All stimulus packages announced by governments the world over are directed towards boosting something called aggregate demand.
Aggregate demand is a special phrase used by economists (and those who pretend to be one) to describe the total demand for final goods and services in the economy at any given time and at various price levels. Of course, this is a simple description. But, it will do for our purpose.
There are 4 elements that comprise aggregate demand. These are:
C for consumption, which basically means the disposable income that is available to everyone in an economy multiplied by something that Keynes called the marginal propensity to consume. Basically, it is assumed that whatever is NOT saved, will be consumed or spent.
I for investments by the private sector.
G for government spending.
(X - M) which basically means the net effect total exports (X) minus total imports (M).
C first
Unless you were in some faraway place without access to Malaysian business news, you will probably be aware that C is declining. This could be a matter of people deciding to postpone spending. It could be a matter of people having less money to spend (maybe lost in the share market). So, C doesn't look good.
Looking at (X - M)
This is a strange thing. Imports (M) are down. Exports (X) are also down. So, in absolute terms, the net effect of (X - M) has a lower value. So, (X - M) doesn't look good either as a component of aggregate demand.
I is looking shaky
Businesses who are related, directly or indirectly, to FDI activities, particularly the Electrical and Electronics (E&E) sector won't be investing in new plants or equipment for some time. Many SMEs which produce goods for export also won't be investing any time soon either.
Which leaves good 'ol G
The G component includes the RM7 billion first stimulus. It will also include the estimated RM10 billion to RM30 billion (no one can confirm yet, until March 10) second stimulus package.
Where will G go?
This is the billion Ringgit question.
Which part of I can the G stimulate and arouse?
Which part of C can the G stimulate and arouse?
The best G-spot
Where does education and training fit in? Because that is the absolute and, most important, expenditure that G should be directed into. It is not sexy because education and training has a time-lag effect. It takes time.
But, education and training is directed towards HUMAN CAPITAL. That has to be the best G-spot of all to arouse; the MINDSET and SKILL SETS of the Malaysian.
17 comments:
Alternatively
Stick a finger way up and move it towards you....it should be somewhere there...
:)
bro de minimis...wah now got picture of u online for the sime diner..
how do u find em corporates big shot? Deserve to be shot or not
bro satD
Like all things Malaysian, when we meet them bigwigs in person they are invariably courteous and quite charming. Good men. Maybe the circumstances are more complex, what with all the vested interests that they have to answer to. Checks and balances. That is what is needed in Malaysia to keep all these good men focusing on the important things that they are entrusted to do. Keep them in the straight and narrow and we'll all be better off for it.
just wondering how the function of minority shareholder watchdog in KL nowadays?
"vested interest".....yeah that's d buzz word for Corporate Level skim cepat kaya
The SMWG does a decent job. But with so many PLCs in Bursa they're probably running helter skelter. Many things will fall between the cracks.
thats where people like u (walla, ethoerist n dali) come into the picture bro
bro, just a few "commandos" (you included) running around won't make a dent, as you know. There are too many of them PLCs, GLCs and public agencies. But, it's fun. I know it's fun for you to poke a few "shiity" asses :D
deminimis,
Nice article, explainations & comments from you.
Just look Globally, at Enron, Citibank, Satyam, etc...
The "Weakest Link" broke & Backfired (Sub-prime & Derivatives, Junk Bonds, etc!)& the Financial bubble burst causing this Global Financial meltdown...
What I call the "Illuminati & Bilderberg Group", with the US's "Planned" Pearl Harbour" attack on the World - Financial Weapons of Mass Destruction!
Their Y2K "sting" 9 years ago, conned the whole world USD Trillions - Fear & Chaos Principle!
Guess who the Malaysian & the other nation's Bigwigs are (including Hilary & many more)...recruited "By Invitation Only, into that "Financial Club's" downstream group...
That is what happens when anyone tries/get to be "Too Big" in their country & then try to venture Globally...like a small fish now swimming in the Ocean with Man-eating sharks all around....
They somehow get "Induced" into those "Club's" downstream groups as a "junior member" with "Financial" pledgings, etc.
Media mogul like Robert Maxwell who was unfortunately "Eliminated", Rupert Murdoch, Bellisconi, Thaksin, PM Tanaka, etc who have become "Slaves" to the club & downstream groups...
When the "Club's Big Boys" need to help their "Senior member like the US", in their "Bail-out" exercise, etc, then everyone has to pledge their allegience to the "Club" with their own & their party, their Corporate & maybe (Indirectly), their netion's contributions....
They also "Induce/Recruit" identified target students (Tenderfoot scouts) from the "Ivy League Universities in the US & also from UK's Ivy League Universities (remember Kim Philby ?)
Where did KJ & 4th floor guys
Ethos consulting & ECM Libra, etc do their UNI studies ?
So with Big Brother...you are either with us...or you're without us....
Since you will be a threat to us....so you will be "Shamed, Ostracised, etc (with their compilation of Dossiers like Tanaka & Locheed), etc..
sometimes....unfortunately get "Eliminated" like Robert Maxwell and many others....
So that is what the World's G20, Davos, etc is all about at the Global scenario...
So those "behind the scenes Goverment Advisers are the "Group" members in almost every country...including our Bolehland....
That is why almost all of our nation's & the rest of the World's "Derivatives" Investments got sucked into the US "Sub-Prime, Junk Bonds, etc Sink-Hole."
So this Bolehland's top Politicians,Govt Bodies, GLCs, Corporate Owners, Corporates Chairmans & Directors, (Advised by these behind the scenes "Group" members as Goverment Advisers) sometimes get "Misguided"....
So, they continue "Crunching Numbers, Cooking Numbers, etc" some more at the top Greed)....only to get "Caught out" with the "Weakest" link "Downstream"...SOON.
Just look at Temasek....LKY's daughter could not deliver so had to step down & is replaced by an "Expat Foreign Consultant"....
Why a Foreigner expat & not another Singapore Brain ????
“Everyone of them "Globally" also is “Squeezing each other by the Orbs/Juggular” for Promotions, Power & $$$...IMF, World Bank, ADB, etc...controlled by Big Brother...
Why did KJ & 4th floor guys move Amirsham from Maybank (when he had good control of the Ship) be to Dy Minister; Swap Khaleb into TNB & put the TM guy in Maybank; Murshid into Sime; now trying to swap/move Hassan Marican from Petronas ?
....so all those Ship can be Diverted?....
They are the Malaysian Pirates of Bolehland....
Just look at our Nineth Malaysia Plan, etc has now become "Mine Family Plan"!
Do you all realise that we do not need to fear our neighbour Singapore's Air, Sea & Land Fire Power anymore....they sure beat us with a "Walk over" with their "Cost Efective Evaluation, Planning & Procurementof the World's Best Hardwares & softwares with no Surplus to Needs with Integrity & Discipline.
Anyone involved in “Graft, Corruption, etc” would rather “Self-Destruct” than have to face the Senior PM and their peers.
Do you all realize that Singapore does not need to deploy any of their Air, Sea & Land Hardware, not even their Foot soldiers across the Causeway to "Walk-over" us....
Our own kind have aleady "Compromised" ALL our our Defence Database , National Security database, IT Central Mainframes, Bukit Aman Forensic Solutions, Iskandar Dev Region (Remember Haliburton!), etc, etc....
Our own kind have been silently fronting Temasek in some of our GLCs, etc, etc. including our Sime....
The bits of information has been written in all our business journals, magazines, news, etc...and it clearly shows that more than 50% of our nation's economy is indirectly controlled by Foreign Interest,
So, Singapore with the assistance of US & Israel Consultants can just "Cripple" us "Remotely"....
Why do we bother spending & wasting RM Billions on Air, Sea & Land Military Hardwares at "Exhorbitant Prices."
With the Global Financial Meltdown, NO Country/Government can understand & appreciate the "Actual Impact" to the "Nation" & its "People" until they get hit "Hard" like "Iceland."
The Government of the day then....
- "ACCEPTED THEIR FAILURE NOT THROUGH CORRUPTION THOUGH"....
- thereafter "GRACIOUSLY & HONOURABLY STEPPED DOWN ENBLOC"
- A "New Government is now in place" to "Salvage" the nation !
- Do you know what is happening in this Bolehland ?
- With the "Double Whammy" Financial & Political Tsunami at our doorsteps....
- there is still no "Structured Contingency plan nor Quantums" in place...
-Whilst the G20 Presidents,PMs, FMs, Governments, are strategising & synergising their positions on the GLOBAL FINANCIAL "Chess Board"....
- In Singapore, with such a Policy in place, their Senior Leaders, Generals, CEOs, etc do not even have to be seen....
- but everything runs the way it should for the nation and its rakyat’s “Guaranteed Basic Needs”
- (In this Bolehland it is the reverse !)
- They are the “True Leaders” involved in the “Bigger Vision” for the Nation’s International Political, Security, Economic, R & D, Manufacturing, etc Policy and Standing - The DBS, MAS and Termasek together have financial “Reserves” of more than 600 Billion Singapore Dollars.
- For a small nation, they have acknowledged, deliberated, identified and mobilized a “Structured and Dynamic” contingency financial plan to mitigate this financial meltdown
- with an initial package of 20.5 Billion Singapore Dollars and they are “Rock Solid” with their cash reserves.
Meanwhile in this Bolehland....
- Mahathir wants to retire gracefully but....cannot yet...
- with Mukhriz's position still "Hung."
- Pak lah also wants to retire gracefully but....cannot yet...
- with SIL's position still "Hung."
- PR & the rayaat want the assembly to be “Officially, Legally & Mutually Dissolved” but....cannot yet...
- with the PR/BN Assembly still “Hung.”
- Bank Negara's Zeti also wants to retire gracefully with a UN position but....cannot yet...
- as PM & Finance Minister/PM wannabe are still...
- "Quarreling with PR & Anak Bangsa Malaysia with POLITICS JAGUH KAMPONG ala KINDERGARTEN style & still playing with Marbles" when all the other nation's PM & FM are playing "Chess."
- We the "Rayaat" have to be "Proactive" and it is a matter of "What can I do for myself & my family NOW" rather than...
- "Ayooo...will the gomen help me....
- how to live with job & no money lor !"
SOON....it will be "Every man for himself"....
- Only you can save yourself & every man for himself....
- So please consider repositioning yourselves & family financially (mortgages, Loans, children’s educational expenditures, etc)...
- Rentals cheaper than >50% loans repayments; downsize your mortgages, cars/loans, etc.
- reposition your profession, career, jobs, etc;
- Remember every dollar is precious & “Cash is King",
- As such...my frenz....“Pleez Fasten your seatbelts tight” to safely rideout this "Double Whammy" Financial & Political Tsunami.
flyer168
As always, I find your comments intriguing. I usually have to read your comments a few times. True to your moniker your perspective is aerial and holistic, covering a wide landscape :D
DM,
you reckon without taking into consideration people like this one:
"Rather than giving money to third parties to conduct refresher or training courses for retrenched workers, it is better to give the money directly to the workers."
Compare the above with the response in the Star from the Japanese on the one-off Stimuli (?).
Why bother on the long term, when short term is definitely more enticing.
That's why you have people withdrawing from the EPF to buy home theatre sets etc.
At least they CONSUMING :)
I'm all for further education.
The only fear here is that it would be in the RM500 per name per month mold of the retraining scheme.
See how that worked out?
Tolong kawan2 lagi...
RD
This is the fun part about blogging. We can set the benchmark for all and sundry to see. Then we can, at least those who agree with the benchmarking, audit the policies and implementation for any discrepancies. Right now many can only decry hints of variance and inconsistencies. I would like to believe that little posts like these will contribute to awareness-building so that everyone can make sure that those entrusted with our nation's wealth will not fritter it away willy-nilly.
Someone lamented that teachers given allowances to learn english used them to buy branded handbags, upgrade their handphones or change their cars.
We seem to be issuing many checks but not receiving any balances.
bro de minimis
look at David Webb from Hong Kong he started a one man show in 1998
http://www.webb-site.com/
so if the commandos begin consolidating as the saying "everysnow flake in an avalance pleads not guilty" can be achieved....we'll give them a run for the money...
bro satD
It is quite amazing what David Webb has done. You've got a solid example there, bro. Rambo!
Good post.
My take is:
If you believe this slowdown is going to be short - and the consensus appears to be a resumption of growth in the 2H2009 - then boosting private consumption coupled with infrastructure projects is the way to go, provided you can ensure that spending actually happens. I'm not an advocate of income tax cuts or tax rebates in this stimulus budget, though now is a good time to lower the corporate tax rate to more competitive levels vis-a-vis Singapore.
The problem with tax cuts is the MPC you posted about, which means some portion of any tax cut or rebate will be saved rather than spent - yes, that means buying handphones and handbags is actually a good idea in supporting the economy. On that score, the Japanese plan is unlikely to have any large or lasting effects, especially in the deflationary environment their economy is in (i.e. saving has a higher value than consumption). I do like the stimulus package Taiwan is implementing, where they distributed shopping vouchers instead of cash, which means actual consumption will happen, rather than a round robin of govt borrowing->tax cuts->savings->purchases of govt debt. A further point is that tax cuts will disproportionately favour the already well-off, who have a lower MPC anyway.
Infra and construction projects are also indicated because empirically they have higher multiplier effects than the alternatives, in other words the effect on the economy will be greater than unity for every Ringgit spent.
However, if you believe that this is going to be a more protracted downturn, than I'd say we should go back and boost and augment spending on the many of the initiatives under the 9MP, particularly those having to do with moving up the value chain, R&D, and human resource development. If we're going to have to spend, we might as well do so in a way that improves our future productive capacity. Note that the G term actually includes both government consumption and investment.
Here's the narrative I'm seeing playing out in the economy over the next few years. First, global trade and capital imbalances have been a key factor in this crisis, and the deleveraging and rebalancing going on means that the world can no longer depend on the Americans as consumers of last resort. It follows that the excess savings that have accumulated here in East Asia and in the Middle East must be unwound and shifted to domestic consumption and investment, otherwise these economies will stagnate. There's a good argument that regional trade can pick up the slack, but that also implies from the Malaysian perspective more trade in finished goods rather than intermediate goods and commodities.
Secondly, the structure of the Malaysian economy has been changing rapidly over the last decade. I've been noting that economic forecasts in both the public and private sectors have been well off target since about 2004-2005, partly because of the bubble in commodity prices, partly the relatively weak performance of electronics exports, and also a very surprising surge in growth in the services sector. The shift towards services is a signal that the Malaysian economy is "growing up" - it's the third stage of development after primary production and industrialisation. We have to align our spending towards supporting this evolution.
Great season for hunting...
pour in all possible provisions,provide a bleak outlook,no orders,tight margins..get the shareholdrs jittery enough to forget the asset values.. >>then do a privatisation at 30% NTA.
Or..pump in private assets on a swop at depressed market share prices?
U will get very happy major shareholders,bankers,legal teams etc etc...screw the small guy.
look at some deals of this nature done over the last three years...and multiply it by 5 going fwd.
hishamh
Good of you to drop your considerable thoughts, bro. I like your analysis. Will give it some serious thought.
The stimulus packages ..in watever form will not be more than a short term panacea >> there is too much structural deficiencies that needs reviews.
Without that >> the ppl will hv no confidence to spend..it's the feast before the famine.
And infra projects?>> 30% will be pure skimming,20% repatriated home by the foreign workers,15% are for all the equipment/parts..but the biggest risk is if the money is on white elephants or good projects done badly/non completed.
I believe the answer is creating more employment opportunities..SMEs..or innovative outsourcing.
For instance,instead of spending a million ringgit for a tourism showcase in London >> create a tourism website where ppl can submit articles on their own hometown n get paid for it.U get reviews about the town from ppl who knows and love the place..who can also bring in readership thru their online social networks..
There are also opportunities for a one to one tutorship online..with instant messaging,audio and videos..establish the infrastructure and seed with some tutors...I am sure lots of grown ups likes to learn the Quran online?
Anyway..its about change,about innovation and about real value creation.
Btw..no more negotiated tenders pls.
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