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Sunday, March 27, 2011

Population and quality of workers in Malaysia

Today, we have a population of about 28.25 million people (Bank Negara Malaysia, 2011). Then there are 12.6 million labour force, 12.2 million employed, and 0.42 million unemployed (Department of Statistics, 2011). When we make a comparison between unemployed and total number of labour force, we can say that the unemployment rate in Malaysia is about 3.4%. To measure active population, Labour Force Survey (LFS) by Department of Statistics uses the age limit of 15 to 64 years as the definition of labour force. The economically active population comprises those employed and unemployed, whereas those who are inactive is classified as outside the labour force.

The population size influences by initial number of population, birth rate, death rate, and migration. We also know that the number of children people have is very much a function of two variables: costs and choices. Costs depend not only on how much food and shelter you give to your children, but also on the time of parents. In most societies, most of that time is the mother’s time (even now in our society father also possible to be a homemaker), which has a value.

As we have become richer, and as women have become better educated are working outside the home more, the cost to them of spending time on children has risen. As these costs have risen, families are deterred from having as many children as they had in the past. They spend much of their time at workplace, and less time at home.

The second variable that economists recognize is that families are making choices about the quality of children’s lives in term of their education, training, and health. In modern economies, this quality component has become very important because the emphasis in modern economies is on knowledge, technology, and skills. But there is a tradeoff. If you spend more on each child’s skills, education, and training, you make children more costly and you are likely to have fewer children.

But we know that, it is not just the size of population that matters but the quality of that population it’s in term of level of education, talent and skills is more important. In other word, the quality of our workforce is also a matter of concern. Only 25 % of Malaysia's workforce is composed of highly skilled workers, compared to higher proportions in Singapore, Taiwan and Korea. The percentage of our population with tertiary education is lower than in other advanced developing countries.

Singapore and Taiwan, with a smaller size, but with a better trained and skilled population, has a per capita income much bigger than ours. Indonesia, with a large population and large land area, has a per capita income much lower, although it is now progressing well. The management of resources is therefore of critical importance. If we mismanage our resources, then a large population will lead us to a serious decline in our standard of living. It is the function of governments to ensure growth, and increasing prosperity through good governance, innovation and creativity.

The government has come out with an excellent plan to grow the economy - the New Economic Model and the Economic Transformation Programme. We must successfully implement this, not only to sustain our standard of living but to enhance it. All Malaysians should support the government's effort in this.

Surely a large market, through a larger population, will help and enable our industries to become larger and more efficient producers. But what will be critical is not just the size of the population but its capacity for innovation and creativity. This will depend on our education system to produce the skills and talent for a fast growing and modernizing economy. We need workers that can do activity such as product innovation and process innovation with their multidiscipline expertise.

Saturday, March 26, 2011

Ketelusan dalam bekerja

Semasa tamat pengajian di sekolah menengah, saya mendapat tawaran untuk menyambung pengajian di dalam program pendidikan, program kejuruteraan marin dan program ekonomi di peringkat Universiti. Walau pun ramai ahli keluarga mencadangkan memilih program pendidikan atas alasan terjamin mendapat pekerjaan selepas tamat pengajian, saya memutuskan untuk memilih program ekonomi. Alhamdulillah saya merasakan saya membuat keputusan yang betul kerana saya dapati bidang ekonomi memang menarik dan merupakan suatu disiplin yang memerlukan pemikiran secara logik dan banyak menggunakan model.

Dalam bidang ekonomi, kita diminta memahami sesuatu secara logik dan digalakkan dibuat kajian sebelum sesuatu keputusan akhir dibuat. Pelajar ekonomi diajar keseimbangan, bukan hanya keseimbangan dalam penentuan harga barangan berdasarkan maklumat permintaan dan penawaran, tetapi juga keseimbangan menjadi ahli masyarakat yang terpelajar dan profesional. Keputusan ahli ekonomi dalam sesuatu hal biasanya memang memerlukan logik dan model pemikiran yang tertentu.

Sebab itu semasa salah seorang penasihat ekonomi kanan di Malaysia memberi komen terhadap perlantikan salah seorang Pengerusi GLC (Government Link Company) yang sebaiknya dari orang bukan politik, maka wujud “kebisingan”/ “teguran” dari pejuang-pejuang bangsa tanpa meneliti dengan baik model asas kepada cadangan sedemikian. Kebiasaannya ahli politik mempunyai pemikiran yang berbeza dengan ahli ekonomi. Ahli ekonomi berpandangan pemaksimuman keuntungan sesuatu entiti perniagaan mesti berasaskan kepada pengurusan perniagaan yang baik. Mereka yang dijangka dapat mengurus perniagaan dengan baik itu pula tentunya dari kalangan yang benar-benar berkebolehan untuk mentadbir organisasi yang diamanahkan dan tidak pernah terlibat dengan perkara-perkara yang boleh meragukan kewibawaan mereka.

Pengurusan perniagaan yang baik memerlukan maklumat lengkap bersesuaian dengan keputusan yang hendak dibuat. Mereka perlu membuat sesuatu keputusan berdasarkan fakta dan bukannya “ada udang di sebalik batu”. Untuk memaksimumkan keuntungan misalnya memerlukan peningkatan dalam Jumlah Hasil dan meminimumkan Jumlah Kos. Beberapa keputusan tepat dalam meminimumkan kos seperti mendapatkan bekalan bahan mentah dari sumber yang baik, tiadanya unsur kepentingan tersembunyi, bebas dari rasuah, penipuan dan ketidaktelusan perlu diambilkira. Mereka yang mendapat tender dari sesuatu projek pula mestilah sebenarnya dari pembekal yang benar-benar berkemampuan, membekalkan input berkualiti dan bebas pula dari permintaan-permintaan yang mengkehendaki sesiapa yang mendapat tender memberikan sesuatu yang tidak berkaitan dengan projek kepada organisasi yang menawarkan tender. Sebab itu di dalam peraturan Kerajaan ada ditetapkan prosedur-prosedur tertentu di dalam proses kelulusan projek dan pemilihan tender yang berjaya. Persoalannya adakah kesemua prosedur tersebut dipatuhi?

Setiap tahun bila Jabatan Audit Negara membuat laporan tahunan, pelbagai teguran membina diberikan oleh pegawai audit. Saya tidak pasti sama ada kesemua teguran audit diambil perhatian dan tidak dilakukan oleh pihak yang ditegur. Agensi-agensi kerajaan atau badan kerajaan lain pula perlu mengambil perhatian dan pengajaran terhadap teguran-teguran membina tersebut. Sekiranya berlaku penyelewengan dalam pemberian tender untuk sesuatu projek, tentu banyak perkara negatif kepada ekonomi Negara boleh berlaku. Pembekal yang terpaksa membuat imbuhan-imbuhan tertentu kepada pelulus projek tentu pula terpaksa menyerapkan harga barangan atau menurunkan kualiti barangan yang dibekalkan bersesuaian dengan kos-kos sampingan yang diminta tadi. Terjadilah bekalan input baja misalnya yang kurang berkualiti, kualiti buatan jambatan yang tidak mengikut spesifikasi, dan pendawaian untuk sistem komputer di sekolah tidak disiapkan seperti yang dijadualkan. Projek tersebut penting kepada kebajikan masyarakat dan ekonomi Negara. Kebiasaannya tender baru dikeluarkan dan projek penting itu terpaksa diteruskan juga. Keadaan ini tentunya melambatkan penyiapan projek dan memberikan tambahan kos kepada negara.

Disinilah peranan Suruhanjaya Pencegahan Rasuah (MACC) dalam membuat penguatkuasaan peraturan yang telah ditetapkan. Rakyat tentu memerhatikan tindak tanduk pegawai-pegawai MACC sama ada menjalankan kerja dengan cekap dan telus. Rakyat tentu tidak mahu melihat pendakwaan terhadap kumpulan-kumpulan tertentu sahaja, sedangkan kumpulan yang lebih nyata unsur-unsur penyalahgunaan kuasa dan penyelewengan lambat didakwa atau tidak didakwa langsung. Seterusnya Institusi Kehakiman, hakim-hakim yang mengadili sesuatu kes perlu jujur dan telus dan membuat keputusan berdasarkan fakta dan kebenaran dan tidak dipengaruhi oleh faktor diluar dari sesuatu kes. Sebab itu kebiasaannya hakim dibayar gaji yang tinggi supaya tidak tertarik lagi dengan imbuhan-imbuhan lain yang ditawarkan oleh orang yang didakwa dan orang yang mendakwa. Persoalannya berapa tinggikah pendapatan yang dikatakan mencukupi itu? Ini persoalan moral dan jika hidup berdasarkan nafsu tentu tidak ada batasan pendapatan yang dikatakan tinggi.

Memang boleh propaganda keadilan dibuat di dalam media arus perdana seperti TV, Radio dan akhbar, tetapi dalam era teknologi maklumat rakyat lebih bijak dan mempunyai pelbagai sumber untuk mendapatkan maklumat, seperti melalui internet dan SMS. Sebarang penyelewengan dan bukti-bukti penyelewengan dan rantaian individu yang lerlibat boleh disalurkan dalam saluran media alternatif ini. Sebab itu dalam kelas saya, saya selalu maklumkan kepada pelajar saya bahawa mereka tidak perlu memberi sebarang hadiah atau sebarang bentuk cenderamata semasa saya mengajar mereka. Saya mengatakan kerajaan telah membayar gaji yang cukup kepada saya, dan tidak memerlukan apa-apa hadiah dari mereka. Jika saya tidak mengajar mereka lagi, maksudnya tidak ada kepentingan pemberian markah lagi, adakah mereka tetap akan memberi hadiah? Mungkin beri dan mungkin tidak, tetapi saya berat lebih kepada tidak beri. Walau bagaimanapun ia tidak lagi menjejaskan keputusan saya dalam membuat penilaian, kerana mereka telah tamat pengajian. Saya berharap dapat memberi penilaian prestasi pembelajaran berdasarkan kebolehan sebenar mereka dalam pelajaran tanpa dipengaruhi oleh perkara lain.

Saya cuma harapkan ilmu baik yang diberikan dapat digunakan untuk kebaikan indvidu, masyarakat dan Negara. Imbuhan Allah dari salah satu amal penyampaian ilmu yang baik itu lebih penting lagi. Dua lagi perkara yang penting di dalam kubur ialah amalan kita dan amal jariah seperti sedekah, pemberian tanah wakaf dan lain-lain perbelanjaan kebajikan. Apabila kita meninggal dunia, ada lima kumpulan yang mengiringi kita ke kubur, iaitu 1. Ahli Keluarga dan sahabat handai, 2. Harta, 3. Amalan, 4. Amal Jariah, dan 5. Ilmu baik yang diberikan kepada manusia di dunia. Dua akan meninggalkan kita selepas kita dikebumikan, iaitu Ahli keluarga dan sahabat handai, dan harta. Yang mengikuti kita ialah Amalan, Amal Jariah dan Ilmu baik yang kita berikan kepada manusia.

Sekiranya semua orang memikirkan kehidupan akhirat dan tidak hanya memikirkan kehidupan di dunia, mungkin tidak banyak kejahatan dan penyelewengan berlaku di dunia ini. Bukankah begitu?

Untuk renungan bersama - cadangan dari bekas rakan sekolah saya yang sangat berguna.

There are 3 things we should ask ourselves at the end of each day from now on:-

1. What had been done today to make us closer to heaven?

2. What had been done today to drive us away from hell?

3. What had been done today to preserve our health?

Wednesday, March 16, 2011

Tokyo woes pose multiple challenges for KL

Malaysia's economy may face multiple challenges from the earthquake and tsunami disaster that struck Japan, the world's third largest economy last Friday, economists say.

They said the potential disruption to the country's trade with Japan will depend on the extent to which the latter's manufacturing production capacity and supply chain are incapacitated by the earthquake, amount of exports and imports originating from the affected areas and speed of reconstruction.

Last year, Malaysia's exports to Japan amounted to RM66.3 billion or 10.4 per cent of its total exports, while imports from Japan totalled RM66.5 billion or 12.6 per cent of Malaysia's total imports.

"We could see an increase in Malaysia's exports to Japan given the need for building materials and other inputs for reconstruction," said RAM Holdings chief economist Dr Yeah Kim Leng.

He said that during the Kobe earthquake in January 1995, Malaysia's exports to Japan rose by 26.4 per cent that year and 12.5 per cent in the following year, both higher than the rise in total exports of 20.2 per cent and 6.2 per cent in 1995 and 1996, respectively.

Dr Yeah said the post-1995 Kobe reconstruction efforts had been estimated to cost US$100 billion (RM304 billion) and this had been cited as one of the causes of Japan's decade-long anaemic growth.

"However, relative to the current size of the Japanese economy, the cost amounts to only 2 per cent of its current gross domestic product," he said, noting that as a high-income country, Japan is in a better position to recover from the tragedy.

Dr Yeah said the impact on the Malaysian economy is likely to be muted given that the rebuilding in Japan will require substantial imports.

He said concern, however, is on the demand multiplier whereby a slowdown in Japan could result in a loss of engine power for the global economy and for the region, culminating in a downward revision of growth outlook for the region.

"We anticipate lower inflows into Malaysia and possibly higher repatriation as substantial capital is needed for the post-quake rehabilitation," he said.In 2010, Japanese foreign direct investments amounted to RM9.7 billion, while outflow from Japanese firms totalled RM6.9 billion, yielding a net inflow of close to RM3 billion.

Universiti Utara Malaysia economic and agribusiness associate professor Dr Jamal Ali said despite the physical damage, the financial impact of the earthquake will be minimal in Japan, and to the rest of the world.

He said the good news is that the quake hit a northern part of Japan that is not very populated as the area around Sendai, city closest to the quake, is mostly agricultural land.

However, Dr Jamal noted that Sendai does have factories, including a number that make parts for Toyota and Nissan.

"Of course, like in the case of Toyota, Nissan and other car manufacturers, one plant shutting down could have ripple effects on other plants that use those parts," he said.

Dr Jamal said another factor in Japan's favour is that it exports more than it imports. That means much of the demand for Japanese goods comes from outside the country.

He said for the rest of the world, the economic impact looks modest.

Petroleum price fell on the news of the quake because Japan produces very little petroleum, but is a big importer, he noted. Dr Jamal said if the economy weakens, it would mean less demand for petroleum from Japan, which would be good for Malaysia.

"Rising oil prices have been a growing worry for the Malaysian economy. However, we have to remember that we are depending on petroleum exports, and Petronas contributes a lot to the country's economy," he said, noting that with the petroleum price falling, the price of rubber will also fall.

http://www.btimes.com.my/articles/kaboom-2/Article/#ixzz1GluY6lYV

By Azlan Abu Bakar
New Straits Times (Business Times: Tuesday, March 15, 2011)

(Thanks Mr Azlan Abu Bakar for discussing about this issue with me)

Monday, March 14, 2011

Impact of Japanese Earthquake to the Malaysian Economy

In this global economy, we are affected by events across the world. We've seen examples of turmoil in the Middle East affected to the price of petrol; climate change in Vietnam, Thailand and India on price of rice and other food products, bird flu epidemics on tourism sectors; and problems of Financial Institution in European Countries and United States on export and import of our manufacturing products. The 8.9 magnitude earthquakes and resultant tsunami that hit Japan near the city of Sendai on Friday, March 11, 2011 could also have an impact on Malaysia economy. The tsunami, a Japanese word meaning "harbor wave", surged through towns and cities, bulldozing everything in its path. A large freight ship was sitting bizarrely in the streets. A wrecked airplane lay nose-deep in the rubble of homes in the port of Sendai. Cars were piled atop one another, train carriages tossed carelessly aside. About 10,000 people were feared killed by the earthquake, and as many as 20,820 buildings were either destroyed or badly damaged. The death toll could go higher.

What are the impacts of earthquakes and resultant tsunami on Malaysia Economy? I think that with the manufacturers’ and businesses disrupted in Japan, we can expects that Korea, United States, Europe and even Malaysia cars manufacturing industry like Kia, Hyundai, Ford, General Motors, Volvo, Peugeot, Renault, and even Proton could see short term benefits. Nonetheless, the area of where the quake hit, the nature of Japan's economy coupled with the economics of natural disasters is likely to mean that despite the physical damage, the financial impact of Friday's earthquake will be minimal in Japan, and indeed in the rest of the world. Here's why:

First of all, the good news is that the quake hit in a Northern part of Japan that is not very populated. The area around Sendai, which was the city closest to the quake, is mostly agricultural land, even from the You Tube we can see also port and airport from this disaster areas. Sendai also has some factories there, including a number that make car parts for Toyota and Nissan. Still, analysts estimate that the area that was effected accounts for less than 2% of the Japanese economy overall. Of course, like in the case of Toyota, Nissan and other car manufacturing, one plant shutting down could have ripple effects on other plants that use those parts. One interesting sidebar to the economic impact of the quake was that the success that Japan has had with "just in time manufacturing" (remember important of new management technique and process innovation) could come back to haunt the country, especially if it finds itself with few inventories, and problems with transporting goods.

Another factor in Japan's favor is that, unlike the United States, it exports more than it imports. That means much of the demand for Japanese goods comes from outside the country. And there is no reason to believe demand from other countries would drop because of the earthquake, only then factories in Japan cannot fully fulfilled demand from their importers. With the problems in the supply of electricity in Japan because the explosion and radioactive leakage at the Fukushima Daiichi nuclear power plant, the situation of limited supply of electricity will affect the industry. This incident also gives a good reason why Malaysia should think carefully with the intention of building our own nuclear power plants. Nuclear power plants facility was vulnerable to earthquake, tsunami and floods, means it was not easy to maintain the safety of such facility. The public demands nothing less than perfection from the nuclear industry in terms of safety. Fear of radiation is deep-seated in our mind with this nuclear technology.

Lastly, confidence is a major driver of economic activity. When consumers and companies get nervous they spend less and that can cause recessions. But earthquakes tend not to cause big hits to consumer confidence. That's because earthquakes are specific events and the scope of the damage is usually known pretty quickly, if not the eventual cost. Bird flu epidemic for instance, caused much more economic damage than say the Indonesian Tsunami, because the fear of the disease caused months of stalled travel and uncertainty. People just didn't know what they were dealing with.

The earthquake and tsunami in Japan could also negatively impact on the country's economy while exacerbating the country's ballooning public debt issues, as spending by the Tokyo government will spike to carry out emergency response measures. For the rest of the world, the economic impact looks modest as well. Petroleum price actually fell on the news of the quake. That's because Japan makes very little petroleum, but is a big importer. If the economy weakens, that would mean less demand for petroleum from Japan, which would be good for the Malaysia. Rising oil prices have been a growing worry for the Malaysia economy. However, we have to remember that we also depending on export from petroleum, and PETRONAS contribute a lot to Malaysian Economy. With petroleum price, fall, then the price of rubber also fall, that why if look at the market today, the price of rubber fall from RM8 per kg to only around RM4 per kg. We can apply the concepts of Cross-elasticity of demand with the impact of changes in petroleum price on the price of rubber products.

Tuesday, March 8, 2011

The landlords: demand, supply and price ceiling

Some of University students in my housing area are complaining that some of the landlords of their renting houses charging excessive rental rate. It is normal that tenants are paying about RM800 – RM1,000 a month for a two bedroom house. I am thinking about the policy of imposing limits on the rents that landlords can charge to the tenants. The purpose of rent-control policy is to ensure that the students can find affordable rental houses.

The questions are what type of price control we want to implement? How can we influence the landlords to follow the policy? What is the best policy for the tenants and the landlords of the house? We know that owners of those houses face daily concerns, such as covering rising insurance, upkeep, water, plumbing, landscaping and other costs. The problem is that repairs are not in a timely fashion. Is it possible in Malaysia that the owners to pass through half of the costs of capital improvements to tenants? For example, when the landlords painting a bedroom for RM1,000, he or she may divide half of that cost to the tenants, to cover the cost of painting.

Is it true that a rent control policy that reduce the price for which a landlord can rent their houses. Clearly this will hurts the landlord, but it also can harm renters. The lower the rent for this house will make building or buying houses in this area less profitable. If the landlords can’t make a profit building or buying a house, then they will not build or buying them. Over time, the number of rent-control houses should decrease as old houses become run down and landlords lack the incentive to build new one.

Thinking critically about policy:
1. This article describes that significant costs associated with rent-control policy. Despite these costs, rent-control policy is very popular with tenants and local politicians. Why would some tenants support rent-control policy? Do all tenants in the market gain from rent control policy?
2. Economists are critical of rent-control policy for several reasons. One reason is that the policy creates a deadweight loss. The magnitude of this deadweight loss depends on the slopes of the demand and supply curves. What causes the deadweight loss? What would the supply curve have to look like for the deadweight loss to equal to zero?