The global financial crisis and Malaysia
The Bush Administration has announced that a rescue package of almost US$700 billion is required to save some of the prominent banks from following the footsteps of Lehman Brothers two weeks ago. JP Morgan, Merril Lynch and a host of investment banks in New York and other cities are already crying foul.
Some of us already know that the world’s economy is worth US$60.2 trillion and the American economy about US$12.5 trillion. Just imagine about 6.5 percent of the total American economy is now being used to save the ailing investment banks including one of the world’s largest insurers, AIG, which itself needs about US$85 billion to be resuscitated from receivership.
Money has four uses: used as a standard, used as a saving, used as an exchange for buying and selling and used for speculation. Investment is speculation. Almost US$100 billion is traded everyday in the European money market. Some currencies go up and some currencies go down. Some currencies are not even accepted for trading. One of the currencies that is not well traded is our Malaysian ringgit.
Based on an economic strength of about US$124 billion (GNP) and total banking capitalisation of about RM60 million, we are not in the position to even worry about how President Bush would rescue these investment banks. Malaysia is financially a small and insignificant nation depending very much on the current trading of petrol and tertiary sector incomes. With a population of about 25 million and an average per capita income of RM4,200, we are now walking on a tight rope.
Malaysians have to be ready for the following:
1. Investors will be pulling back to find more stable markets. This will mean loss of jobs and loss of income for thousands of people in tertiary sectors. People in the financial, banking and insurance sectors will be the worst hit. The insurance industry in Malaysia holds slightly more than 7 percent of the GNP.
2. Our banking industry will tighten its lending and if this happens, business will cool down and will drastically affect the retail industry. The Malaysian retail industry with more than 2 million provisions shops and nearly a 1,000 supermarkets will be hardly hit. The retail industry is worth around RM70 billion and this figure may be drastically reduced to RM40 billion or even less, with reduced prices and lesser purchases. This may be a very difficult problem for us, as a nation to overcome.
3. Our secondary sector hardly exists and most of the production is based on heavy industries such as automobiles and steel and shipyards. However, the vibrant nature of our small and medium industries could give us sustained strength to overcome some of the problems faced by the ailing steel industries and automobile companies. The government must gear up this sector and reduce the role of foreign workers in this sector to generate more opportunities for Malaysian job seekers.
4. The government must now seek a tough stand on foreign migrant workers and also on multiple entry visas and control those who do business away from Malaysia while staying in Malaysia.
We need a very bold, tough and creative finance minister who can speak for all: the investors, the consumers and the workers. The government must now come up with bold contingency plans and reduce the role played by the non-productive government-linked companies. If need be, some could even be shut down.
Structural changes in the economy must be made and rates on utilities must be controlled. Consumer laws should be enforced very stringently on all sectors of the economy to ensure moderation of production and curbing of inefficient use of resources.
The government must now seriously enforce price checks on all items from a plate of fried rice to a unit of saloon car. Either we survive or we are doomed as a nation. The days are getting worse. Malaysians must get together.
BN and Pakatan Rakyat must find a way to work together.
(Extracted from the writtings of Richard Kamalanathan)
Some of us already know that the world’s economy is worth US$60.2 trillion and the American economy about US$12.5 trillion. Just imagine about 6.5 percent of the total American economy is now being used to save the ailing investment banks including one of the world’s largest insurers, AIG, which itself needs about US$85 billion to be resuscitated from receivership.
Money has four uses: used as a standard, used as a saving, used as an exchange for buying and selling and used for speculation. Investment is speculation. Almost US$100 billion is traded everyday in the European money market. Some currencies go up and some currencies go down. Some currencies are not even accepted for trading. One of the currencies that is not well traded is our Malaysian ringgit.
Based on an economic strength of about US$124 billion (GNP) and total banking capitalisation of about RM60 million, we are not in the position to even worry about how President Bush would rescue these investment banks. Malaysia is financially a small and insignificant nation depending very much on the current trading of petrol and tertiary sector incomes. With a population of about 25 million and an average per capita income of RM4,200, we are now walking on a tight rope.
Malaysians have to be ready for the following:
1. Investors will be pulling back to find more stable markets. This will mean loss of jobs and loss of income for thousands of people in tertiary sectors. People in the financial, banking and insurance sectors will be the worst hit. The insurance industry in Malaysia holds slightly more than 7 percent of the GNP.
2. Our banking industry will tighten its lending and if this happens, business will cool down and will drastically affect the retail industry. The Malaysian retail industry with more than 2 million provisions shops and nearly a 1,000 supermarkets will be hardly hit. The retail industry is worth around RM70 billion and this figure may be drastically reduced to RM40 billion or even less, with reduced prices and lesser purchases. This may be a very difficult problem for us, as a nation to overcome.
3. Our secondary sector hardly exists and most of the production is based on heavy industries such as automobiles and steel and shipyards. However, the vibrant nature of our small and medium industries could give us sustained strength to overcome some of the problems faced by the ailing steel industries and automobile companies. The government must gear up this sector and reduce the role of foreign workers in this sector to generate more opportunities for Malaysian job seekers.
4. The government must now seek a tough stand on foreign migrant workers and also on multiple entry visas and control those who do business away from Malaysia while staying in Malaysia.
We need a very bold, tough and creative finance minister who can speak for all: the investors, the consumers and the workers. The government must now come up with bold contingency plans and reduce the role played by the non-productive government-linked companies. If need be, some could even be shut down.
Structural changes in the economy must be made and rates on utilities must be controlled. Consumer laws should be enforced very stringently on all sectors of the economy to ensure moderation of production and curbing of inefficient use of resources.
The government must now seriously enforce price checks on all items from a plate of fried rice to a unit of saloon car. Either we survive or we are doomed as a nation. The days are getting worse. Malaysians must get together.
BN and Pakatan Rakyat must find a way to work together.
(Extracted from the writtings of Richard Kamalanathan)
