlarge their efforts to protect their economies by copy some-more money, emanate tensions between nations, beggar thy next door neighbour as well as lowering of bond yields due to banking interventions will additionally assistance enlarge seductiveness rate supportive consumption.
To proceed with Malaysia's income supply had been usually increasing for the past few years. The following draft shows Malaysia's Money Supply as of 2002 compartment 2012.
Malaysia's sum Money Supply consists of M0+M1+M2+M3 which can be widely separated into the following,
How most has the Money Supply Grown?
From the records above, the sum Money Supply in January 2002 was RM 475 billion though it someway managed to explode upwards to RM 1.34 trillion in Nov 2012. This represents an enlarge of about 268% for the duration of 10 years. Whereas in the U.S during the same duration from 2002 to 2012, the sum Money Supply as totalled by M2, grown from $ 5426.2 billion to $ 10408 billion. Period to duration in commission terms their Money Supply had usually grown by 91.8% (10408-5426/5426). This can be shown by the following graph.
How gladdened have been the consumers?
Due to the mending mercantile conditions since the Global Financial Crisis in 2008, Malaysia's GDP per capita has additionally been improving. Since 2002 the GDP/Capita has been taking flight from the low of US 3933.94 to US 5364.50. This can be shown by the following chart.
The rise in income has altered the consumer spending pattern. There is the macro change in consumer spending from the traditional'needs based'to the 'wants based'. This equates to consumers have been splurging upon luxuries rather than necessities. Consumers have been some-more willing to splurge upon the latest hand phones, oppulance handbags, ipads, excellent dining, abroad travel as well as so upon though ever giving it the thought. As the outcome of their addiction to spending they beg! an to lo ok for some-more avenues to lift income similar to credit cards as well as personal loans as well as as the outcome lead to an blast in the consumer debt level. The following dual charts shows the upward trend in their spending habits as well as additionally helped to explained the blast of both the open as well as in isolation section debts.
the trend in consumer spending in Malaysia seems to be edging aloft as well as aloft with no finish in sight. Thanks to the a Government's earlier bid in compelling the consumer spending manage to buy as well as during the same time relaxing the mandate to obtain loans so as to emanate a'loose money'economy albeit there have been efforts to quell such practices recently . From the upon top of draft consumer spending rose from RM 59300 million in January 2005 to RM 99812 million in September 2012 which represents the 68 % enlarge during this period. Government controlled medias have been telling folks which the manage to buy is recuperating as well as you have been moving forward to better times. In being the in isolation section is one of the most gladdened in the segment as well as their debt turn can be deliberate 'up to the eyeballs'.
The following draft is the household debt/ Disposable income of multiform countries as well as Malaysia is no disbelief the personality between them.
Deteriorating External Sector
Malaysia's profits from exports have been additionally down especially from the camp section following the decline of Global Commodity prices. As the outcome Malaysia's external section has additionally been affected. Palm oil price is during RM 2400 down from the tall of RM 3820 in 2011 as well as similarly rubber prices remain low trading during reduction than RM 1000 compared to the tall of RM 2160 in 2011. Hence there have been reduction funds accessible for the Government to outlay as the outcome it incurs deficits in the budget.
A bill necessity is the incident where the Government spends some-more than it received. From the upon top of it seems which the Government had been using bill deficits since 1999 compartment today. To financial bill deficits routinely there have been three options accessible to the government as well as they have been reducing open spending, enlarge taxation or borrowing. Given the current depressed mercantile scenario, enlarge taxation in the form of income as well as sales taxation might place serve weight to the already over stretched consumers in Malaysia.
Reducing open expenditure will be out of the theme since it will inhere slower mercantile expansion as well as will be suicidal politically in the upcoming elections. The final option will be to borrow from abroad through arising emperor holds to foreigners or to internal institutions similar to EPF as well as so on. Thus this will serve enlarge the debt weight as well as in the future will additionally enlarge the Government's Debt/GDP. The problem with aloft Debt/GDP is which seducti! veness w ill have to be paid as well as in this case to foreigners although their share represents about 25% of the total. This will paint the leakage in the manage to buy as well as as the outcome there will be reduction income circulating around the manage to buy as well as will positively affects the turn of mercantile activity.
Nevertheless the categorical threat to the Malaysian manage to buy is the debts although the Debt/GDP comparative measure has yet reached critical level. The lesson you must sense from the Global Financial Crisis during 2008 is which the majority of the countries which went bust had their Debt/GDP next 70%. Below is the Debt/GDP table of those countries which fell during the Crisis.
Table 1. Eurozone Countries Government Debt/GDP
Column1Column2Column3Column4Column5Column6 Country
2008
2009
2010
2011
2012
Cyprus 58.8
48.9
58.5
61.3
71.1
Iceland 28.5
70.5
87.8
92.8
99.2
Ireland 25.1
44.5
64.9
92.2
106.4
Portugal 68.3
71.7
83.2
93.5
108.1
Spain 36.1
40.2
53.9
61.5
69.3
Italy 103.6
106.1
116.4
119.2
120.7
Greece 105.4
112.9
129.7
148.3
170.6
Source : Trading Economics
Any Risk in Defaulting?
As can be seen from the above, Malaysia cannot rest upon the accolade which the Debt/GDP (52.6 %) is inside of manageable level. We must know which in normal marketplace conditions risk as well as prerogative follows alinear pathand which equates to aloft risk will be compensated by aloft return. However during impassioned marketplace movements (during the crash) risk as well as prerogative will follow anon-linear pathmeaning aloft risk will not be compensated with aloft return. In aMicro levelan particular investor's perfectly diversified portfolio which consists of most stocks as well as alternative derivatives will not be equates to to withstand impassioned marketplace movements. Say for e.g. the 10 % dump in the FBMKLCI will routinely outcome in the bigger decline in his portfolio as well as as the outcome the P&L. Similarly upon aMacro levelMalaysia's well diversified manage to buy will not be spared possibly if one or dual of the! consequ ential macroeconomic metrics such as exchange rates (drop susceptibly) or seductiveness rates (sky rocketing) reacted negatively to big marketplace moves.
Further to which even if they try to pre-empt any impassioned marketplace movements by stress testing their portfolio or manage to buy will not work. Evidence during the 2008 predicament proved which even though the banking attention tried to stress test their robustness with Quantitative Finance Risk Management collection such as VaR (Value during Risk) as well as CrashMetrics, it proved which is not sufficient to overcome to severity of the Crisis. Without bailouts from the authorities most of them will not be around by now.
In Summary
The alternative day you was reading the little articles created by the little of the internal analysts observant which Malaysia will not face any risk of defaulting since of the strong fundamentals. Further to which they argued which you cannot review Malaysia with Greece or Spain since they had the history of defaulting as well as Malaysia has never defaulted before. What rejection !
there is regularly the 'first time' as well as you must remember which the first cut is the deepest. Malaysia is equates to to shun most destruction upon the manage to buy during the Asian Financial Crisis behind in 1998 since which Crisis was mostly cramped inside of the South East Asian segment albeit causing the few mini crashes here as well as there in Russia as well as South America. But what is coming soon is the opposite animal as well as it is upon the Global scale. The compound has already been illuminated by the recent Currency Wars.
Malaysia Chronicle
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