MESTI BACA / MUST READ : TEH TARIK ECONOMICS 2024

 This is a gist of Prof Murray Hunter's latest article.

• Malaysia must be very cautious 
• economy directly exposed to global events.
• number of warning signs for Malaysia
• GDP grew 4.2% in Q1 2024
• major contributors 7.3% rise in public sector (spending taxpayer's money)
• Private consumption growth 4.7% consistent since 2Q 2023
• dramatic drop in imports, since Q1 2023 confirms this
• 8% increase in imports in Q1 2024
• manufacturing slump, almost no growth last 9 months
• exports declining, until Q1 2024.
• FDI RM 926.3b over Q4 2023 
• capital outflow RM 662.8b Q4 2023
• government expenditure driving GDP growth

(OSTB : This is NOT good news. How can you use tax collection to generate an entire economic growth)

• any increase in oil price will further increase transport, food prices 
• Ukraine war, Europe on brink of recession, US slowing down
• Malaysia’s trade and investment prospects look grim
• foreign investment likely subdued 
• worst-case scenario, E_ RL and F- - -st City in danger
• Public debt RM 1.2 trillion. Public debt grew 8.6% 2023
• current government keeps running budget deficits. 
• RM 49.8b or 12.6% of 2024 budget just to pay interest 
• healthcare and education in crisis mode
• Reducing poverty also difficult, with budgetary constraints.  
• effects of weak Ringgit on food inflation
• BNM saying value of Ringgit doesn’t represent strong fundamentals
• If this is not the case, then a grave miscalculation is possible.

Monetary Policy

BNM must seriously look at an OPR rate cut to alleviate financial stress on borrowers This will have a direct bearing on the financial wellbeing of many households.

(OSTB : I dont know why BNM is being so stubborn and stupid over the OPR. What economic text book tells you to INCREASE INTEREST RATES when the economy is obviously facing lower growth, lower exports, weak demand and weak everything. Please cut the OPR back to where it was. Hello BNM please wake up. Tell those WEF types to take a hike).

Identity-economics

• large Bumi companies, corporations little or no trickle down effect 
• no reason similar pro-Bumi policies any different especially if recession
• Projects with financial leakages, only increase public debt
• Bumi centric policies inefficient in providing real benefits for Bumis
• national rate of poverty increased after Covid 

Productivity

• economy must be de-regulated to increase efficiency and productivity.  
• Monopolies must be broken up to increase competition and lower prices. 
• More competition will generate efficiency and force firms to improve productivity. 
• The key to increasing productivity is increasing value of what is produced

• Public sector spending
• Public sector costs 2024 budget RM 95.6b (24.3%)  
  
• 13% increase in civil service salaries add RM10b to operating costs
• freeze on new Civil Service employees 
• offer early retirement to trim down numbers
• Obsolete departments and agencies should be closed. 
• Duplication in activities must be stopped

• Food security
• Malaysia’s food imports were RM 71.6b in 2023

• Corruption
• MACC must investigate current corruption in civil service today 
• a much greater deterrent in preventing future corruption
• recession may force govt to become reform minded (Err..I dont think so)
  

 

My Comments :

Ok here is some simple TEH TARIK economics. Please refer the picture of that glass of TEH TARIK.

The 2024 Budget was RM394 Billion. Government tax collection in 2023 (which will be used for 2024) was RM183 Billion.  

 

More than one website says that Malaysia's GDP (Nominal) for 2024 is about RM2.0 TRILLION!! Thats a huge jump from about RM1.5 TRILLION from just a year earlier. Is it because the Ringgit depreciated ?

Anyway when you discuss economics you always need TWO HANDS. One the one hand it is like this, while on the other hand it is like that.

The implied taxation rate on the Malaysian economy is therefore TAX COLLECTION / GDP or RM183B / RM2000B = just over 9%. 

In this picture here, if the full glass of TEH TARIK represents the Malaysian GDP of about RM2.0 Trillion (in 2024) then those taxes collected are just the froth or buih-buih that are floating on the top. It is less than 10%.

Tax collection was RM183 Billion. Budget 2024 is RM394 Billion. So the shortfall RM211 Billion is covered from other revenues and debt - it is a hugely deficit budget.

So when Murray Hunter points out that  "government expenditure is driving GDP growth" it means our la-la-land boys hope to use that RM183B tax revenue (plus debt) to be the engine of growth in an RM2.0 TRILLION economy.

This includes paying the Civil Service salaries, funding the GLCs (including bailing them out) and funding almost the entire Bumiputera economy (for example that RM10b announced during the recent Kongres Ekonomi Bumiputera).

It is like taking back the pocket money you give to your school going children and using that pocket money to pay for your housing loan, your car loan, buying groceries etc. 

It will not work. 

You cannot collect the 9% of froth or buih-buih that is floating at the top of the glass of TEH TARIK and then use some magic teaspoon to 'bancuh kuat-kuat' and regenerate a full glass of TEH TARIK again.  It does not work that way.

Its the other way around. The only way for the government to increase its revenues, to fund the Bumiputera agenda, to pay the Civil Service salaries etc is to rapidly grow the size of that glass of TEH TARIK.

The bigger the size of that glass of TEH TARIK, then the more revenue that will rise to the top as the buih-buih. Only then can the government collect more revenue. 

Hence we must :

• economy must be de-regulated to increase efficiency and productivity
• Monopolies must be broken up to increase competition and lower prices
• More competition will generate efficiency and force firms to improve productivity
• The key to increasing productivity is increasing value of what is produced
  

There is no other way. There is no 'Islamic way', there is no such thing as 'mengikut acuan kita sendiri' bla bla. That is just being childish.

The economy is facing difficulties. The country is facing difficulties. The society is undergoing all sorts of stresses. 

All because the la-la-land boys do not understand that the government is a cost-center whereas the economy is a profit center. They think the opposite ie the government can become a profit center from spending taxes collected from the economy.   It does not work that way.

Look at that picture again. Just let the economy go.  Free up the economy from all the shackles, the cronyism, the monopoly licenses, the oligopolies, the government licensed cartels and such. Government get out of the way.

• If you do not then there will be trouble in the land. 
• It is happening already.
  
• Listen to Syed Akbar Ali.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.