Malaysia economic outlook looking better on firmer ties with China, says Manulife


KUALA LUMPUR (Aug 1): The economic outlook in Malaysia is looking to be better as the strengthening relationship with China is expected to pave way for rising investment flows from China to Malaysia, according to Manulife Asset Management Services Bhd.

In its mid-year market outlook report today, Manulife Asset Management Services head of total solutions and equities investments Tock Chin Hui said the revival of major infrastructure projects is expected to pump-prime the economy for the second half of the year.

“Malaysia corporates and consumers are expected to spend more due to the progressive disbursements of tax refunds and the resumption of infrastructure projects, which will eventually drive domestic consumption, and investor sentiment is expected to improve as the government continues to embark on structural changes to overhaul the economy and future-proof it.

“Looking ahead, Malaysian equities offer attractive dividend yield and significant defensiveness amid uncertainty caused by trade tension. The Malaysian market is expected to show resilience and could outperform regional peers given its defensive trait and year-to-date laggard performance,” said Tock.

Commenting on the region, Manulife said Asian assets could offer opportunities given their resilience to market volatility in the first half of 2019.

It said Asian equities have held up strongly despite the negative impact of escalating Sino-US trade tensions, and the US Federal Reserve’s increasingly dovish stance has allowed Asian bonds to remain in a good position.

Manulife Investment Management chief economist and head of macroeconomic strategy Frances Donald said central banks have entered a global easing cycle in response to the deteriorating global growth activity and heightened uncertainty surrounding international trade policy.

“This uncertainty has created a confidence shock that is slowing global hiring and business investment along with global trade.

“We expect the Federal Reserve will cut rates at least twice in 2019 as insurance against deteriorating growth in the face of heightened uncertainty but also to stoke inflationary pressures which have been absent.

“Should trade tensions re-escalate in the second half of the year, we would expect the Federal Reserve to respond with more than two rate cuts,” said Donald.

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Let’s talk economy – the sequel of education


The pump-prime our financial situation, we need a massive investment to revamp and rebuild our education  

 

Moving forward We need a complete revamp of our school curriculum as well as new,
well-designed and well-operated places for our children to learn in.

 

I WAS not done the last time, so let’s continue our talk about the economy.

In the last article, I wrote that we must spend our way out of the recession and we must act now. We have to spend it on the right things, for the right reasons, using the right people, at the right value.

In the ’80s, we spent on massive highway infrastructure and got ourselves out of the recession. As I said, today we need a different solution that will hit various sectors that will have an overall impact not just on themselves, but also our fundamental way of life.

Where then shall we stake our economic salvation to spark growth in our economy and blaze a path to recovery of the Malaysian nation as a progressive one that will pave our way to be developed?

I say we build on education. Fundamental education. We reform, revamp and rebuild our education infrastructure, systems, administration and human resources. To be specific, primary and secondary education.

Think about it – the East Coast Rail Link (ECRL) is to be built at a cost of RM44bil. Imagine the number of people, companies and all and sundry subsectors that will benefit from a massive capital investment like this in education, not just in the short term but in the long term as well.

Today, Malaysia has in actual fact, a dilapidated, outdated and obsolete – primary and secondary – education infrastructure and system. Our administration and human resources are geared towards upholding this obsolete education model. We need a full revamp and rebuild.

Most public schools are in shambles – old and poorly constructed and poorly maintained buildings; run-down facilities with no air conditioning in this tropical climate. Basically, the hardware of our schools needs a total replacement.

We also need a full revamp of the teaching software – the administration and teaching human re­sour­­ces currently operating our education system. Over the last 30 years, our obsession with seemingly racist policies and religious fundamentalism has produced an ethnic and religious-centric education system, curriculum and teaching profession and administration that is not capable of producing a scientifically and technologically advanced and humanistic progressive majority.

Why else would we have people in government and authority making stupid pronouncements that liberalism and pluralism are dangers to our society?

If you don’t believe our education is so bad, I give you Exhibit No.1: a public university that proclaims so-called religious-based “scientific findings” such as that the various geological age of the Earth did not happen. And you know your education system is in trouble when your professors start theorising that dinosaurs were actually ‘djinns’.

We need a complete revamp of curriculum – what should be taught and not taught in our public schools and who are really qualified to be teachers and administrators for the education of our children. And we need new, well-designed and well-operated places for them to learn in.

For half of the ECRL budget, say RM20bil, we can start the investment and pump-prime the economy beyond our wildest dream. In addition, this spending will fundamentally change the majority of our society to one that is modern and progressive instead of the one we have today, backwards and inward-looking.

It would be something we could call The Great Malaysian Education Revamp Investment.

I would take this initiative away from the current Education Ministry. A ministry that has produced this failed education system cannot be entrusted to carry out a revamp of this nature. An academic, especially one who is steeped in an education based on religious beliefs, is not equipped to lead a major reformation and capital investment initiative. This is a major professional corporate-level investment initiative.

It has to be carried out by a select group of corporate and education professionals supported in the team by various governmental functions on-loan from ministries such as Works, Finance and Legal. This must be a one-stop centre special projects task force. This task force should be separated into

two segments, namely Education Reform and Infrastructure Rebuild.

It is really not that difficult to see what kind of schools we need, both in terms of infrastructure and curriculum. Go to the international schools in this country which cater primarily for children of first world countries – get their blueprint, work with them to understand why they do what they do and implement them.

Look at their infrastructure, see what they have as teachers, what and how they teach, their content and curriculum, and how they administer – and copy them.

If you want to become develop­ed, follow those who already are. Life is that simple.

To all you ethnocentric and na­­tiona­listic purveyors of such pride, I have this reminder. You do not go to Nasa and say, “Show me how to build the Saturn V rocket so I can get to the moon and then decide I need to modify its fuel mixture because I need the ingredients to reflect the national identity.”

That doesn’t work. You will be blown to pieces at the launchpad, which is exactly what happened to our education system the day we decided to do that. You want to reflect national identity? Don’t change the fuel. Paint the fuel tanks with our flags, that’s all.

I hope people get the hint.

Hence, this is what we should be investing in – a developed educational infrastructure, curriculum, teaching resources and a small but efficient administrative capability of international standards. Let’s spend tens of billions on it as capital investment. The rewards will be astronomical and will be far reaching all the way into generations.

It will fundamentally change our society. Imagine international schools for our public school system for primary and secondary education. Imagine the society that creates. Imagine, imagine!

So you may ask, what then should we do with our current infrastructure and resources? You do not move from your house in the ghetto to a spanking new bungalow in the suburbs and bring along your old furniture, do you? You transition only the ones that can fit into this new home and leave behind all the rest.

Sounds harsh? Of course it is. If something or someone is capable enough to be part of a developed infrastructure and resources, you test them and take it with you. If they don’t, you leave them behind. Eventually, close them down one by one until the entire ghetto is gone. Then you bulldoze all of them down.

Some will say that what I am saying is utopian, idealistic or not achievable. Here is my answer to that. Look around the world. Don’t look around underneath our tempurung. Changes are everywhere and they are coming fast. This is the 21st century. You either get on with it or you are going to be left behind. Industries are closing down and being replaced by those we never even imagined before. Never imagined.

Where are the telephone operators at the exchanges today? They don’t exist anymore. Anybody using landline phones in homes lately? Are we holding a telephone or a camera? Or is it a miniature laptop or a recorder or a photo album or … oh well. I don’t know what it is anymore. Cry all you want, but the taxi industry is going to cease to exist. Satellite TV? Wait till 5G comes along.

Disruptions in industries are the norm. In the 21st century, it is moving at breakneck speed. Sometimes I wonder how long general medical practitioners or pharmacists, as we know them today, can survive, or even conveyancing legal practitioners.

Education is not a sacred cow, especially if we want our nation to survive. We either get on with the programme or we wait for our time to perish like that proverbial frog in the slow-boiling pot.

We must change or die. Going back to economics, we are actually living precariously on borrowed time on the credit of our oil money. The other parts of our economy chip in here and there, but it’s very much oil money today. We need to change that narrative now and produce citizens who can compete and create new economies for the 21st century.

We cannot have this education system that turns our people into sheep, rather than thought-provo­king industry creators and innovators. We need to stop this nonsense.

If we continue on this path, we will see the collapse of our civilisation. Sounds alarmist? No, I am being a realist. People complain that our university graduates are still earning starting salaries of those about 20 years ago. It’s true, but it’s not the employers’ fault. As Bill Clinton used to say, “It’s the economy, stupid.”

The economy will pay what its cost structure can stand for it to be viable. You can fix a minimum wage but if it cannot sell because no one can afford to pay for it, it will close down. And then no one gets paid. There is a reason the Human Resources Minister suggested that we look at African labour.

This is because our other neighbours’ wages have risen to that of what we pay that they don’t have to come to work here anymore. This is because our economy has not grown with the growth of our population, that’s why.

The signs are all there to see, but we refuse to see it. The worse thing is, our civil service and government-­linked company sub-economies have artificially provided shelter and complacency among the majority population, fully financed by taxpayer debts and diminishing oil money. I guarantee you that the retorts to this article, as was to many of my articles, will come from such subsidised mindsets.

Today in Malaysia, mediocrity and unproductivity is rewarded. This cannot, and will not, last for long. We need to change our condition. That change must come with education. Since our economy needs vigorous pump-priming, we might as well go all in with massive investment in education. And in that, we need a true revamp and rebuild of our education.

Let’s just do it.

Siti Kasim is a proud liberal, a non-conformist and a believer in the inalienable rights of individuals to choose their own path as long as no harm is caused to others.

The views expressed here do not necessarily reflect those of Sunday Star

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Recession fears hit Asian region including Singapore


Malaysia may, to a certain extent, be less vulnerable with the revival of major construction projects which in view of the country’s strained finances, have been shrunk to cut costs. The Singapore economy may undergo a “shallow, technical recession” in the third quarter.

TALK of recession has hit the region, and near home, Maybank Kim Eng Research is flagging that possibility for Singapore in the next quarter.

Export-reliant economies are hard hit by slowing growth and supply chain disruptions caused by the prolonged US-China trade and tech war.

There may be a ceasefire now in the fight between the US and China following talks between President Donald Trump and President Xi Jinping at the Group of 20 Summit in Osaka last Saturday.

Existing US tariffs on Chinese imports still remain; additional tariffs on the remaining US$300 bil worth of Chinese imports, as threatened, will not be imposed for now

However, the new timeline for truce remains elusive; the suspicion is that of a “creeping” imposition of tariffs, as “each truce is followed by new tariffs and then, another truce.”

In December last year, Trump and Xi had struck a truce following which talks broke down in May this year, and tariffs on US$200bil of Chinese imports leaped from 10% to 25%.

Will there be light out of this tunnel, with harder issues involving tech and supremacy not tackled? Smaller economies with the fiscal and monetary space may be able to cushion their economies somewhat from the downdraft on growth.

Malaysia may, to a certain extent, be less vulnerable with the revival of major construction projects which in view of the country’s strained finances, have been shrunk to cut costs.

The Bandar Malaysia and East Coast Rail Link projects to be revived, are now downsized to RM144bil and RM44bil respectively.

Works for the Light Rail Transit (LRT) 3, from Bandar Utama in Petaling Jaya to Johan Setia in Klang, will resume in the second half of the year, at a reduced cost of RM16.63bil.

Talks are said to be ongoing to revive the Mass Rapid Transit Line (MRT) 3, or MRT Circle Line round the city centre, at possibly RM22.5bil which is half the original cost.

“The timing (of the revival of these projects) has been very good for Malaysia,’’ said Pong Teng Siew, the head of research at Inter-Pacific Securities. “These projects will go on for several years and positively impact the economy over that period.’’

Domestic spending and activities will provide ‘some comfort’ to the local economy but we should ensure that any further monetary easing actually goes into the real economy to support these activities, according to Anthony Dass, head of AmBank Research.

Malaysia’s private consumption was at a record 59.5% of its nominal (calculated at current market prices) Gross Domestic Product, which hit US$88.5 bil in March, 2019, according to CEIC Data.

Benefits from trade diversion from China, the current US tariff hotspot, are offset by downward pressure on global trade where volume was flat in the first quarter, the weakest since the financial crisis.

Global semiconductor sales also declined in February and March, the first back-to-back double digit contraction since the financial crisis.

In view of this decline, the volatile global trade environment and rising geopolitical tensions, open economies “should be prepared for the unexpected,’’ said Nor Zahidi Alias, the associate director of economic research of Malaysian Rating Corp.

The Singapore economy may undergo a “shallow, technical recession” in the third quarter, said Maybank Kim Eng, pointing to possible intensification of supply chain disruptions and US export controls on more Chinese tech firms.

Following the Trump-Xi talks, the US has reversed its equipment sales ban on Huawei but will that ease fears of other similar bans down the road? Defined as two consecutive quarters of negative quarter-on-quarter growth, a recession will prompt further easing of monetary policy in Singapore.

Manufacturing in Singapore, which accounts for a fifth of the economy, fell 2.4%, with electronics dropping 10.8% in May from a year ago; output is expected to decline again in June.

Hong Kong has also been issued warnings of recession, as its economy experienced the largest contraction since 2011, declining by 0.4% in the first quarter against the previous quarter.

Thailand’s economy grew at its slowest pace in four years, in the first quarter, hitting 2.8% from 3.6% in the same period last year; exports remain weak.

Taiwan’s economy avoided contraction in the first quarter but private consumption and gross capital formation slowed significantly while government consumption declined.

In the US, a mis-calibration in interest rate policy by the Federal Reserve can cause a sharper slowdown than expected or bring on a recession.“Monetary policy affects the economy with unpredictable lags, it could be hard for the Fed to time its policy (rate cut) that can prevent a downturn this and next year,’’ said Lee Heng Guie, the executive director of Socio Economic Research Center.

Columnist Yap Leng Kuen notes the reminder to ‘expect the unexpected.’

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Facebook delves into Cryptocurrency, the Libra coin plan


Cryptocurrency and Facebook logo are seen together in this photo. Photo: IC

Experts raise concerns over privacy and regulation

Facebook unveiled plans Tuesday for a new global cryptocurrency called Libra, pledging to deliver stable virtual money that lives on smartphones and could bring over a billion “unbanked” people into the financial system.

The Libra coin plan, backed by financial and nonprofit partners, represents an ambitious new initiative for the world’s biggest social network with the potential to bring crypto-money out of the shadows and into the mainstream.

Facebook and some two dozen partners released a prototype of Libra as an open source code for developers interested in weaving it into apps, services or businesses ahead of a rollout as global digital money next year.

The nonprofit Libra Association based in Geneva will oversee the blockchain-based coin, maintaining a real-world asset reserve to keep its value stable.

The Libra Association’s Dante Disparte said it could offer online commerce and financial services at minimal cost to more than a billion “unbanked” people – adults without bank accounts or those who use services outside the banking system such as payday loans to make ends meet.

“We believe if you give people access to money and opportunity at the lowest cost, the way the internet itself did in the past with information, you can create a lot more stability than we have had up until now,” Disparte, head of policy and communications, told AFP.

Facebook will be just one voice among many in the association, but is separately building a digital wallet called Calibra.

“We view this as a complement to Facebook’s mission to connect people wherever they are; that includes allowing them to exchange value,” Calibra vice president of operations Tomer Barel told AFP.

“Many people who use Facebook are in countries where there are barriers to banking or credit.”

But the move raised questions about how such a new money would be regulated, with one lawmaker calling for a pause on Libra.

“Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues,” said Maxine Waters, chair of the financial services committee in the US House of Representatives.

Meanwhile French Finance Minister Bruno le Maire said such digital money could never replace sovereign currencies.

“The aspect of sovereignty must stay in the hands of states and not private companies which respond to private interests,” Le Maire told Europe 1 radio.

Bank of England Governor Mark Carney said Facebook’s new currency would have to withstand scrutiny of its operational resilience and not allow itself to be used for money laundering or terror financing.

ING economists Teunis Brosens and Carlo Cocuzzo said in a research note it was not clear what Libra was or how it might be overseen while US Senator Sherrod Brown, a Democrat and banking committee member, voiced concerns over Facebook’s checkered record on protecting users’ privacy.

Backed by real cash

Libra Association debuted with 28 members including Mastercard, Visa, Stripe, Kiva, PayPal, Lyft, Uber and Women’s World Banking.

Calibra is being built into Facebook’s Messenger and WhatsApp with a goal of letting users send Libra as easily as they might fire off a text message.

Libra learned from the many other cryptocurrencies that have preceded it such as bitcoin and is designed to avoid the roller-coaster valuations that have attracted speculation and caused ruin.

Real-world currency will go into a reserve backing the digital money, the value of which will mirror stable currencies such as the US dollar and the euro, according to its creators.

“It is backed by a reserve of assets that ensures utility and low volatility,” Barel said.

The Libra Association will be the only entity able to “mint or burn” the digital currency, maintaining supply in tune with demand and assets in reserve, according to Barel.

“It is not about trusting Facebook, it is effectively trust in the association’s founding organizations that this is independent and democratic,” Disparte said.

New directions

The launch comes with Facebook seeking to move past a series of lapses on privacy and data protection that have tarnished its image and sparked scrutiny from regulators around the world.

Chief executive Mark Zuckerberg has promised a new direction for Facebook built around smaller groups, private messaging and payments.

The new Calibra digital wallet promises eventually to give Facebook opportunities to build financial services into its offerings, offer to expand its own commerce and let more small businesses buy ads on the social network.

“We certainly see long-term value for Facebook,” Barel said.

Facebook said it would not make any money through Libra or Calibra, but rather was seeking to “drive adoption and scale” before exploring ways to monetize the new system.

Financial information at Calibra will be kept strictly separate from social data on Facebook and won’t be used to target ads, Calibra vice president of product Kevin Weil told AFP.

Libra will be a regulated currency, subject to local laws in markets regarding fraud, guarding against money laundering and more, Weil said.

‘Watershed’ moment?

According to Facebook and its partners, local currencies and Libra may be swapped at currency exchange houses or other businesses.

And the ubiquity of smartphones means digital wallets for Libra could make banking and credit card services and e-commerce available in places where they don’t now exist.

Analyst and cryptocurrency investor Lou Kerner said Facebook’s move has the potential to open the door for cryptocurrency to a wider public.

“What Facebook is really good at, is making things really simple to use,” Kerner told AFP.

“And that’s what is super exciting for the crypto industry, is somebody comes along who understands user experience and has billions of users that they can roll this out to.”

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Why does the West fail to understand China? The West misreads, China is rising, said Cambridge Prof


https://youtu.be/oiGm2E8BaC4

Martin Jacques
Martin Jacques (2012)
Born 1945 (age 73–74)

Coventry, England, Great Britain, U.K
Nationality British
Education King Henry VIII School, Coventry
Alma mater University of Manchester (B.A.)

University of Cambridge (PhD)

Occupation Editor, academic, author
Website MartinJacques.com

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How to make living more affordable?


 

 

IN my previous article I asked the question, Do you earn enough to sustain your lifestyle?

The feedback received was consistent. People told me that they worry about the situation, some even wrote in to share their concern.

A reader by the name of Yap wrote me an email about his observation after reading my article.

“I always doubt how a family with a median household income can survive in KL. Based on my calculation, there is no way a family with two children can survive in KL with RM6,275 without accumulating bad debt or spending 4.5 hours to travel on the road. Housing is one of the factors, but not the only one,” he wrote in his email.

Belanjawanku, an expenditure guide launched by the Employees Provident Fund (EPF) in early March states that a married couple with two children spend about RM6,620 per month on food, transport, housing, childcare, utilities, healthcare, etc.

However, the median household income for Malaysians in 2016 was RM5,228. While the median income of M40 group (Middle 40%) was RM6,275, which means five out of 10 households in this category received RM6,275 per month or less. This is far below the RM6,620 required for a family with two children to stay in the Klang Valley.

Another alarming fact is… Belanjawanku compiles only core living expenses without including long-term financial planning tools such as education funds or investments. The actual budget constraint can be more severe if we take them into account.

The living cost in major cities is inevitably higher than in small towns or suburb areas.

As such, when we discuss housing affordability in the cities such as Kuala Lumpur and the Klang Valley, we shouldn’t impose the same benchmark of RM300,000 as everything else is more expensive in the city. Affordable housing should benchmark against the cost of living of the area.

Based on the research for Belanjawanku, even if housing was provided for free, a household of four would still need RM5,750 to sustain their lifestyle.

The transportation cost alone is RM1,040 for a family, higher than the RM870 allocated for housing.

Therefore, if a family is looking to lower their cost of living, moving to suburb areas would allow them to have a more affordable budget.

According to a news report which quoted information from brickz.my, the housing prices in KL are five times higher than in Seremban, with median housing price of RM1mil (RM940 psf) in the KL city centre, versus RM200,000 (RM210 psf) in Seremban.

Suburbs which are nearer to KL such as Klang and Shah Alam also offer attractive housing prices with a median price of RM340,000.

For families who stay in the city centre and plan to reduce their cost of living, they can consider moving to suburbs to enjoy a better quality of life, and leverage on the improved public transportation which offer hassle-free travelling from suburbs to city centre.

Although high living cost is a concern for many Malaysians, KL is ironically found to be the cheapest city to live out of the 11 major cities in Asia, according to the 2018 Wealth Report Asia.

We are “cheaper” or ranked lower than our neighbouring cities, including Bangkok, Manila and Jakarta. KL, Manila, and Jakarta are also the most price competitive cities when it comes to the residential properties segment.

Why are we still facing the challenge of high living costs despite being the “cheapest” city in the region? The underlying factor is because of the low household income earned by most Malaysians, as the previous government failed to transit us to a higher income nation.

In his email, Yap mentioned that “I always imagine what Malaysia can be if there were no leakages. Hundreds of billions could be spent to stimulate various industries. Our GDP per capita could be close to if not similar to Singapore’s”.

That is the vision and sentiment shared by a majority of Malaysians. With the new government that promises to be more transparent and efficient, we hope that one day, we can afford to live comfortably in any city we wish to, with a higher household income.

Datuk Alan Tong has over 50 years of experience in property development. He was the World President of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email bkp@bukitkiara.com

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Malaysia’s economy: Fine growth with minimal inflation


The economy continues to chug along just fine even as it recorded the first inflation of the year in March. The consumer price index (CPI) rose 0.2% in March 2019 from the previous year.

The recovery away from a deflation in the previous two months was driven by the transport and the food & non-alcoholic beverages components of the CPI.

MIDF Research said in its report that the country’s consumer inflation is likely to stay low following the lower capped prices of RON95 and Diesel at RM2.08 and RM2.18 per litre respectively.

Nevertheless, it said that the demand-push factor remains firm amid stable job market and steady wage growth.

Meanwhile, labour force growth has maintained at 2.1% year-on-year (yoy) in Feb 2019 while employment growth inched down to 2.1% yoy while jobs added in the economy was recorded at 34,000.

It noted that the number of unemployed people officially increased by 1.6% yoy.

But it noted also that growth in both the labour force and employment continued to outpace unemployment growth for the last 24 months since Mar 2017.

“The stable job market reflects healthy development of Malaysia’s economy and provides solid support to domestic demand,” the research house said.

Meanwhile, exports dropped 5.3% yoy in Feb 2019, the lowest in more than two years mainly due to a short calendar month on top of the long Chinese New Year (CNY) holidays.

Imports also fell and it declined more than exports at 9.4% yoy.

During the CNY holidays, all Chinese factories were shut down with most of them closed one or two weeks prior to the festive holidays. As the celebration put a halt to mass production, it disrupted the global supply chain resulting in a weak trade performance.

All sectors recorded a negative exports growth: agriculture (-13.7% yoy), manufacturing (-4.3% yoy) and mining (-5.5% yoy).

Despite the poor exports and imports figures, trade surplus maintained at above RM11bil in Feb 2019.

When compared with the previous month, both exports and imports contracted by 22% and 24.8%

respectively.
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