Wednesday, December 2, 2009

Double-dipping et al

It appears that people like me, who fretted over a "W" effect of economic health, may have our worst fears realised. Even sceptics like Paul Krugman are making observations like this:

I’ve never been fully committed to the notion that we’re going to have a “double dip” — that the economy will slide back into recession. But it has been clear for a while that it’s a serious possibility, for two reasons. First, a large part of the growth we’ve had has been driven by the stimulus — but the stimulus has already had its maximum impact on the growth of GDP, will hit its maximum impact on the level of GDP in the middle of next year, and then will begin to fade out. Second, the rise in manufacturing production is to a large extent an inventory bounce — and this, too, will fade out in the quarters ahead.

Such a view is shared by our own MIER, who had this to say:

Malaysia may need a third stimulus package should the US economy go into a relapse next year, according to the Malaysian Institute of Economic Research (Mier).

Executive director Prof Emeritus Datuk Dr Mohamed Ariff said in the event of a double dip recession in the US, Malaysia could use an additional RM8bil to pump prime the economy and “that is something we can afford to have.”

“We may need an additional RM8bil if there is going to be a double dip (recession) in the US and elsewhere,” he told reporters after the Mier National Economic Outlook Conference 2010-2011 yesterday.

Stimulus packages - good or bad?

The foregoing leads me to the several questions (some of which may overlap because I am writing on a first-draft basis, as always):
  • Do stimulus packages cause economic players to defer painful decisions?
  • Do stimulus packages have the unintended effect of protecting enterprises that either (1) took too many risks, (2) made too many mistakes and/or (3) are inefficient?
  • Will stimulus packages create more long-term problems than solve short-term ones?
I have some intuitive feelings about the above questions but, no hard answers.

Mind you, in Malaysia's context, as MIER has pointed out, any double-dip effect in Malaysia's economic health are externalities i.e. when the U.S. so much as sneezes countries like Malaysia catches AH1N1 (pardon the macabre pun).

Statements on reforms - real or sandiwara?

That said, Malaysia's economic managers cannot be complacent. And, judging from the rumblings from Ministers about further economic reforms and revamp of divisive policies, the BN government is beginning a feeble and tentative attempt.

I say "feeble" and "tentative" because negative trends have not been reversed.

The indelible impression is that the government has been reacting to criticism and exposes rather than proactively earnestly correcting matters. This lends credence to the view that March 8, 2008 has not resulted in a genuine desire to reform a plethora of archaic socio-economic and socio-political policies.

Instead, it is quite obvious that in light of the apparent disarray in Pakatan Rakyat (mark the word "apparent"), the ruling coalition is exhibiting the type of behaviour that clearly points to the return of the old arrogance. The good 'ol "negotiated tender" is rearing its ugly head again.

A bit about "safe haven insurance" as a symptom

As if to underline the perception that "business as usual" is not a good thing we are witnessing the phenomenon of Malaysians of assorted ethnicity securing what I will term safe haven insurance by obtaining residential status in other jurisdictions.

Anyone who wishes to cast bilious remarks towards this category of Malaysians will only confirm the worst fears of these and many other Malaysians who only want a peaceful, progressive and prosperous Malaysia.

In this context, the challenge, therefore, is not to find a Thesaurus of invective but, rather, to remedy and remove the "push factors" that are causing Malaysian brains to consider leaving our fair shores by the droves. Mark the word "considering" because a Permanent Resident status is not a renunciation of citizenship, hence my invented aphorism, "safe haven insurance". The tide can be reversed if enough sincere effort is put into institutional and policy reforms.

And, let us not forget Hamlet's reminder about the insolence of office

There’s the respect
That makes calamity of so long life.
For who would bear the whips and scorns of time,
The oppressor’s wrong, the proud man’s contumely,
The pangs of dispriz’d love, the law’s delay,
The insolence of office and the spurns
That patient merit of the unworthy takes,
When he himself might his quietus make
With a bare bodkin? Who would fardels bear,
To grunt and sweat under a weary life,
But that the dread of something after death,
The undiscovered country from whose bourn
No traveller returns, puzzles the will
And makes us rather bear those ills we have
Than fly to others that we know not of?
Thus conscience does make cowards of us all;
And thus the native hue of resolution
Is sicklied o’er with the pale cast of thought,
And enterprises of great pith and moment
With this regard their currents turn awry,
And lose the name of action.


Raison D'etre said...

Not much we (as in we Malaysians) can do, isn't it?

Stimulus Packages are the "Take from one hand give to the other" kind of hogwash.

It's a brief respite, akin to that of taking cash advance from a second credit card to cover the first.

There's still no cash in our pockets.

The hope was that this passing would pressed those with money to start spending or do something.

Did they? Not in a major way at least.

Two cents from a non economist who once dipped into his second CC to cover first and ends up paying for the folly for a good long while. :)

walla said...

Husni should be commended for saying it at last what the rakyat have been saying for years.

But it's now too late to be better late than never.

The leakage rate we know is two-thirds. For every 3 ringgit spent, two are siphoned.

No wonder the govt is facing its biggest deficit in twenty years.

For that reason it should be more careful about special offers.

Which is why the matrade centre proposal is an oddity. It seems to be already up:

So if it is already up, what is it again that the govt is getting in return for giving out 24 hectares of prime land?

Maybe the way to avoid such things reeking of bailouts amongst cronies is to re-concentrate more brains into the country.

They were concentrated before. Then they dispersed for reasons which should no one can deny anymore.

Now is the time to lure them back, in so doing perhaps stemming further exodus of the next batches.

For all that to happen if at all possible, everything must change in the way this country is to be governed from now on.

If they still leave, at least the country would have taken remedial steps to improve and redress itself.

That should be a bonus. Unless there's some masochistic tendency to remain sub-par for the comfort of being sub-standard and corrupt.

Corruption must be completely eradicated. Standards must be completely elevated. That's the only way to change W to V.

The next blogosphere theme :


Any which way, and everywhere, get them up.

msleepyhead said...

The image of the country is probably at its lowest, even if in reality things may not be that bad, it will be tremendously tough to do a brain gain.

Best thing to do might be to wake up to reality, as echoed here and elsewhere, start nurturing and retain whatever brains already here, plan thirty years ahead, a New Malaysian Policy perhaps?