The Economy Is Recovering, But What About People?

All signs are pointing towards a speedy recovery. Contrary to what this writer initially predicted, the economy seems to be genuinely recovering. Key companies, including many government-linked corporations, are reporting profits once again. Across Asia, key economies led by China and India are experiencing growth in Q2, Japan is experiencing output growth, and the worst is over in Europe and the US – the epicentres of the financial crisis.

Our own economy is seeing a lower contraction of 3.9% in Q2 as opposed to a 6.2% contraction in Q1. The Asian Development Bank is predicting a 0.2% contraction this year followed by a 4.4% growth in 2010.

The amazing amount of stimulus being pumped in by governments across the globe is seeing its effects. Consumers are buying again. Cars are being sold. And in Malaysia, property speculation and ‘investment’ is hot again. All the pent-up demands are slowly being unleashed into our economy.

U, V, W or L

Economists and politicians alike have been talking about various ways the economic recovery will take. Depending who you talk to, the alphabets U, V, W or L are being brandished as the shape in which the recovery will take. If you are an optimist, then a V of straight up recovery it will be, but if you are pessimist, then a W shaped recovery followed by another dip may be what we’re looking at.

The good news is, regardless of the shape, a recovery now seems a certainty. The bad news is, employment is still at an all time high. Official figures asides, graduates are finding it tough to get jobs, large employers have not started re-hiring and there’s only so many Bumiputra graduates the government can absorb. These, plus the mass retrenchment last year, and VSS offered by many GLCs, mean there are still hundreds of thousands of Malaysians out there who are without jobs. What does an ‘economic recovery’ means to these people?

We were screaming for a major overhaul of the system. For more stringent measures to be put in place to ensure transparency and accountability in both private and public sectors. For our manpower to move up the value chain and stop thinking and acting like unskilled workers. For our economy to be further liberalised and the distinction between Bumiputra and non-Bumiputra in business to be narrowed. I have not heard any objections to any of these goals. Yet, a year into the financial crisis, we are not seeing much real change happening in this country.

Speculators are still being allowed to play up the prices of property. People are still expecting hand-outs from the government. Major trade bodies are still asking for protectionism to be kept in place. And promises of major reform in the government have so far netted more strings of alphabets than real changes.

Capitalism at its finest

There was a major debate among economists and politicians, including at the World Economic Forum and at the G20 Summit that there must be a new economic model to replace the current capitalism for us to prevent another global economic meltdown.

Yet, we are seeing the very essence of capitalism – that the rich gets richer and the poor gets poorer. Even the economic stimulus packages tend to accentuate this. Massive bailouts are benefiting major shareholders and corporate movers and shakers, lower rung employees are being sacrificed as ‘excess headcount’ while top management and business owners are getting away with little more than their cars being downgraded. Politically connected construction companies that were seeing double digit growth before the crisis are seeing double digit growth once again. While small manufacturers that had to scale down are still being turned away by banks. Now, where’s the new economic model these ‘world leaders’ were talking about?

Teach them to fish!

If we continue to ignore the plight of the lower income group, and fail to develop a sustainable strategy to improve their livelihood, we are going to see an ‘Indonesia ‘97’ styled revolt soon. The current practice of handouts and skills training need to be overhauled, as the problem is not physical poverty, but mental poverty.

People will remain poor because they are not being taught how to move out from their comfort zone. We’ve been offered the proverbial crutches for so long, we can no longer stand on our own. With the recession over, barriers down and globalisation resuming, we are doomed as a nation.

Well connected companies will continue to make money, some segments of the society will continue to prosper, but for majority of Malaysians, where’s the recovery?

As Nobel laureate Joseph Stiglitz said, “recovery will amount to nothing if the most important element of the economy: labour, is overlooked”. The economy may be recovering, but have we done enough for the people on the ground for all these to matter?

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This is my article for the Perspective section of SME Magazine September edition. If you haven't got your copy, head towards your nearest news stand now. :-)

HR Ministry Not Important?

I read this news on Star Online with considerable surprise. I hope The Star has gotten their information wrong, as they have a tendency to sometimes.

2. I cannot fathom how the Ministry of Human Resources is less important than the Works Ministry. Given the increasing emphasis on human capital development, and Prime Minister Najib’s assertion of a People First, Performance Now policy, I would assume that it is an honour to be placed in charge of human capital development.

3. Perhaps some of these close-minded politicians referred to the ‘contracts-awarding’ power of the Works Minister. If that’s the case, then they have no place in the Cabinet to begin with.

4. The importance of a Ministry is a sum of how the Minister and his officials project themselves and evolves with times. In the first cabinet of Tunku Abdul Rahman, Agriculture and Rural Development were right at the top of the ‘list of important’ ministries, along with the Finance Minister and Prime Minister.

5. I hope the Human Resources Minister will openly dismiss this as mere speculations and the works of some irresponsible elements within his party. To say the Ministry of Human Resources is ‘not prestigious’ reflect badly on how much he has achieved as a Minister so far.

Are We Doing Enough for the Economy?

US President Barrack Hussein Obama announced a US$ 1 trillion (RM 3,620,000,000,000) rescue plan to move the country out of its worst economic crisis in 70 years. That's almost 7% of the country's GDP.

We will not ask where the US government will find that kind of money, short of printing them. Even if the Congress approves the plan, economists are already arguing that the US$ 1 trillion is not enough. Some are proposing as much as US$ 20 trillion. Yes, you read that right.

Nearer to home, China announced a stimulus plan of about US$ 600 billion or about 8% of its GDP (not 16% as some mainstream newspapers erroneously reported).

In Malaysia, Finance Minister Dato' Sri Najib Tun Razak announced RM 7 billion in a stimulus package last December. He's scheduled to announce a second stimulus package of about RM 11 billion anytime now. I've said recently in this blog and on Radio 24, that RM 18 billion is a little over 1% of our GDP, and is clearly far from enough. What we are facing is not just a currency crisis like in the '97 - '98. What we have now is a global recession and severe credit crunch. And unlike the US and Europe (or even China), we are relatively resilient and distanced from the source of the crisis. Perhaps this has lulled the government into believing that the stimulus packages are sufficient. It is not.

Because our banking sector is still relatively liquid and our fundamentals are still strong, we need measures that differ from that of the US and Europe. The keyword is confidence building.

People has begun to panic, due to lack of clear communications from the government. People, like you and I, has been hearing bad, scary economic news through the internet, blogs, etc. As a result, businesses stop their plans to expand and freeze all capital expenditure. Consumers opt for cheaper items and delay buying houses and cars. Employees worry about their jobs and start searching for new ones. The end result is a complete breakdown of confidence. If this continue, the economy will grind to a halt, and true enough, we will be in a recession deeper than any. It's self fulfilling prophecy.

What we really need is a huge and bold (or shock and awe, yes - goodbye Bush) stimulus package to the tune of 30 - 50 billion ringgit. We need sustained government spending on a scale so large that people forget there’s a recession. We should bring the 10th Malaysian Plan projects forward. We cannot worry about a budget deficit or inflation from pumping more money into the markets. This is no time for fiscal prudence. We need bold, unconventional measures like we did during the Asian financial crisis. And the funds should be spread across as many industries as possible, not just the infrastructure / construction industry - hoping that it will trigger recovery in other sectors.

More importantly, there must be MERITOCRACY AND TRANSPARENCY in how these funds are disbursed. Without that, please, don't waste our money and time.

Live on Radio! Malaysia in Recession or Not?

I'm going live on Radio 24 on Monday, 2 February 2009 from 12 noon to 1 pm with host Anita Pandian.

Among the things I will be sharing are tips on overcoming the current tight economic situation and how SMEs in Malaysia (and the region) can take immediate actiohttp://www.blogger.com/img/blank.gifns to mitigate the risks to our businesses.

Will also discuss unemployment among youths as that seem to be a topic Radio 24 says readers want to hear. Hmmm. Sure.

Those in Klang Valley, tune in to 93.9, and those outside, visit www.radio24.com.my for streaming audio.