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Showing posts with label Middle-income trap. Show all posts
Showing posts with label Middle-income trap. Show all posts

Tuesday, February 13, 2018

Malaysia needs structural reforms says global investor

Middle-income trap, brain drain and high public service spending among Malaysia’s risks

Cheah(pic) thinks the local stock market could go up by between 5% to 10% this year while the ringgit, which has mostly been on an uptrend in recent times, is “still down quite a lot”, against the US dollar.

Middle-income trap, brain drain and high public service spending among Malaysia’s risks

KUALA LUMPUR: A renowned global investor has called for structural reforms in Malaysia, saying that the country faces “very real” structural issues.

Penang-born Datuk Seri Cheah Cheng Hye (pic) who left Malaysia decades ago counts the middle-income trap, brain drain and high public service spending as current risks to the country.

Based in Hong Kong as the chairman and co-chief investment officer of fund and asset management group Value Partners Group for over two decades now, Cheah who helps manage over US$16bil in funds, however concedes that Malaysia remains a country with huge potential and opportunities.

“I don’t think we should underestimate the importance and attractiveness of Malaysia but what I am saying is that if we don’t want to be stuck forever (being) a so-called middle-income country, we need structural reforms,” he told StarBiz in a recent interview.

“Or maybe... we do want to be stuck because it is a comfortable position and because then, we can make a lot of compromises.”

“ (If that’s the case), we should be frank and say it, don’t pretend that we want to be an advanced country because that requires certain sacrifices.”

“The reality is that we are getting less and less competitive, we ranked number 23 in the latest Global Competitiveness report ,behind France and Australia which are developed countries. (Number 23) is not good enough for a developing country,” said Cheah, who recently made it to the top 40 richest Malaysians list.

Emphasising the issue of brain drain, Cheah, a former financial journalist and equities analyst said Malaysia could perhaps emulate India in this area where the concept of an Indian national overseas card has been introduced.

“I am told there are more than one million Malaysians overseas – (people like) entrepreneurs, these are exactly the type of people we want to stay here but they are not.

“We could introduce a new type of card called the Malaysian national overseas card for Malaysians who have chosen to leave the country and become citizens elsewhere.”

This card will give these Malaysian-born individuals no voting rights but will allow them to come back to work and invest here like everyone else, he said.

Cheah said this could help re-attract talent and there will be no political price to pay, because these people cannot vote here nor transfer this card to their children who would likely be foreigners.

“Some may actually come back, because it is not always greener on the other side... but you must make it easy enough (for them to come back).”

Cheah also pointed out that the amount Malaysia spends on public service is “very high” by any standards.

“Quoting from memory, about 30% of government spending is on civil service salaries and 16.5% of all employment in this country comprise civil servant jobs.

“No matter how you explain it, this is abnormally high ; something that I have learnt from my stay in Hong Kong is, keep the government as small as possible.”

He said although the civil service segment here appears to be bloated, it would be “unrealistic” to fire civil servants.

“Instead, maybe we can consider freezing and redeploying resources.

“Like any corporation, if you have too high a headcount, you freeze hiring and you redeploy people to where they are needed,” Cheah said.

Separately, Cheah, whose investments are mostly China-centric believes that Myanmar could be the next big thing.

“Nowadays, I like Myanmar because it is still cheap.

“It has about 55 million people but its gross domestic product (GDP) is only about US$65bil, Malaysia’s GDP is probably about US$320bil.

“Myanmar has enormous potential, at last they are emerging , gradually reconnecting with the world, they have (a lot of ) raw materials and are in a good position as one of the significant Belt and Road countries, China will go out of its way to invest there.”

Cheah said he would like to set up a Myanmar fund to invest in the country and is in the process of studying this possibility.

Among markets in Asia, Malaysia to Cheah, is “moderately attractive”.

He said consumer sentiment here was finally improving after it took a beating largely due to the implementation of the Goods and Services Tax (GST) back in 2015 plus there are some “interesting corporate restructuring taking place.”

Also, it is General Election year which going by history, tends to send the market higher, he said.

“I think there are good arguments why the Malaysian market is good this year but the arguments are not strong enough to result in a very strong market - and there’s also a global environment that’s not as good as last year.”

“I think the US administration is now focusing on globalisation and world trade and it seems to be moving in the direction of conflict with China over trade.

“If there is a China-US trade war, Malaysia will suffer collateral damage because we are a medium-sized player in a global supply chain, so it will be very disruptive,” Cheah said.

Upside for the Malaysian market could also be limited this year, he said, because its current valuation is relatively high at over 16 times price to earnings.

Cheah thinks the local stock market could go up by between 5% to 10% this year while the ringgit, which has mostly been on an uptrend in recent times, is “still down quite a lot”, against the US dollar.

The local unit appreciated by 8.6% against the dollar last year after losing some 4.5%, a year earlier.

At last look, it was traded at 3.9395 against the greenback.

By Yvonne Tan The Staronline


Related Links:

World Bank: Malaysia needs structural reforms - Business News



Related posts:

Huge Civil Service Size, Attractive Emoluments and Benefits are costing Malaysia ! 

Arrest decline in productivity and competitiveness in Malaysia

Corruptions, Conflict of interests, politicians and Malaysian bloated civil service

Structural issues including education are holding Malaysia back

Malaysia no longer stuck in middle-income trap?

Hedge fund management, Value Partners; Malaysian a Hye Achiever in HK, eyes Penang projects

Serious deficits that cannot be financed could lead to bigger global crisis

Malaysia needs structural reforms says global investor

Middle-income trap, brain drain and high public service spending among Malaysia’s risks

Cheah(pic) thinks the local stock market could go up by between 5% to 10% this year while the ringgit, which has mostly been on an uptrend in recent times, is “still down quite a lot”, against the US dollar.

Middle-income trap, brain drain and high public service spending among Malaysia’s risks

KUALA LUMPUR: A renowned global investor has called for structural reforms in Malaysia, saying that the country faces “very real” structural issues.

Penang-born Datuk Seri Cheah Cheng Hye (pic) who left Malaysia decades ago counts the middle-income trap, brain drain and high public service spending as current risks to the country.

Based in Hong Kong as the chairman and co-chief investment officer of fund and asset management group Value Partners Group for over two decades now, Cheah who helps manage over US$16bil in funds, however concedes that Malaysia remains a country with huge potential and opportunities.

“I don’t think we should underestimate the importance and attractiveness of Malaysia but what I am saying is that if we don’t want to be stuck forever (being) a so-called middle-income country, we need structural reforms,” he told StarBiz in a recent interview.

“Or maybe... we do want to be stuck because it is a comfortable position and because then, we can make a lot of compromises.”

“ (If that’s the case), we should be frank and say it, don’t pretend that we want to be an advanced country because that requires certain sacrifices.”

“The reality is that we are getting less and less competitive, we ranked number 23 in the latest Global Competitiveness report ,behind France and Australia which are developed countries. (Number 23) is not good enough for a developing country,” said Cheah, who recently made it to the top 40 richest Malaysians list.

Emphasising the issue of brain drain, Cheah, a former financial journalist and equities analyst said Malaysia could perhaps emulate India in this area where the concept of an Indian national overseas card has been introduced.

“I am told there are more than one million Malaysians overseas – (people like) entrepreneurs, these are exactly the type of people we want to stay here but they are not.

“We could introduce a new type of card called the Malaysian national overseas card for Malaysians who have chosen to leave the country and become citizens elsewhere.”

This card will give these Malaysian-born individuals no voting rights but will allow them to come back to work and invest here like everyone else, he said.

Cheah said this could help re-attract talent and there will be no political price to pay, because these people cannot vote here nor transfer this card to their children who would likely be foreigners.

“Some may actually come back, because it is not always greener on the other side... but you must make it easy enough (for them to come back).”

Cheah also pointed out that the amount Malaysia spends on public service is “very high” by any standards.

“Quoting from memory, about 30% of government spending is on civil service salaries and 16.5% of all employment in this country comprise civil servant jobs.

“No matter how you explain it, this is abnormally high ; something that I have learnt from my stay in Hong Kong is, keep the government as small as possible.”

He said although the civil service segment here appears to be bloated, it would be “unrealistic” to fire civil servants.

“Instead, maybe we can consider freezing and redeploying resources.

“Like any corporation, if you have too high a headcount, you freeze hiring and you redeploy people to where they are needed,” Cheah said.

Separately, Cheah, whose investments are mostly China-centric believes that Myanmar could be the next big thing.

“Nowadays, I like Myanmar because it is still cheap.

“It has about 55 million people but its gross domestic product (GDP) is only about US$65bil, Malaysia’s GDP is probably about US$320bil.

“Myanmar has enormous potential, at last they are emerging , gradually reconnecting with the world, they have (a lot of ) raw materials and are in a good position as one of the significant Belt and Road countries, China will go out of its way to invest there.”

Cheah said he would like to set up a Myanmar fund to invest in the country and is in the process of studying this possibility.

Among markets in Asia, Malaysia to Cheah, is “moderately attractive”.

He said consumer sentiment here was finally improving after it took a beating largely due to the implementation of the Goods and Services Tax (GST) back in 2015 plus there are some “interesting corporate restructuring taking place.”

Also, it is General Election year which going by history, tends to send the market higher, he said.

“I think there are good arguments why the Malaysian market is good this year but the arguments are not strong enough to result in a very strong market - and there’s also a global environment that’s not as good as last year.”

“I think the US administration is now focusing on globalisation and world trade and it seems to be moving in the direction of conflict with China over trade.

“If there is a China-US trade war, Malaysia will suffer collateral damage because we are a medium-sized player in a global supply chain, so it will be very disruptive,” Cheah said.

Upside for the Malaysian market could also be limited this year, he said, because its current valuation is relatively high at over 16 times price to earnings.

Cheah thinks the local stock market could go up by between 5% to 10% this year while the ringgit, which has mostly been on an uptrend in recent times, is “still down quite a lot”, against the US dollar.

The local unit appreciated by 8.6% against the dollar last year after losing some 4.5%, a year earlier.

At last look, it was traded at 3.9395 against the greenback.

By Yvonne Tan The Staronline


Related Links:

World Bank: Malaysia needs structural reforms - Business News


Related posts:

Huge Civil Service Size, Attractive Emoluments and Benefits are costing Malaysia ! 

Arrest decline in productivity and competitiveness in Malaysia

Corruptions, Conflict of interests, politicians and Malaysian bloated civil service

Structural issues including education are holding Malaysia back

Malaysia no longer stuck in middle-income trap?

Hedge fund management, Value Partners; Malaysian a Hye Achiever in HK, eyes Penang projects

Serious deficits that cannot be financed could lead to bigger global crisis

 

Thursday, August 18, 2016

Malaysia no longer stuck in middle-income trap?

Stuck in the middle-income trap 


Attributing the positive development to the various reforms undertaken via the multi-year economic transformation programme (ETP), the Datuk Seri Idris Jala,(pic) CEO of Performance Management and Delivery Unit (Pemandu) points out that Malaysia’s GNI at US$10,570 (RM42,340) per capita last year is now only 15% away from the high-income-economy benchmark of US$12,475 per capita.

KUALA LUMPUR: Malaysia is no longer stuck in the middle-income trap, as its gross national income (GNI) is now progressively growing towards the high-income benchmark as defined by the World Bank, says Datuk Seri Idris Jala.

Attributing the positive development to the various reforms undertaken via the multi-year economic transformation programme (ETP), the CEO of Performance Management and Delivery Unit (Pemandu) points out that Malaysia’s GNI at US$10,570 (RM42,340) per capita last year is now only 15% away from the high-income-economy benchmark of US$12,475 per capita.

This compared with a gap of 33% between Malaysia’s GNI of US$8,280 per capita in 2010 and the then high-income economy threshold of US$12,276 per capita.

“As a result of the things we have been doing since 2010 and up to now, we have become completely unstuck (from the middle-income trap), with the gap (in Malaysia’s per capita GNI against the high-income threshold) now narrowed down to just 15%, compared with 33% in 2010,” Idris, who has been leading Pemandu, which is an agency under the Prime Minister’s Department, since 2010, said.

“The gap was even wider before 2010, and we could never close the gap for many years, resulting in many economists and financial experts proclaiming that Malaysia is stuck in the middle-income trap, and would not be able to become a high-income nation by 2020 unless we become unstuck,” he said in his keynote address on the Public Private Partnerships panel discussion here yesterday.

The panel discussion, jointly organised by research and publishing company The Business Year and education services provider Brickfields Asia College, was themed “Innovation as Driver for Local Economic Empowerment”.

According to Idris, Malaysia had managed to transform its economy, as a result of implementing innovative strategies. He said the Government remained confident of closing the GNI per capita gap and achieving the high-income target by 2020.

Under the ETP, the target was to achieve a GNI per capita of US$15,000 by 2020.

Meanwhile, in addition to GNI growth, Idris said Malaysia was also making good progress in the fiscal-sustainability space, as evident in the narrowing of the Government’s budget deficit and the continued manageability of its debt level.

The reduction of Malaysia’s fiscal deficit to 3.2% of gross domestic product (GDP) last year from 6.6% of GDP in 2009, for instance, was an indication of a stronger and more sustainable financial position. The country’s fiscal-deficit-to-GDP ratio was expected to reduce further to 3.1% by the end of 2016.

The Government debt-to-GDP level, on the other hand, would remain below the self-imposed limit of 55%. It stood at 53% last year.

“We have reduced subsides and implemented the goods and services tax (among the various economic reforms) to achieve fiscal sustainability,” Idris said.

“We have also put in a lot of effort to stimulate private investment growth” he added, noting that private investment growth had outpaced public investment since the launch of the ETP.

Idris said while there were still challenges in implementing economic reforms, Pemandu would continue to monitor closely the progress made by various government ministries.

“We are tracking all the investment projects one by one ... we want to make sure that all these projects are being implemented just as we said they would,” Idris said.

On the moderate growth of the country’s economy and gradual pace of fiscal-deficit reduction, Idris said these were a result of deliberate policy to ensure that Malaysia did not grow at the expense of accumulating more debts, or had its budget deficit cut drastically at the expense of the country’s economic growth.

Through this balancing act, Idris said, Malaysia had managed to stay in the “safe zone” in terms of debt-to-GDP and fiscal deficit levels while maintaining a steady growth path. - Cecila Kok The Star

But in the same article, Danny Quah, professor of economics and international development at the London School of Economics, disagreed that Malaysia had moved past the middle-income trap.

Quah maintained his position on Saturday, at a panel discussion organised by Sunway University in Petaling Jaya.

He told the university’s students that Malaysia had been going after “low-hanging fruits” in policymaking, resulting in it being trapped in the middle-income status.

“We are now in a situation where we are in a good place, but we’ll not get past it to gain fully developed country status in Malaysia’s own mould,” he said.

Quah is of the view that Malaysia has become complacent about its achievements, and that the nation suffers from what economists call the “natural resource curse”.

The economist pointed out that only about one million out of the 30 million people in the country are paying income tax, noting that this small fiscal base would be unsustainable moving forward.

The problems are an unclear direction, lack of leadership commitment, high-level plans that are not practical, rigid implementation, a silo mentality and work approach, public demands and inputs not adequately obtained, poor accountability, and a lack of transparency and trust deficit.

Related:



Related posts:


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Oct 30, 2010 ... Thus, if the Northern Corridor can escape the middle income trap, then, so can Malaysia. This is a timely and relevant book as it comes out at ...

Mar 8, 2016 ... Malaysia's flight MH370 mistakes reflect stagnant politics; Bad apples in NZ sex crime.. Malaysia is poised to escape the middle-income trap, .

Aug 8, 2016 ... Brain drain gains momentum. ZIYING'S BRUSH. Malaysia's brain drain is not limited to adults as increasing numbers of children are also .