Sunday, January 25, 2009

Economic contraction: S'pore's solution, Malaysia's dissolution

Singapore govt taking the Ox by its horns, Malaysia's govt taking the Ox by its nose

The world is in the grip of a recession, with a stream of worsening news from the United States, Asia and Europe. The exceptions are only (probably) Malaysia, if the statement of opinions and confidence exuded by the Second Finance Minister and the Prime Minister are correct, and Zimbabwe, as the govt of Zimbab is printing notes in trillion denomination, and where necessary, in 100 trillion or zillion.

With all our major markets in decline, exports are falling sharply and domestic disposable incomes are shrinking fast.

The result: Singapore has had to revise its growth estimate for 2009 down to between minus 5 per cent and minus 2 per cent; and Malaysia has also revised its growth estimate from +5.5% to +1-2% (very positive projections).

To tackle the crisis, the Singapore Government had put together the $20.5 billion Resilience Package in this year's Budget. Its two special growth boosters are the $4.5 billion Jobs Credit Scheme to help subsidise companies' wage costs and the $5.8 billion Special Risk-Sharing Initiative to help ensure their access to financing. They will be funded by the reserves.

To tackle the crisis, the Malaysian Government has also put together two stimulus packages: The first stimulus package of RM7bil was announced in November 2008, and is still being rolled out in stages in the first quarter of this year; and a second stimulus package is in the pipeline, awaiting public suggestions

Our Malaysian Finance Minister and also Deputy Prime Minister, Dato' Seri Najib Tun Razak invite all Malaysians to participate in providing constructive and healthy, yet concise inputs as their personal contribution to move our nation forward. You can submit your comments on his blog: or email him at

In Singapore, PM Lee Hsien Loong said that the economic packages will help businesses to stay afloat so that they can continue to provide jobs for Singaporeans. (I am not sure whether this means those foreign labours in Singapore will be excluded; and unfortunately, Malaysia is the largest groupings of foreign labours in Singapore).

In Singapore, additional support is also given to households, with more for low- and middle-income families, he added. 'Hopefully, with some government help, Singaporeans can continue to provide for themselves and their families.”

Mr HL Lee said that while these measures will mitigate the downturn, they “will not instantly lift the economy from recession”.

“No government package can do that,” Lee said, noting that the recession is a global one. “We must expect to see exports contract, unemployment rise, and growth remain negative for more months, and perhaps for the whole year.”

So looking ahead, Singaporeans must “brace” themselves for a “challenging Year of the Ox”.

“But there is no need to be despondent,” he said. “Singapore has strengths which will let us outlast this recession. We have the resources, the programmes, and the tenacity to ride the storm.”

Said Mr Lee: “This is a major decision, which the Government has thought over very carefully.”

Singapore's reserves, he said, are a key asset for the country. “We have built them up patiently over the years so that in a critical situation, we have the wherewithal to mount a vigorous response. The present crisis is clearly such a moment.”

And when it is over, Singapore must go back to nurturing its reserves, he stressed.

"That Singapore can tap on them now – unlike most other countries – is due to its prudent habit of saving and investing its surpluses over many decades," he said.

“We must therefore maintain these critical instincts. When things return to normal, we must resume our habit of putting something aside in the reserves whenever we can. Then when we next face a serious crisis, which is bound to happen one day, we can again meet it with confidence.”

What about us, Malaysians and our resources? We have huge foreign reserves and also a huge current account deficit and off-balance sheet. We did not accured the necessary contingent surpluses over the decades, but an imprudent spending habits and an irrationally-exuberant habit of investing at the "right time" (through borrowings) and buying over companies dumped by Temasek and SIG who viewed seriously the current economic contraction by disposing some of their market-sensitive assets, while our GLCs treat the offers as opportunities to buy high and to be sold at its lows.

We are still maintaining these critical instincts. Even when the economic climate returns to normal, our habits will continue, to cast aside the need for strong national reserves and to borrow extensively to fund our spending habits by way of giving out lucrative contracts and conspicuous projects thoughtlessly creative and innovative.

Malaysia's reserves (or borrowings) are the key mobility, being dragged successfully by crony capitalism and wishful indulgence. We have built these habits up impatiently over the decades ,since the years of Mahathirism, such that in critical situations we have nowherewithal to mount and support any vigorous affirmative response; however, we can assign good causes - Act of God, Global impact, American's Sub-prime Mortgage problems and Banking Crisis - reasons beyond our fault or control (because we do not have such control nor systems capable to control).

Nonetheless, and nevertheless, we are still okay; semua okay; and I am okay too; so are some of you. Our economic problem can be attribute to Pakatan's Selangor MB Khalid Ibrahim's huge expenditure and donations to slaughter some cows during Hari Raya and getting PKNS to pay for it. It was such a big problem to Khir Toyo and Umno and Ezam's Gerak.

We are a blessed country and the people are blessed. We are okay, even when the signs and realities are contrary. So let's rejoice as it is festive season again. Gong Xi Fa Cai and a Happy New Year.

Adapted from the original story "Singapore govt taking the Ox by its horns, The Malaysian Insider



Anonymous said...

I believe it's the other way round-- the Ox has got Najib by his balls

mberenis said...

Thanks for sharing this blog. I really like the way you lay it out, the colors, and the content. Please check out Top 3 Recession Grants and let me know what you think!

Top 3 Recession Grants

Students, Citizens, Immigrants

Moo.... said...

According to our BRAND NEW finance minister, our economy is strong, no multinational companies has left the country(close shop and VSS not counted) and our foreign reserve can finance our import for a year(I have no clue what our foreign reserve has to do with the rakyat or recession unless the government decided to distrubute it to us).

What recession??????

No recession for all the Umnoputras or BeeNnites at all.

If you are not an Umnoputra or BeeNnites, it is not the government problem. What a BULLshit....

Anonymous said...

Happy New Year to you & Family- Mmudahlupa

RaZ said...

There are those who believe we are in a recession and there are those who don't. Its a free world, think what you like.

You guys sound like Microsoft who wants to cut 5,000 jobs because they missed their profit target by 11.5% (achieving only USD 4.17 billion last quarter.) So much for their values on employees and human resources.

But then again 5,000 jobs represent only 6% of their global workforce. And it is normal to see a 15-30% employee turnover rate annually in the IT industry. All Microsoft has to do is wait for normal attrition to trim down their workforce. (That is what we did in 2006 to reduce our workforce from 650 to 500.) Their announcement of job layoff may just be to pleased their investors so they won't be penalize on their share price.

What matter more is what how you think the economy will impact you in 2009. Will you be out of a job?

If you you still have a job this year, then you can look forward to a great consumption year. Products and services will see falling prices.

Those of you who work for GLCs or strong and stable companies who pride themselves as responsible employers will benefit. Yes, GLCs too. Though they have been bad boys and focus too much on profits lately, I doubt they get approvals for layoffs the next few years.

For those here who behave like Chinaman. Good Luck! What go around, comes around. After all, takda untung, takda kerja.

Growing economies is about good guesswork. If you are in business, here's some points to ponder:

1. How long do you think this recession/contraction will last? When's the bottom? If you can guess that one right, you will find yourself in a position to leap-frog your competitors.

2. Can you ride-out this rough times? And at what level of operating cost? If you do not loose money at your present operating cost, will you trim back expenses to be profitable?

3. How will you deal with your defaulting customers? Nurture and negotiate, drag them to court or throw them to the debt recovery companies.

4. With everyone cutting back on expenses and consolidating, do you follow suit or can you use the opportunity to get more market share?

Baah! Why am I wasting time sharing business strategies with you people? Most of you think the end of the world is near anyway. Maybe Mav can understand since he is in business for himself.

Enjoy the recession! With less work, you can use the extra time to plan or spend more quality time raising your family.

And don't think recession is bad for everyone. Accountants and lawyers benefit from additional business in receivership and bankruptcies. Alcoholic beverage companies see higher consumption as more and more people drown their sorrows. Companies producing low-end necessary products will see a boost in their revenue. I have seen people who made it rich in times of recession as much those who made it during the boom times. If you are smarter than the rest, you can find the opportunities recession brings about.

Otherwise, you just one of the crowd. Make marnee during the good times, and loose marnee in the downturn. (My grandmother can do that too.)

Maverick SM said...


You have profound knowledge and I agree with the points you pondered including the essence of recession.

However, there may be many who had lost their job due to retrenchment and many more suffers pay-cuts. Let's be empathetic.

Maverick SM said...


We are not yet in recession but the outlook isn't good. However, let's hope the stimulus packages will pump-prime the economy and mitigate the rise of unemployment.

Maverick SM said...


Happy New Year to you and your family.