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Wednesday, February 28, 2018

Jomo Unravels Kleptocrats Bullshit Economic Figures

The following is an interview in Malaysiakini with the economist  Jomo Kwame Sundram  that appeared in Oct 2017.  

It is not just about the Malaysian economy but how the gomen is obviously bullshitting the Malaysian public with fake news about how great is the economy. 

Jomo takes apart some of the gomen's bullshit with simple, factual rebuttals. My few comments in blue.

Before we begin, I just want to make one point.  In this interview Jomo refers some official report which says that there are 6.7 MILLION foreign workers in Malaysia.  About one in FIVE people in Malaysia is a foreigner. 

This means effectively there are 32 million Malaysians + 6.7 million foreigners = 38.7 million human beings living, producing and consuming economic products and services in Malaysia.

Not too long ago, the Ministers and the gomen were saying there were ONLY about 2 - 3 million foreign workers in the country.

Here is an update. Recently I heard from a friend who is closely linked to people in the gomen that there are now 11.2 MILLION foreigners in the country!   I did not say foreign workers but foreigners.  This means that now in Malaysia, one in FOUR people is a foreigner.

If this is true, then there are 32 million Malaysians + 11.2 million foreigners =  43.2 million human beings living, producing and consuming economic products and services in Malaysia.

Please keep this in mind. 
Not only does this distort the economic figures but this is also why the Malays are going to become dirt poor.   
Melayu akan jadi lagi miskin. Do read on.



interview with economist Jomo Kwame Sundaram conducted in August 2018
 
Developed country status

Question: Malaysia achieving developed country status 


Jomo: developed country involves more than high-income status. 


  • even ‘high-income’ country we are not there
  • unless we resort to statistical manipulation
  • for example: using 2013 exchange rates
  • or ignoring 1/3 of labour force who are ‘undocumented’ foreign workers

For example, ringgit declined RM3.2 / US$ in 2014 to RM4.50 
recover to current RM4.20 

we continue to use old exchange rate 
pretend we are almost there
we are cheating ourselves

we grossly underestimate number of foreign workers 

denominator for calculating per capita income goes down
by excluding low paid foreign workers, income inequality declining 
their inclusion may give different picture
 
"high-income" if we pretend only 1-2 million foreign workers
even minister admitted last year to 6.7 million foreign workers !

7 million foreign workers is > 1/3  of country’s total labour force


OSTB : What this means is that our economic output (say total GDP) is the product of ALL workers in the country. Including those 6.7 million foreign workers.  

Malaysia has a 14 million workforce. These are Malaysians. If you add those 6.7 million foreign workers, then the workforce becomes about 21 million workers. So you must divide total economic output by these 21 million workers to get average output per worker, GDP per worker etc. This is closer to the truth.  (relak brader, I am speaking roughly only ok, cos GDP is per total population, not per total workforce).

But if you ignore the 6.7 million foreign workers and just divide our economic output by 14 million MALAYISIAN workers, then of course "dari Perlis sampailah ke Sabah kita sudah makan roti kaya".  The gomen is bullshitting us with their numbers. 

What if the foreign workers are actually 11.2 MILLION ?? Not 6.7 MILLION ?? 
   

What do you think of Najib's New Economic Model?

Jomo:    NEM made many promises and raised expectations

hollow in terms of implementation 
NEM dropped after it was announced 
has never been policy expected to be

Premature deindustrialisation

Jomo: ‘premature deindustrialisation’ cited as proof M'sia is developed 
services currently account for most job retrenchments

Malaysia deindustrialising far too early
before developing industrial capacities beyond refining palm oil 
We abandoned emphasis on industrialisation
have not progressed to sophisticated, higher value-added

Japan, South Korea, China nurture industrialists to become international  

enabled countries to grow, industrialise, transform themselves rapidly

suffering illusions if we think we can leapfrog industrial stage straight to services

Singapore continues progress up value chain in industrial technology

need to stop blindly following policies by international institutions

GST  long promoted by IMF 

Middle-income trap
M'sia stuck in middle-income trap 

Jomo: ‘middle-income trap’ due to uncritically following World Bank, IMF
‘middle-income trap’ of our own making
e.g. giving up on industrialisation

current discourse emphasise financial services
why investors want to come here rather than Singapore? 
If they want lower costs, there are other locations.
tax breaks, loopholes, tax haven - why come here rather than Singapore
how much has economy benefited from Labuan Offshore Financial Centre? 
Do we need to keep making same errors?

heavily dependent on FDI for access to markets, technology, expertise
foreign investors growing share in publicly listed companies
foreign ownership never been as high since 1970s. 


Macroeconomic management
Bruce Gale praised macroeconomic management.

Jomo: Gale needs to ‘cari makan’. 
He is not serious macroeconomist 
he appears to have selective amnesia
giving credit ONLY to prime minister and late father

 
Malaysians worse off?
Malaysians become worse off in recent years?

Jomo: Moderate economic growth since 1997-1998 financial crisis

2012 - 2014 low-income earners better off, thanks to minimum wage
Since then commodity prices fallen
unemployment rising (especially youth) 
GST introduced 
consumer confidence lower than 1997-1998 or 2008-2009 financial crises.

consumer sentiment negative according to CLSA and MIER 

now lowest in Southeast Asia.

Food prices rising, transport increasing 

lower commodity prices reduced farm incomes

unemployment up from 2.9% in 2014 to 3.5% in 2016

high youth unemployment among tertiary educated.

Retrenchments worst for services

wage growth slowed after minimum wage
real incomes hit by higher prices and taxes

Wage depression
Malaysian wages artificially lowered

  • Jomo: official numbers misleading 
  • we do not account for massive foreign labour
  • especially undocumented immigrant workers

They depress wages for low-income M'sian workers
labour’s share of national income gone down 

low wages retard technological change (which raise productivity).

low wage policy stands in the way of labour-saving innovation
such as mechanical harvesting, so necessary for development
We need strategy that is far less reliant on cheap foreign labour

Consequently, wages and living conditions too low, especially agriculture
even smallholder agriculture neglected by officialdom for some time

  • Fighting jihad against middlemen 
  • thinly disguised, misinformed, misguided stunt 
  • to score ‘ethno-populist’ points
  • irrelevant to addressing contemporary challenges 

OSTB : This refers to the ketuanan paranoia about 'Chinese middlemen' which was cleverly exploited by that Dumb Mamak. Soon the GLCs started parroting this 'jihad against middlemen'.  It was  a camouflaged way of saying "anti Chinese".

So instead of abolishing Kuok's sugar monopoly they gave it to another mamak.
Now the price of sugar is so high. 
Instead of abolishing the rice monopoly, they gave it to the mamak again. 
Now the price of rice is so high.

Then they went out to buy 'Chinese businesses' to put the Chinese out of business.
They all went bust. 
These are really, really stupid people who do not know anything about business.  

Shifting tax burden
recent tax reforms affected M'sian households?

  • Jomo: GST increased tax from RM42b in 2014 to RM67b in 2016
  • GST more than doubled indirect tax from RM17b to RM39b
  • households paid taxes of RM5,600 each, more than ever before
  • government subsidies declined
  • falling from RM43b in 2013 to RM25b in 2016
  • food subsidies removed between 2013 and 2016

Inflation numbers
public doubt official inflation numbers

Jomo: many reasons why public doubts official inflation numbers

Ringgit drop RM3.2/USD to RM4.5/USD 
25% decline in Ringgit  surely have inflationary consequences 
GST since April 2015 directly affect half of household spending 
up to 20% more indirectly affected
this affected cost of living
subsidies for sugar, rice, flour, cooking oil removed since 2013
raising prices by 14% to 31%
transport – fuel, toll – prices have risen 

Hence people are skeptical (with the gomen's super low inflation levels).


(OSTB - I heard from my favorite economist - who used to work for the gomen - that the gomen is bullshitting the people about inflation by including over 500 items in the Basket of Goods used to calculate the CPI or Consumer Price Index. 

FIVE HUNDRED ITEMS ! ! 

And here is the catch - this list of 500 items may include non household goods.

Huh ?? So maybe things like Caterpillar tractors, Scania container trucks, Scorpene submarines, Sukhoi jet fighters that are NOT part of an average household's Basket of Goods are also included? So the gomen is bullshitting the CPI.  

Of course the gomen can explain this by telling us exactly how many items are included in the Basket of Goods that is used to calculate the household CONSUMER Price Index? Can the gomen be honest about this? Problem solved.

While they are at it, please tell us what are the passing marks for the Additional Mathematics subject in the SPM. Is it 9 marks? 12 marks? 20 marks? Apalah nak rahsia sangat?)

Transformasi Nasional 2050 (TN50)

Jomo: TN50 unfortunately political support for regime before elections

where country should go and how to get there
beyond feel-good, clichés

country in political crisis that paralysed policymaking
Malaysia desperately needs legitimate and consultative leadership 
to implement bold measures to take country forward

Many people know what ails the economy
we do not have open discussion to tackle challenges 
free, independent media will improve legitimacy of public policy
 
Read more at https://m.malaysiakini.com/news/398558#oafLubzrL3TJ8oL7.99

My comments :   At our house once a week, we hire those housecleaning maids who are paid by the hour. Two girls will come and they will do the usual house cleaning etc for  a few hours.  Usually it is Indon girls. They are super fast. They learn fast.  

Then suddenly the maid agency sent two local university students.  Final year undergrads trying to earn extra income. Possibly ponteng classes as well. We tried them a couple of times and then we fired them.  

Two of them took ONE HOUR just to sweep the car porch.  Then when one girl cleaned, the other girl would just stand and stare at her friend - doing nothing. So we fired them and asked the agency to send the Indon girls instead.

Yesterday we were in Port Dickson. We stopped at a kopitiam where the Nepali boys were working. No locals. The Nepalis spoke English, are polite and most importantly they can communicate.  None of the "tak tahu" bullshit. 

Latest I heard that local banks have at last hired Filipinos for their local call centres. This is why when you call a local bank, and press English, Gloria Macapagal Arroyo answers the phone. 

These foreigners are taking away many jobs from our locals, especially that most vital entry level jobs which pave the way for young people to move up the career ladder.
 
But you cannot blame employers. The local boys and girls do not know basic common sense. Even university graduates.   
So now we  have 6.7 million undocumented foreign workers in the country. 
One view says the number is higher, maybe 11.2 million foreign workers.

And then the gomen ignores these 6.7 million or 11.2 million foreign workers when they calculate the average income, the high income, the low income, the per capita GDPs etc.

Just keep bullshitting themselves.

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