Keep exchange rates open

It would appear that my pedestrian reading of greater monetary movements into Malaysia in a recent blog post has been proven to be accurate. I am not insane! There is "hot money" flowing in.

There are murmurs about re-instituting some form of capital control to regulate the influx of these speculative funds into Malaysia's economy.

Analysts are expressing concern about capital controls being imposed.

I am in agreement with this school of thought that no capital controls should be instituted.

Any form of capital control runs contrary to what the Malaysian government has being pronouncing on economic issues.

The challenge is whether Malaysians are nimble enough to parlay this influx of temporary largesse into high multiplier activities as opposed to the narcissism of fooling around with Bursa Malaysia-listed shares and, buying condo properties in Mont'Kiara.

As the mariners know, when the wind blows you set the sails.

The thing is, do we have the right compass directions?

And, by the way, the economic managers shouldn't worry too much about the exporters, especially the palm oil industry.

It's time that Malaysian exporters wean themselves off their own version of a "subsidy mentality". Don't keep baying for a cheap Ringgit. That is a decidedly Third World mindset.

An example of the correct analysis

MP Rembau gets the analysis right and arrives at the proper inference:

After a hard fought campaign, it's only fair that I begin with the obligatory tributes to those at the forefront of Barisan Nasional's efforts in Hulu Selangor. Chief amongst these are the Prime Minister YAB Dato’ Sri Mohd Najib Tun Razak himself who came personally to campaign not only as Premier, but also as UMNO Liaison Chief for Selangor, the Deputy Prime Minister YAB Tan Sri Muhyiddin Yassin who led the campaign, BN Hulu Selangor parliamentary by-election deputy director YB Datuk Seri Noh Omar and operations director YB Datuk Ir Mohd Zin Mohamed, and the secretariat led by Dato’ Seri Tengku Adnan Tengku Mansor, Datuk Ahmad Maslan, Datuk Abdul Rauf Yusoh and Datuk Abu Khamis. I also take pride in the fact that the BN Youth election machinery executed our strategy well resulting in positive gains among the younger generation. Not least, the man of the hour YB P. Kamalanathan who campaigned well and - despite provocative attacks by the PKR election machinery - managed to smile his way through the challenges.

We can expect everyone to be poring through the numbers trying to ascertain what conclusions can be drawn from the by-election, some maybe clutching at the slightest hint of a silver lining. Let there be no doubt, this was a crucial by-election – one that the PM himself acknowledged as a referendum of his leadership. But first things first, it gave BN the opportunity to win its first parliamentary by-election since the 12th General Election. We realized early on that a BN victory here would mean a statement of intent – not just in recapturing Selangor at the next general election but also reclaiming a two thirds majority in Parliament.

For all the above reasons, BN's victory in Hulu Selangor was an important marker, representing a turning point of sorts for us. But ever the cautious optimist, allow me to indulge in a couple of salient developments I noticed upon going through the results.

The first is something that was immediately evident as the results were being reported. Although ethnic Malay and ethnic Indian support was relatively better for BN, it was widely concluded that Chinese votes have not only not improved but deteriorated. Looking at the numbers for key Chinese voting districts, it is evident that Chinese voters chose once again to vote Opposition. We managed to garner only 28% of the Chinese vote (compared to 37% during the last GE). Unsurprisingly, BN lost in almost all the Chinese-majority polling stations – whilst winning almost all the Malay-majority ones.

The second point I want to highlight is the trend pertaining to young voters – and this is something related to the first point. Based on voting stream data, there has been a noticeable shift in the voting pattern of young voters towards BN. As BN Youth Chairman, I am naturally happy with this development, in part given that this was a KPI for us. Granted, data from polling streams may include a mixture of young and older voters but as a rule of thumb it remains the means with which we gauge voting patterns according to age. For those less familiar with the nitty-gritty of post-elections analyses, the crude methodology would be to look at the higher numbered streams at each polling station as an indication of how young voters cast their ballots. Based on this methodology, there was a swing of around 1,329 young voters to BN compared to 2008 at the parliamentary level. In 2008, BN managed to win in only 11 polling streams which we would categorise as consisting of mostly young voters whereas PKR won in 34. This time BN won 30 and PKR 23. (The statistical difference in the total of ‘young voter’ polling streams or saluran muda is due to new streams created at several polling districts).

But the interesting – and perhaps worrying – aspect of the voting pattern amongst the youths in Hulu Selangor is that it is very much reflective of broader trends of voting along ethnic lines. We were able to gain significant improvements in young voter polling streams in Malay and Indian majority areas. The gains were especially significant in the Malay areas. However, in Chinese majority voting districts we suffered a marked erosion in support among the young voters. In Kg. Baharu Kalumpang, for instance, the difference in the winning margin for PKR in the saluran muda jumped by 130 votes. In Kg Baru Rasa, the majority for PKR increased by 241 votes. This signals, among others, a sustained drop in support from younger Chinese voters – perhaps more so than the older generation. As someone who has placed BN Youth and a progressive approach for Malaysians as a priority, this is as stark a reminder as any that more needs to be done to address this particular segment of the population.

Of course, the two observations above, especially the former, will lead and has already led to calls of punishing the Chinese community. There will be familiar refrains of how 'ungrateful' they are and that BN – or UMNO to be exact – should write off the community and focus on the Malay votes. There are many things wrong with this. I will just mention two here.

First, it is fundamentally the wrong thing to do. If we are serious in assisting the PM in realizing his vision of a united 1Malaysia, we need to commit ourselves to doing right by all Malaysians regardless of the electoral reward. And in any case, I am sure if we continue with a centrist course assisting all communities with justice and equality, perceptions will improve. I believe many who vote against us remain cynical and want to see us walk the talk before supporting BN. This is a prevalent sentiment among the younger voters, especially from the Chinese community. So, for us to be sincere in rolling out 1Malaysia, we must not abandon the PM's inclusive leadership just because we are not seeing one community respond to it electorally just yet. This was never meant to be an easy fix. Again, I cannot overstate that it's also the right thing to do; we should do it anyway.

Second, relying on the Malay and Indian vote is strategically dubious. Yes, Hulu Selangor may have seen strong Malay and better Indian support especially when compared to 2008, but there is a sizable proportion of both communities that are sticky supporters of PKR. The notion of Malay unity remains elusive especially in terms of electoral choice. There will always be a sizable proportion - anywhere from 30-50% - in any constituency that will support the opposition, especially the PAS faithful. Indian voters have also demonstrated increasing discernment and much will depend on how they view changes in MIC and the delivery of promises made to them. Thus, abandoning the Chinese community may not be tactically sound especially when BN's hold on the other major communities is not, and never will be, absolute. Never should we forget, in today’s crosscutting political fragmentations, we do not speak for entire communities, not that I think we ever did before.

What this means is that we need to reject voices calling for Chinese voters to be 'punished' or ‘sidelined’. This will be a popular call for some who view politics in terms of electoral results, nevermind that I’ve established that this tactic does not stand up to challenge even if judged purely by electoral reasoning. And call me a wide-eyed idealist, but I have never forgotten that politics is more than just votes; it is also about ideals, principles and doing what’s right. I believe the PM will stick to his 1Malaysia trajectory and keep reforming until voters - of whatever ethnicity - become convinced that the changes are for real and here to stay. Importantly, I am confident that he can convince them.

Young voters have been dismissed as swing votes favoring the opposition. If in Hulu Selangor, bar the Chinese young voters, we managed to get a decent swing back to BN, I have no doubt that if we commit and wholly support the changes introduced by the PM, BN will see positive changes by the general election.

An example of poor analysis leading to a wrong conclusion

Extracted from Malaysian Mirror:

The Hulu Selangor by-election results showed that Chinese voters are not receptive to the 1Malaysia concept and the New Economic Model (NEM), said former Selangor mentri besar Dr Khir Toyo.

This is an example of poor analysis leading to a wrong conclusion.

If this is the level of analysis at the lower ranks of UMNO-BN, then, it is no wonder that the powers that be fail to understand how to deal with change.

It also shows the uphill struggle that Najib faces from within the UMNO-BN superstructure.

Strong Ringgit, weak will

While I cheer the strengthening Ringgit, I view with some trepidation the true causes of its strengthening.

Is the Ringgit strengthening because of Malaysia's own economic recovery?

Or, is it due to the influx of "hot money" that is directed largely towards :

• speculating in Bursa Malaysia;

• speculating in Malaysian properties; and

• speculating in the rise of the Ringgit itself? (granted that one cannot speculate in the Ringgit in the manner that was done in 1997-1998 - now it's a more tactical "parking" of funds in Ringgit-form than outright trades)
  

Many of us are aware that stimulus funds injected by governments throughout the world into their respective economies coincided with loose monetary policies that suppressed interest rates. This has created the phenomenon of cheap money.

Cheap money is fodder for the financial elite of many Western countries. Are they using this cheap money to make money in emerging markets like Malaysia?

This is a very likely possibility.

Which means that the Barbarians are not only at the gates of Malaysia, they're already within our fortress and, many Malaysians have been seduced into thinking that the good times are back.

We should all - especially policy-makers - pause to consider the recent phenomenon more carefully lest we fall into the 1992-1997 trap of thinking that our economy is doing so well that genuine investors are flowing back from every God-forsaken crevice into Malaysia for the medium to long term.

It ain't so.

Malaysian policy makers need to be watchful. Malaysian economic players need to be cautious.

This is especially so for those who speculate in Bursa Malaysia and properties.

For, when the "hot money" decides to flow elsewhere, the only good product is the facial tissue for which there will be plentiful demand to wipe away tears of sorrow.

No matter how nimble you are, dancing on a bed of hot charcoal will burn your feet.
pix from here.

JT: You've Got A Friend +

One never tires of the best pieces of work. JT and Carole King are immortalised in the two Youtube clips below:

Lessons of History

It was my sister who, in the 1970s was (and, still is), a rabid Readers Digest subscriber, who received a sample book. The book was Lessons of History (1968) which is the prelude to an eleven volume work entitled The Story of Civilization, which was written over a stupendous span of four decades by the husband and wife team of historians, Will and Ariel Durant.

Since I first picked up the book I haven't let it go. We couldn't afford the eleven volumes, but we had the free book.

I feel sad that Readers Digest is experiencing financial problems presently, a victim of the changing fortunes caused by technology. But, I'm certain that it will rebound. It's brand value is sound. Their management should have gone further down the route of Hallmark (which started off as a mere greeting cards company) into the electronic media. It was just a case of poor product positioning. But, the brand value is there.

I have digressed.

pix from here

Back to the Durants and their seminal book.

I think it was the elegant prose that engaged me the first time. It was Love at first sight.

After that came the wisdom contained in the prose that were parenthesised by pivotal historical events.

Here's what I mean; the first chapter is modestly entitled, Hesitations, and it starts with this passage:

As his studies come to a close the historian faces the challenge: Of what use have your studies been? Have you found in your work only the amusement of recounting the rise and fall of nations and ideas, and retelling "sad stories of the death of kings"? Have you learned more about human nature than the man in the street can learn without so much as opening a book? Have you derived from history any illumination of our present condition, any guidance for our judgments and policies, any guard against the rebuffs of surprise or the vicissitudes of change? Have you found such regularities in the sequence of past events that you can predict the future actions of mankind or the fate of states? Is it possible that, after all, "history has no sense," that it teaches us nothing, and that the immense past was only the weary rehearsal of the mistakes that the future is destined to make on a larger stage and scale?

As you can judge for yourself, how can a teenager, reading the foregoing first passage of a book with such prose and, such penetrating questions, put it back down? And, the first chapter ends thus:

Since man is a moment in astronomic time, a transient guest of the earth, a spore of his species, a scion of his race, a composite of body, character, and mind, a member of a family and a community, a believer or doubter of faith, a unit in an economy, perhaps a citizen in a state or a soldier in an army, we may ask under the corresponding heads - astronomy, geology, geography, biology, ethnology, psychology, morality, religion, economics, politics, and war - what history has to say about the nature, conduct, and prospects of man. It is a precarious enterprise, and only a fool would try to compress a hundred centuries into a hundred pages of hazardous conclusions. We proceed.

I was enthralled.

Over the decades, the book has become an old and, ever wise, friend.

I just re-read one of the chapters of the book and found the following passage to be resonant:

Democracy is the most difficult of all forms of government, since it requires widespread intelligence, and we forgot to make ourselves intelligent when we made ourselves sovereign. Education has spread, but intelligence is perpetually retarded by the fertility of the simple. A cynic remarked that, "you mustn't enthrone ignorance just because there is so much of it." However, ignorance is not long enthroned, for it lends itself to manipulation by forces that mold public opinion. It may be true, as Lincoln supposed, that "you can't fool all the people all the time," but you can fool enough of them to rule a country.

- Will and Ariel Durant-
Lessons of History (1968)

Steve Jobs, iPhone and the "jamban" experience

This week's iPad launch in the U.S. is momentous. This one is a likely gamechanger...until Steve Jobs creates the "iScroll" (it's one of my fanciful thoughts where technology meets the ancient). The gamechanging is actually in the field of publishing and book-reading. But, I'll leave that for another time.

Stephen Fry's piece in Time that coincides with the iPad launch has this passage:

A little calmer, I remind Jobs that at the product launch of the iPad in January, he had stood in front of two street signs, one reading "Liberal Arts," the other "Technology." "This is where I have always seen Apple," he told the audience, "at the intersection of the Liberal Arts and Technology."

I suggest there's a bit more to it than that; surely Apple stands at the intersection of liberal arts, technology and commerce? "Sure, what we do has to make commercial sense," Jobs concedes, "but it's never the starting point. We start with the product and the user experience. You seen an iBook yet?"

It's about the iPhone that I want to talk about. It's about my using the iPhone as a reading window into blogs, media news and e-Books.

The catch here is the venue in which I use the iPhone as a reading tool.

I'm a voracious reader and news junkie (aren't we all?). So, like many (I think) I will obssessively clench when Nature calls until I can get my hands on a book or a magazine. Not just any book or magazine. It must be one that interests me at that moment in time. Sometimes that clenching reaches epic proportions with audible flatulent rushes (which is already too graphic to bear for you, the poor reader).

Thus, Steve Jobs may be interested to know my "user experience" with the iPhone in the jamban (the Malaysian word for a water closet).

Long before the launch of the iPad, armed with the iPhone, I have already reduced my book and magazine purchases.

As an experienced user, my user experience is relevant. Clever alliteration, right?

Be forewarned that you will need to clothe your precious iPhone with a non-slip silicone jacket because slippages do occur and, you may make an inorganic deposit that may annoy IWK not to mention emotionally scarring your sensibilities.

If you are a jamban smoker and a reading junkie, you will have to be even more dextrous, which is where the touch screen comes in. The touch screen is the most sensible innovation ever. I don't believe that one can ever be a jamban smoker cum reading junkie and, still be able to use any other smartphone. But, you can do that with an iPhone.

All of which brings me to this troubling thought; the iPad is lovely to behold.

But, I can't use it in the jamban. So, how now Steve Jobs?

Bedeviling the details

In the context of the healthy chatter over the NEM, the idiom, "The devil is in the details" appears to have made some more informed quarters touchy while it rolls off the tongue of others with ease.

Granted that it is a throwaway phrase that enables indolent minds with pretensions of wanting to say something about the NEM to say something curling, the touchy response is rather amusing and, if I may say, a trite dismissive. Some may even say it smacks of arrogance at some level.

The setting of strategic goals is a necessary starting point in any meaningful endeavour. As de Bono has pointed out on many occasions, strategy sets the parameters within which tactics are required as a form of adjustment mechanism. The directional flow set by strategy cannot be immutable since there are many risk factors and happenstance events that can never be envisaged much less anticipated.

That said, the NEM Part I sets the strategy.

And, when we get to the implementation stage, whenever that might be possible, it is the tactical features that will come into play. These are the details that, some say, may bedevil the NEM.

As such, even if indolent minds use the idiom and, even if they are clueless about being able to answer any challenge for specifics, such a paltry response does not deserve dismissal. For, to use a phrase from Bruce Lee when he was expounding his Jeet Kune Do philosophy, "A wise man can learn more from a foolish question than a fool can learn from a wise answer".

If "inclusiveness" is a strategic goal in the present context, then, the principle should be broadened to include foolish questions or, even throwaway idiomatic remarks by stakeholders who may also be voters...unless there is no wisdom...in which case we are doomed.

In any event, in true Malaysian fashion, I offer my contrition for, mea culpa, I am guilty of such a foolish utterance albeit made in good faith.