Saturday, September 26, 2009

Facing the red-wave US tide

DEC 2, 2008 – The US stock market crashed again and is barely over the 8,000 barrier mark.
Yesterday, the Dow fell almost 690 points, representing almost an 8% drop.
This was on the back of news that the biggest economy in the world has been in recession since December 2007.
It only confirmed the worries of the business community concerning the deflated and lethargic US market.
Even though the US economy managed to climb out of the red temporarily, it has since the middle of the year fallen back into the red.
On top of the recently announced financial bailout package of US$800 billion (RM2.8 trillion), Capitol Hill has announced that they are going to spend more money in order to resuscitate the economy through pump priming projects.
The Bush administration has all but admitted defeat — as compared to his pompousness —by revealing that unemployment jumped and is expected to reach a worrying 8% by the end of the year from 6.5% which is where it is currently. This is already the highest in 14 years.
Outgoing US President Bush has failed in his attempt to halt the sliding confidence among the business community even with the announcement of big budget bailouts and financial programmes.
It is not surprising that some opinion makers are demanding that he step down as soon as possible than risk being labelled a lame duck President which has lost its gung-ho Texan swagger.
New York Times columnist Thomas Friedman recently lambasted Bush economic policies and demanded that his economic team and that of President-elect Barack Obama put forward a joint series of economic measures that will stimulate the economy continuously rather than having a stop-start policy when Obama assumes office in late January next year.
He even went a step further by calling for Bush to step down as soon as possible to make way for Obama as it will help revive the flagging economy.
This sounds all too similar to the situation back home — but the variable is political fortune in Malaysia rather than economic health for the US.
The rest of the country is apprehensive about global economic health despite the optimism of Bank Negara and the government in projecting a positive growth of around 3.5% - 5% this year.
With the US being our second largest trading partner behind Singapore, any economic mishap to them will definitely affect our economy.
True, our markets are largely insulated as compared to those of our neighbours' but it will nevertheless affect us... even though it may not be as bad as others in the region.
The business community and economists alike are taking a more conservative approach towards the nation's economy with the comfortable knowledge that we are rich in natural resources — oil and gas — as well as commodities — palm oil and rubber.
However, with the US and Singapore taking a battering and reducing their purchase of our oil, gas, palm oil and rubber, it will definitely affect our revenue.
We are now looking towards China, India and other smaller economies to sell our commodities.
We are also comforted slightly with the fact that we have huge reserves of almost US$100 billion even though it is minute — almost one-tenth — to China's reserves.
Hence, it is a worry when indicators show that our reserves are shrinking albeit at a small percentage.
Malaysia unlike Singapore has a diverse array of industries and sectors to generate revenue.
Apart from pockets of manufacturing industries especially in the big cities of Klang Valley, Penang and Johor Bahru, our services industry has not really taken off and should be developed even further.
Financial, tourism, healthcare and many others are some of the high potential services industry that ought to be the major driving force of the country's growth.
At the same time, the government's focus on agriculture and bio technology have to be injected with massive investments and infused with the latest technology for it to bring massive returns to the country.
We must focus in developing our human resources and at the same time reduce leakages and wastage in government procurement through being transparent, stifling corruption and adopting prudent financial management.
In times of crisis, we have to prioritise our requirements, needs and wants as a nation.
We demand that our leaders grow up and focus their energy and thoughts on improving the livelihood of the people.
Instead of being embroiled in ideological differences or harping on divisive racial and religious rhetoric; the economic wellbeing and welfare of the people should be of utmost importance.
But, then again, it is we who put them there in the first place.

- published in The Malaysian Insider : Dec 2, 2008

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