Bleak future ahead for us and our future generations?

Reading this report by Bank of America Merril Lynch is a bit worrying.


Basically a short summary from the report would mean this: Malaysia’s relatively high population growth rate will see the country remain comparatively young over the next two decades but economic growth is not expected to keep pace with population expansion.



Of course most of us already know that current living costs here in Malaysia is already very high compared to most countries of similar GDP per capita. And this is despite us "enjoying" subsidies on many items. THings like Petrol, sugar, rice and etc are heavily subsidised by the government.


Looking at the simple statement that our salaries just does not adequately allow us to live a normal lifestyle. While the costs of food, housing and etc have risen significantly over the past 20 years, our salaries have not grown at the same pace. As a result, fresh grads today in actual fact, make less money (in real dollar terms) than their parents did.



So its no surprise to me that in 20 years time, the situation will be no different from now unless drastic action is taken by the government. In the end only ouir kids and grand children will suffer as we earn less and less, and possibly, be even considered poor by most other countries.

For too long now, we have marketed our country as a low cost country to do business. Its been the case for 25-30 years ago. That was when we really needed foreign investments in our country to boost our economy. Fast forward 20 years later, we are already becoming a strong economy desptie the crippling "Affirmative Action" policies by the government.



However, it has slowed our growth a lot more compared to other countries that didnt have these policies. A good example would be South Korea. They started industrialising at the same time of us but look at how big and strong their economy and companies are today. And this is despite them going through several huge recessions (esp in 1997) and mismanagement of the economy by the goverment.



They key for us to succeed and grow even faster is to remove all these crippling policies like quotas that have no specific benefit to the enitre nation (only to a certain ethnic group). Policies like these are no different from the Apartheid in South Africa except that in our situation, its making us disabled and uncompetitive compared to every1 else.




The sooner we lift all these restrictions, our local companies will be on the same level playing field as other international competitors. And I have no doubt that we have the entrepreneurial talent to compete against these big boys. Maybe one day we will see the likes of Genting, Maxis and et al becoming major household names like Samsung and Hyundai.



That way, our economy and our income can finally grow and catch up with our pace of growth. Just ask anyone, in most companies, the average rate of increment given is just about the same level as our inflation, if not lower. Our fixed deposit rates in banks are definitely lower than inflation rate. If this goes on, there can only be 1 way we are going. DOWN!








Boodyboy, out!!!

Populists Economic Policies: Petrol Price

Sometime in the middle of last week, the govt decided to reduce petrol prices by 10 cents, stating that the world oil price has decreased. And since they are using a fixed 30sen subsidy system to detemine fuel prices, the amount the govt subsidises per litre is fixed. But what is not fixed is the total amount that the government must compensate to petrol producers. This is amount is decided by the number of litres of petrol that has been purchased by consumers like us.

Now here is where I'd like to give my 5 cents worth (used to be 2 cents, but due to rising inflation, it has now increased ;-p). And why do I think that my 5 cents is important? Because I majored in Economics, thats why!! Hehehe, well, actually this topic has been bugging me ever since I realised how much the govt spends on petrol susidies in our country.

Majority of the population in Malaysia finds that it is important that our govt not only continues, but to increase its subsisdies so we can enjoy lower prices at the pump.

My suggestion is definitely unpopular: Remove Subsidies totally and let us pay the world petrol price!!!!

Most of you would kill me if I was the Prime Minister but hear me out. Here is my reasoning:

First of all, before I totally reduce subsidies, I will lower import duty and excise duty for all vehicles. In 1 year, I will lower it to only a levy of RM5,000 per vehicle or 5% of the vehicle price (those under 2,000cc), whichever is higher. For cars that use alternative fuels or green vehicles, road tax will be waived for 5 years to encourage use of environmentally friendly vehicles.

And during that time i will slowly increase the price of petrol over 1 or 2 years, giving people time to adjust. The schedule as to how much per increase and when it will increase shall be released to the public to ensure there are no "midnight petrol kiosk madness" all over the country.

And what is my aim of doing that? Lets say the real world petrol price which we will pay in the future is RM 3.50 per litre (assuming it stays fixed for some time), we will pay RM1 per litlre more than we are currently doing. But if Taxes of cars were to be reduced, so for example, a fuel efficient Honda City will now cost RM60,000 to 65,000 including the new tax scale i mentioned. A Honda City now would cost at least RM 85,000.

With the new pricing structure, a person stands to save at least RM20,000 when he buys a new vehicle. That RM20,000 is enough to pay for another 20,000 litres of petrol (based on the extra amount that we will pay if subsidies were to be reduced). SO in this case, we will receive a "subsidy" on our petrol and still have lower car price. Lower car price means shorter car loan tenure or lower interests rates for us. Which will in turn, lead to greater savings.

And even better, lower prices will allow us to switch from gas guzzling cars to more fuel efficient ones, which in turn, will reduce pollution as these vehicles will emit less greenhouse gases.

Oh wait, I have not mentioned that all our tax money will not be spent on subsidising our own petrol. Also, if the subsidies were to increase, people will tend to waste the resource more than they will appreciate it. Ppl will overtravel unnecessarily, which will lead to higher petrol consumption, which will then lead to higher subsidies to be paid by the govt. Government savings from subsidies can then be used to develop and improve the country even further. The economy will defitely be boosted if money is spent on development, not on subsidies. Subsidies does not help the economy expand in anyway.

SO what i'm trying to say is that by making both petrol price and car prices reflect the world prices, the economy and the environment stands to gain. Of course the losers will be people who just bought vehicles or the poorer people. But the poorer people will stand to gain, once our local car manufacturers and low end vehicles are sold at sub-RM20,000 price tag, which I'm sure is possible. Plus a higher petrol price will then send a alarm to those people who cant afford to drive to wake up. Living beyond your means will only get them into trouble, but with a strong wake up call, they may still be able to salvage their finances.

Yes i know the increase in petrol price will lead to a general increase of price everywhere. But even without petrol price increase, the cost of goods will still increase anyway, so why let us live in a bubble-wrapped world. We have to start paying world prices for goods if we are to be globally competitive anyway.

And yes, the money can be used to help to poor Malaysians living below a monthly income of RM2,000 a month in cities and RM1,500 in smaller towns. Public transportation will definitely be improved.

In the end, what i have said is pretty much my opinion on how our economy should work, but then again, i'm entitled to say it and i dont think reducing petrol prices is the way to go. And for our govt and other Opposition memebers who play with the petrol price issue, i urge them to stop it as it is of no benefit to the citizens. Educate them, tell them why being at world price is important. It maybe painful at first, but this is only short term, in the long run, everything will normalize.

Well, anyway, i just want to reduce wastage and save the environment at the same time. And i dont like the way the politicians try to sway the people by playing with petrol price. Its very damaging to the economy...

I wonder if there are any of you that concurs with me?



Boodyboy, out!!!