ECONOMIC RECOVERY PLAN
(Applicable to ACCA Professional Level :P5 & P3 )
Dear Prime Minister,
I have read the progress of Malaysia with keen interests. After much research, I humbly propose the following as route to economic and very relatedly political recovery:
1. Asian economies are too export dependent for its economic growth. WIth USA & UK recessions, Taiwan had 43% fall in export in Dec 2008, Singapore -38%, China -18%, Korea over -50%, Malaysia also not spared with contraction of over -15%.
2. After a decade of overspending, US&UK consumers will need to rebuild savings mean that demand remain subdued. Asian economies cannot treat this as a cyclical recession anymore but a real permanent fall in demand.
3. Govt commendably have had stimulus package. The 'multiplier' effect on traditonal sector like construction is broad as it affects over 160 industries. Still, this is insufficient as consumers with low confidence likely to hold on spending.
4. Encourage consumers spending as economic recovery and growth by liberalising services sector by:
a)reduce subsidies on manufacturing, petrol, food ceiling prices as it tends to have over-investment in it at expense of services
b)liberalise banks sector to foreign competition as it will encourage lending and innovative financial products.E.g. Break oligopolies hold on Credit card lending at 18% interest pa that subdue spending.
c)homes and automobiles account for 65% of take home income. Open up automobile industry encourage more local contents by doing away with local tax duties. Govt pays lip service to this but needs to benchmark car affordability of 1 car equivalent to 9 month average income ie. 5000/month (combined family income)X 9 = 45,000. Pls note this price is current selling prices ex-duty based in Labuan,Langkawi. Toyota through Perodua has a strangle hold market share of more than 50%. Protected industry drives out other genuine investment. UMW todate ‘only’ spent RM4billion on car assembly plant for a total market demand of excess TIV 0.5million worth RM1.5 billion ringgit per year.
d) if essential goods, car and home, account for have a drop from 65% to 50% of total take home pay, this puts RM750 per month additional disposable income. Extrapolate that to average a million household equals to RM0.75 billion spending income per month. Note this is without government stimulus yet but the savings for government through subsidies removal.
e) consumers savings among highest in the world of average 32% of disposable income. Young savers plan for retirement due to poor social net like pension fund, health care, costly education. Invest and improve services sector ‘aggressively’. Set up independent committees to monitor progress, KPI, benchmark. Consumers will be less anxious of future if assured of proper health and retirement plans by government, improving confidence and spending.
f) hire and train doctors, professionals, head hunt overseas professors/researchers to improve health and education ‘soft’ –skill quality. Import doctors from India, professors from Singapore, France, Harvard Medical of USA. Offer KPI as controlling parenting style whilst giving autonomy to researched based universities. Resist temptation to construct more buildings. Competitive advantage is Human Resource talents, not cement blocks.
'
Conclusion
Malaysia economy enjoyed diversified income of manufacturing and agriculture sectors that account for more than 70% of GDP. This will not work now as both dependent on exports earnings. Domestic demand is the key. Rapid services liberalisation is the key for recovery and economic growth for next 3 years.
Best wishes,
Marcus Ong (CA, MSc)
ACCA lecturer now in INTI College of Subang Branch
Useful Links:
Prime Minister YAB Datuk Seri Najib, 2009, Personal Blog, http://www.1malaysia.com.my/, Visited on 3rd February.
(Applicable to ACCA Professional Level :P5 & P3 )
Dear Prime Minister,
I have read the progress of Malaysia with keen interests. After much research, I humbly propose the following as route to economic and very relatedly political recovery:
1. Asian economies are too export dependent for its economic growth. WIth USA & UK recessions, Taiwan had 43% fall in export in Dec 2008, Singapore -38%, China -18%, Korea over -50%, Malaysia also not spared with contraction of over -15%.
2. After a decade of overspending, US&UK consumers will need to rebuild savings mean that demand remain subdued. Asian economies cannot treat this as a cyclical recession anymore but a real permanent fall in demand.
3. Govt commendably have had stimulus package. The 'multiplier' effect on traditonal sector like construction is broad as it affects over 160 industries. Still, this is insufficient as consumers with low confidence likely to hold on spending.
4. Encourage consumers spending as economic recovery and growth by liberalising services sector by:
a)reduce subsidies on manufacturing, petrol, food ceiling prices as it tends to have over-investment in it at expense of services
b)liberalise banks sector to foreign competition as it will encourage lending and innovative financial products.E.g. Break oligopolies hold on Credit card lending at 18% interest pa that subdue spending.
c)homes and automobiles account for 65% of take home income. Open up automobile industry encourage more local contents by doing away with local tax duties. Govt pays lip service to this but needs to benchmark car affordability of 1 car equivalent to 9 month average income ie. 5000/month (combined family income)X 9 = 45,000. Pls note this price is current selling prices ex-duty based in Labuan,Langkawi. Toyota through Perodua has a strangle hold market share of more than 50%. Protected industry drives out other genuine investment. UMW todate ‘only’ spent RM4billion on car assembly plant for a total market demand of excess TIV 0.5million worth RM1.5 billion ringgit per year.
d) if essential goods, car and home, account for have a drop from 65% to 50% of total take home pay, this puts RM750 per month additional disposable income. Extrapolate that to average a million household equals to RM0.75 billion spending income per month. Note this is without government stimulus yet but the savings for government through subsidies removal.
e) consumers savings among highest in the world of average 32% of disposable income. Young savers plan for retirement due to poor social net like pension fund, health care, costly education. Invest and improve services sector ‘aggressively’. Set up independent committees to monitor progress, KPI, benchmark. Consumers will be less anxious of future if assured of proper health and retirement plans by government, improving confidence and spending.
f) hire and train doctors, professionals, head hunt overseas professors/researchers to improve health and education ‘soft’ –skill quality. Import doctors from India, professors from Singapore, France, Harvard Medical of USA. Offer KPI as controlling parenting style whilst giving autonomy to researched based universities. Resist temptation to construct more buildings. Competitive advantage is Human Resource talents, not cement blocks.
'
Conclusion
Malaysia economy enjoyed diversified income of manufacturing and agriculture sectors that account for more than 70% of GDP. This will not work now as both dependent on exports earnings. Domestic demand is the key. Rapid services liberalisation is the key for recovery and economic growth for next 3 years.
Best wishes,
Marcus Ong (CA, MSc)
ACCA lecturer now in INTI College of Subang Branch
Useful Links:
Prime Minister YAB Datuk Seri Najib, 2009, Personal Blog, http://www.1malaysia.com.my/, Visited on 3rd February.
5 comments:
Knowledge is a sustainable competitive advantage. I have read so much about the economic stimulus plan, which in my view unsustainable. Hence, my letter to the Prime Minister.
If you candidates of strong P5 and P3 (ACCA) knowledge you will be able to relate and comment on the above.
I welcome your esteemed opinions!
Warm wishes,
Marcus
Nationalising the tol operations has negatives:
- spooks investors' confidnece who contracted with understanding of cash payback over 30 yrs. Its business here.
- precisely what govt should not do intervening the market operation
- history shown that business is better left to business. govt tends to be inefficient over long run
- not provide crutches of subsidies that distorts resource allocation. (nobody is stopping you from going on a motorcycle. if you want straight h/ways, well there is a price)
Govt should concentrate on:
- stimulate 'sustainable' local demand
- liberate services sector to compensate declines in manufacturing demand.
- improve public services of health care and education. by extension, policing services.
Really, government should regulate and not participate in economy.
By the way, there are no thoughts from F5? P3? P5? candidates here?? Its related to your papers. Also, this is real case study, prominent feature in your exam.
Cheers
Marcus
If govt buys the toll operation, I think we will see the road full of potholes left unattended. :)
At least the owner of the roads constructions are doing a decent job in maintaining the roads.
dont have any knowledge in p5 so i cant comment more?
i stil dont really understand wat happen to the economy whereby it hit alot of manufacturing company in malaysia and some even closed down due to economy recession....basically wat do actually happen tat hit the economy so badly where ppl say it mayb worse that the prev economy recession....
Toxic assets
Where banks trading assets which are based on paper value only, without substance, ie, self-created assets in layman term.
So they are actually not as rich as stated in their balance sheet.
And once the wave hits, all banks were affected, and subsequently countries are dragged along due to dependence on banking sector.
something like that, google it for more information.
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