Will You Be There at 5?

RHB Research has raised an alarming prediction for the Malaysian ringgit (reported by Rupinder Singh in Malaysian Reserve, 25 May 2023). It suggests that the currency may soar to RM5.00 against the US dollar in the medium-term. This forecast comes as the initial short-term target of 4.60 was surpassed on May 25, leading to a revised near-term target of 4.70, with a potential to decline to RM4.75.

RHB Research does not rule out the possibility of the USD-RM exchange rate hitting the significant milestone of 5.0 in the medium term. Several factors contribute to the relentless upward momentum of the USD-RM pair.

The negative carry on holding the ringgit is expected to increase as Bank Negara Malaysia falls behind the currency market and inflation curve (explained earlier in two blog articles “Why is the Ringgit Going South” on 24 May 2023 and “See You at 5” on 23 Sept 2022).

Additionally, market expectations of US Federal Reserve Bank (FED) Federal Funds Rate (FFR) hikes continue to rise, with a potential 25 basis points hike at the upcoming June 15 FOMC meeting, further impacting the currency.

Furthermore, dwindling domestic sentiment towards the ringgit is evident through low trading volumes in the domestic stock market and indications of capital flight to alternative assets platforms. The upcoming state-level elections may result in limited fiscal and structural reform announcements, posing further challenges for the Malaysian currency.

RHB Research’s USD-RM model indicates that unless significant changes in guidance from the Bank Negara Malaysia and substantial fiscal reforms are announced in the coming months, the USD-RM exchange rate could reach 4.762 by the third quarter of 2023. The research firm emphasises the crucial need for an interest rate defence of the ringgit by the central bank to stabilize the currency.

However, given the prevailing strong upward momentum, an overnight policy rate (OPR) of 3.75% with hawkish guidance may only be able to stabilise the currency within the range of 4.40-4.60.

The situation reflects a common dilemma observed in emerging markets, where policy responses often lag behind rising fiscal risks and declining domestic confidence in the currency. 

But what practical steps can BNM or the Government take? The people behind the slide could easily be identified – BNM has the data. The banks are also speculators - they do this under proprietary trading. So, impose a forex tax on these “fat” banks – just 0.01% on every transaction. Then have an “exit” tax for other speculators! Reduce the 225 basis point differential between OPR and the Fed Fund rate. Incentivise repatriation of export proceeds and divestment of overseas assets. Then set a medium to long-term strategy, targets and reforms for DDIs and FDIs to flow. Revamp also the MM2H soon.

We need immediate steps not some explanatory note that may not enhance confidence in the markets.

Reference:

RHB Research Warns: Malaysian ringgit could surge to RM5 against US dollar in medium-term, Rupinder Singh, The Malaysian Reserve, 25 May 2023

Jakarta-Bandung HSR: A Useful Financing Model?

Indonesia’s first high-speed train linking capital Jakarta and Bandung – the country’s fourth-most populous city – completed a trial run at 180kmh on Monday, reaching its destination in just an hour. The first of a series of comprehensive trials will see rail speeds gradually rise to 385kmh in the coming weeks. The duration of the journey by rail will be reduced to about 40 minutes from 2.5 hours by car, once the train starts running at its maximum speed. The start of commercial operations is slated for August.

Construction of the 142km-long railway project began in 2016. It forms part of China’s Belt and Road Initiative.

Indonesian state companies, including rail operator KAI and construction company Wijaya Karya, control 60 per cent of KCIC, while China Railway Engineering Corporation and other Chinese companies hold the remaining stake (40%).

The total projected cost of the Jakarta-Bandung high-speed rail was initially estimated at US$6 billion (S$8 billion), but Jakarta said in 2022 that an additional US$1.2 billion was needed to meet the deadline for a commercial launch by June 2023.

The original cost of USD5.2 billion was financed on 75:24 debt-equity ratio. The debt signed in May 2017 was approximately USD4 billion, with 2 tranches – a USD tranche and a RMB denominated tranche.

There was no sovereign guarantee on both loans.

The delays in implementation included: Covid related issues; land acquisition; EIA; flooding; relocation of utilities amongst others. While the spiralling costs and construction delays have prompted a good deal of negative commentary, the completion of the Jakarta-Bandung High-Speed Railway marks a milestone for the BRI.

For China, the fact that it has found a willing partner in Indonesia, stands as a vindication of its economics-first approach to its Southeast Asian relationships. For Indonesia, too, the project will likely be brandished as a sign of the country’s independent foreign policymaking, in which Indonesia welcomes all foreign partnerships, as long as they are mutually beneficial. 

It is an interesting financing model for the KL-Singapore HSR to consider. The drawbacks remain currency exposure unless it is “pegged” or fixed; tenor of 40 years may not be sufficient; and the debt-equity ratio is too “aggressive” for a rail project.

References:

Jakarta to Bandung in one hour: Indonesia’s new high-speed train completes first trial run, The Straits Times, Wahyudi Soeriaatmadja, 23 May 2023

Indonesian high-speed railway to begin operations in August: Minister, Sebastian Strangio, The Diplomat, 11 April 2023

CDB provides $2.3805 billion loan to Bandung High Speed Rail Project, Aiddata, China.aiddata.org

Was the Recent SEA Games a Farce?

Malaysia could only manage a seventh-place finish with 34 gold, 45 silver, and 97 bronze, its worst in the history of the Games since 1959, and failed to achieve the set target of 40-37-64.

Vietnam retained the title of overall champion with 136-105-118 while hosts Cambodia recorded their best showing with a fourth-place finish of 81-74-127. Even before the Games, Malaysia already lost 18 gold, 16 silver, and 30 bronze as the sports and events that were contested in Vietnam were not included, or reduced in the Cambodia Games. Sports that were not popular in Malaysia like kun bokator, kun khmer, arnis, vovinam, ouk chaktrang, and xianqi chess, offered a total of 93 gold medals. From the start, we only had a chance to win 59 percent of the gold medals as we participated in 340 events out of a total of 579.

Source:https://en.wikipedia.org

The SEA Games has turned into a circus of sorts - with participating countries not only including their respective traditional sports but for a good measure, foreigners were given instant citizenship. Cambodia had 13 “foreign” cricketers (from the Indian sub-continent) to win the gold. Others like the Philippines, Thailand, Laos, and Indonesia also had naturalised players.

National sports associations need to conduct institutional reforms so that sports in the country could progress. Malaysia Swimming should focus on new talent development as it was among the sports that offered a total of 39 in Cambodia.

Out of the 427 (63 percent) Under 23 athletes, 222 managed podium finishes with a haul of 18 gold, 21 silver, and 66 bronze medals. The Minister, Hannah Yeoh said, “This is our strategy for the 2025 SEA Games in Thailand and 2027 in Malaysia, we are confident that our juniors can shine.” She also said that sports development funds from Sports Toto had also dropped to around a third of what they were 10 years ago.

Besides funds and foreigners, shouldn’t the SEA Games only have sports that are included for the Olympics? That way we are developing better athletes for the world stage. Otherwise, we will have the “jaguh kampong” mentality and fail to realise our potential for the global stage. And if any country or association is able to persuade the Olympic Council on a sport like sepak takraw, so be it! Meanwhile, we develop athletes in all those events that are included in the Olympics.

References:

M’sian sports declined under political instability – minister, Malaysiakini, 19 May 2023

Comment: Farce at SEA Games can never be snuffed out, R Nadeswaran, Malaysiakini, 

20 May 2023

The Top 10 Strongest Currencies in the World!

The U.S. dollar is generally seen as the most powerful currency in the world. It’s the most-traded currency on the global stage by a wide margin. The greenback is not the strongest of the 180-odd traditional fiat currencies recognized as legal tender worldwide. A fiat currency is money that has a value but not tied to a physical commodity like gold or silver.  Other currencies are stronger because they’re worth more than the dollar. 

Foreign currency is traded in pairs: You buy U.S. dollars with British pounds, for example. As a result, one currency is always priced relative to another currency, and this price is known as the exchange rate. Most currencies are “floating,” meaning their value fluctuates depending on demand and supply. However, some currencies are “pegged,” which means their value relative to another currency, such as the dollar, is fixed at an agreed-upon rate. Exchange rates affect the cost of goods and services in a foreign currency.

Source: https://en.wikipedia.org

When the dollar strengthens against the British pound, American travelers can get more pounds for their dollars and are essentially able to score cheaper vacations in London. But it becomes more expensive for people from the United Kingdom to visit the U.S. because the pound will buy fewer dollars at a foreign currency exchange. Exchange rates create opportunities for investors looking to profit from trading in foreign currencies.  Here are the top 10 strongest currencies as determined by Forbes:

1. Kuwaiti dinar (KWD)

The Kuwaiti dinar is the strongest currency in the world, with 1 dinar buying 3.26 dollars (or, put another way, $1 equals 0.31 Kuwaiti dinar).The Kuwaiti dinar was introduced in the 1960s and was initially pegged to the British pound before being re-pegged to an undisclosed basket of currencies.

2. Bahraini dinar (BHD)

The Bahraini dinar is the second-strongest currency in the world, with 1 dinar buying 2.65 dollars (or $1 equals 0.38 Bahraini dinar). Bahrain is an island nation in the Persian Gulf off the eastern coast of Saudi Arabia. Like Kuwait, the country earns much of its wealth from oil and gas exports. The Bahraini dinar entered circulation in 1965 and is pegged to the dollar.

3. Omani rial (OMR)

The Omani rial is the third-strongest currency in the world, with 1 rial buying 2.60 dollars (or $1 equals 0.38 Omani rial).

Oman sits between the United Arab Emirates and Yemen at the eastern tip of the Arabian Peninsula. As with its wealthy neighbors, Oman is a major exporter of oil and gas. The Omani rial was introduced in the 1970s and is pegged to the dollar.

4. Jordanian dinar (JOD)

The Jordanian dinar is the fourth-strongest currency in the world, with 1 dinar buying 1.41 dollars (or $1 equals 0.71 Jordanian dinar).

Jordan is a largely landlocked country in the Middle East that is less dependent on oil and gas exports than other nations in the region. It has struggled with sluggish economic growth and rising debt. The Jordanian dinar entered circulation in 1950 and is pegged to the dollar.

5. British pound (GBP)

The British pound is the fifth-strongest currency in the world, with 1 pound buying 1.22 dollars (or $1 equals 0.82 British pound).

Britain’s economy is the world’s sixth largest by gross domestic product (GDP), according to the World Bank. The pound was first introduced in the 1400s before being decimalized in 1971. It is free-floating, not pegged to other currencies.

6. (tie) Cayman Islands Dollar (KYD)

The Cayman Islands dollar is in a tie for sixth among the strongest currencies in the world, with 1 Cayman dollar buying 1.20 dollars (or $1 equals 0.83 Cayman Islands dollar).

The Caymans are a British territory in the Caribbean and are an offshore financial center. The Cayman Islands dollar was first introduced in the 1970s and is pegged to the dollar.

6. (tie) Gibraltar Pound (GIP)

The Gibraltar pound shares the No. 6 spot among the world’s strongest currencies, with 1 pound buying 1.22 dollars (or $1 equals 0.82 Gibraltar pound).

Gibraltar occupies just 2.6 square miles at the southern tip of Spain and is officially a British territory. The Gibraltar pound was first introduced in the 1920s and is pegged to the British pound (at par, meaning one GIP equals one GBP).

8. (tie) Swiss Franc (CHF)

The Swiss franc is tied for eighth among the strongest currencies in the world, with 1 franc buying 1.08 dollars (or $1 equals 0.92 Swiss franc).

The Swiss franc is the official legal tender of Switzerland and its tiny neighbor Liechtenstein, and the currency is seen as a safe haven due to Switzerland’s political stability. The Swiss franc was introduced in 1850 and was later briefly pegged to the euro before moving to a free-float.

8. (tie) Euro (EUR)

The euro shares the No. 8 spot among the world’s strongest currencies, with 1 euro buying 1.08 dollars (or$1 equals 0.93 euro).

The euro is the official currency of 20 out of the 27 countries that form the European Union. Euro coins and bank notes entered circulation in 2002, and the currency is free-floating.

10. US dollar (USD)

The U.S. dollar is the 10th-strongest currency in the world, with 1 dollar buying 1 dollar. All other units of currency across the globe are worth less than a greenback.

Created in the 1700s, the dollar is legal tender in the U.S.; its territories, including Puerto Rico; and other sovereign nations, such as Ecuador and Zimbabwe.

The U.S. is the world’s largest economy by GDP, and the dollar is easily the most-traded currency globally. And it’s widely circulated, with people in the U.S. sending tens of billions of dollars abroad to relatives and friends each year.

The dollar also is the largest reserve currency in the world—that is, the currency most held by central banks—and is the currency used to price many commodities, including oil, gold and copper.

Malaysia has a “weak” currency compared to the U.S. dollar or the Singapore dollar, as shown below:

The key reason is we have been slow in adjusting interest rates (OPR) upward to reduce the impact of inflation and the differential with the Fed Fund rate. Other factors too matter, political stability; confidence; new investments; growth rate and surplus/deficit in trade. Some are under our control and others are outside our purview. Can we act on what we can influence?

Reference:

Top 10 strongest currencies in the world in 2023, Doug Whiteman, Forbes

How Much Wealth Do You Need to Join the Richest 1%?

If you wish to join Monaco’s richest 1%, you will need an 8-figure fortune. It takes US12.4m (RM56.1m) to make the cut. This is according to Knight Frank. Switzerland and Australia have the next highest entry points to the 1% - net worth of USD6.6m in Switzerland and USD5.5m for Australia. In the U.S., USD5.1m will get over the threshold.

The findings show how the pandemic and surging living costs are widening the gap between the rich and poor nations. Monaco’s threshold is 200 times higher than the Philippines (USD57,000) needed to join the top 1%.

Lower income households worldwide are feeling the burden of inflation. The world’s 500 richest people have added almost USD600 billion to their combined fortunes in 2023. The global number of ultra-wealthy individuals, however, have fallen 3.8% in 2022 to about 580,000.

To re-distribute wealth and reduce inequalities in Malaysia, tax reform is necessary – a balance between the incentive to grow wealth and the social objective of redistribution.

Reference:

How much wealth will get you into the global top 1%?, Frank Knight, 15 May 2023

Why is the Ringgit Going South?

The ringgit extended its losses to end weaker against the US dollar on15 May 2023 following worries over the slowing global economy, said an economist. Is this true?

The local currency fell to 4.4960/4.4985 versus the greenback and was at MYR4.53 to USD1 on 18 May 2023 (2.21 a.m).

Bank Muamalat Malaysia Bhd chief economist said the ringgit pierced through the 4.5000 level because of concerns about uncertainties over the US debt limit appeared to be taking centre stage with investors remaining cautious.

It depreciated against the euro to 4.8863/4.8890 from 4.8839/4.8915 at the close on 12 May and eased vis-a-vis the British pound at 5.6169/5.6200 versus 5.6082/5.6169 previously but rose against the Japanese yen to 3.3010/3.3031 from 3.3233/3.3290.

Similarly, the local currency traded mostly lower against ASEAN currencies.

The ringgit weakened vis-a-vis the Thai baht to 13.3045/13.3174 from 13.1658/13.1922 on 12 May’s close and declined versus the Indonesian rupiah to 303.6/304.0 from 303.4/304.1. It had also slid to 3.3592/3.3616 against the Singapore dollar compared with 3.3552/3.3609 last Friday but was almost flat against the Philippine peso at 8.02/8.03 from 8.02/8.04.

Some suggest, it is the U.S. debt ceiling, others say it is the Industrial Production Index, or that the 5.6% GDP growth in the first quarter of 2023 was not just good enough to stem the slide. Exchange rate depreciation stem from several reasons, as explained previously in an earlier article.

The above graph shows the impact of inflation and the resultant central bank interest rate hikes. To stem inflation, the Fed and BNM have been working overtime in raising key interest rates. So, the Fed Fund rate from near zero in 2021 has moved to 5% by 2023. Similarly OPR moved from 1.75% to 3% in 2023. The differential between OPR and Fed Fund rate of 1.67% has turned negative 2.08% by May 2023. What does that mean? U.S. rates are more attractive than Malaysian ones, so funds have moved to the U.S. This is how interest rate arbitrage works. The result – ringgit depreciated with ringgit sold for USD.

How can BNM stem this? It will need to move the OPR close to the Fed Fund rate or above domestic inflation. This is not possible because growth will be affected? That’s the general paradox. But BNM could do better to reduce the differential (OPR vs Fed Fund rate) and completely annihilate inflation. Some businesses and consumers will scream. But that’s the price for killing inflation and halting exchange rate slide.

Turkey follows a growth over inflation strategy. In other words, interest rates are kept low and inflation roars above 50%. The result, USD1 in 2023 is 19.68 TL (Turkish lira) on 16 May 2023 compared to USD1 to TL 1.45 in Nov 2006. Are we keen to follow this model? Imported inflation will destroy us even if growth is above 8%.

Where will this end? The long-game for importers or exporters is a stable exchange rate regime. Confidence, stability and narrowed interest rate differential should keep us in the RM4.20 – RM4.50 range to the USD. Can we do that?

Reference:

Ringgit ends lower versus greenback on recession fears, Bernama/FMT, 15 May 2023

Will OPR Hike Make Banks Richer?

The outcome of Bank Negara Malaysia's move to raise the country's overnight policy rate is that banks will earn more at the expense of the borrowing public. The central bank's decision to raise its Overnight Policy Rate (OPR) means that borrowers will pay more to service their variable-rate loans, which are mainly personal financing, and housing and business loans.

The local banks' earnings could bump up by 2.0-4.0 per cent, some analysts have estimated. This is after OPR was raised by 25 basis points (bps) to 3.00 per cent in a move that surprised market participants.

Source: https://en.wikipedia.org

Analysts at Hong Leong Investment Bank Bhd (HLIB) estimated that over a one-year forward earnings, the 25bps rate hike would increase the banks' net profit by 3.7 per cent or slightly more than RM1 billion to RM30.07 billion from RM28.99 billion forecasted earlier.

Malayan Banking Bhd (Maybank), for example, may see its estimated net profit during the period rise by about RM310 million or 3.4 per cent to RM9.56 billion from RM9.25 billion as a result of the hike. CIMB Group Holdings Bhd's earnings will likely grow at a faster rate of 5.2 per cent to RM6.63 billion from RM6.3 billion, while Public Bank Bhd's may edge up 1.9 per cent to RM6.82 billion from RM6.69 billion.

HLIB, however, named smaller players Alliance Bank Malaysia Bhd and BIMB Holdings Bhd as the biggest gainers in terms of growth pace. Alliance Bank's net profit should grow 5.8 per cent to RM751 million from RM710 million and Bank Islam parent BIMB's earnings to jump 8.4 per cent to RM690 million from RM637 million.

Every 25bps OPR hike would widen sector net interest margin by 5.0-6.0bps which in turn, lift up earnings forecast by 3.0-4.0 per cent (on a full year basis), without taking into account of potential market -to-market losses and higher defaults. Alliance Bank and BIMB would benefit the most while Affin Bank Bhd and Public Bank are poised to gain the least.

Kenanga Research said similar to the preceding 25 bps OPR hikes, the annualised impact from the recent move also appeared to be a 1.0-3.0 bps increment to banks' net interest margins. This translates to earnings upgrades of up to two per cent.

Bank Negara, in restoring the OPR to the pre-pandemic level (its fifth increase since Covid-19 and first this year), said it was timely to further normalise the degree of monetary accommodation as the domestic growth prospects remained resilient.

There is no problem with an interest rate hike if that is to contain inflation. But this increase in profit due to no effort of their own is a windfall. Hence a windfall tax on bank earnings is timely. Why are they protected? It is time for the banks to contribute excess profits to the Government coffers for the benefits of the rakyat. And when banks are in trouble, it is the taxpayers’ money that is used to bail them out.

Reference:

OPR hike: Banks get richer (by RM1 bil?), borrowers squeezed more, NST Business, 8 May 2023

Should We Care About Inequality?

Since World Bank economist Branko Milanovic published his book The Haves and the Have-Nots in early 2011, the discussion over inequality has heated up around the globe. The focus on disparities in income and opportunity comes as the United States and Europe continue to struggle with an economic downturn that appears to be widening the gap between rich and poor. Inequality is getting more attention in some developing nations such as China and India. A growing body of research indicates that growth and decreasing poverty rates in regions such as East Asia are coinciding with rising inequality which, then leads to social tensions.

Globally, inequality may be shrinking as economic power shifts and new markets emerge. Within many nations, just the opposite trend is at work: The gap between rich and poor is widening. So where are we on inequality and why does it matter?

Source: https://www.wikiimpact.com

Some studies show that high inequality encourages poor people to choose very high tax rates on the rich, which reduces investments and growth rates. Another is that the social stability and the social fabric of a society are torn apart if there are very large income differences. It reduces investments and discourages economic activity.

In Europe with the large cuts in social programs, there are very high rates of unemployment, particularly among the young. On the other hand, you still see huge incomes in the financial services sector. Some of these high incomes are no longer seen as legitimate. 

Brazil and China are interesting examples, and for two opposite reasons. China has had a very high growth rate for more than 30 years and incomes have increased by probably a factor of five. China has also had a huge increase in inequality.

China’s “Gini” – the scale economists use to measure inequality – was 42.5 in 2005, up from 29.1 in 1981, according to World Bank estimates. The higher the number, the more unequal the country is. China’s Gini is now approaching that of many Latin Americans countries. Since growth in China has been so outstanding, the overall poverty reduction has been very substantial – despite the rise in inequality.

Brazil represents a different trend. Brazil still remains one of the countries with the highest inequality in the world. But the level of inequality was reduced over the last 10 years. High growth rates and a reduction in inequality helped reduce poverty – although Brazil is more unequal as a nation than China. Brazil’s Gini was 54.7 in 2009, down from a high of 63.3 in 1989. 

As far as inequality between nations is concerned, there isn’t much people or nations can do because we don’t have a global government that can address this.

If people in rich countries really want to make a difference they could, for example, look at their country’s policies on migration. If you believe that there is a certain injustice in large global income gaps, you might want to work to promote freer migration.

Studies have shown that if the foreign-born labor force in developed countries rose to represent 3 percent of the domestic labor force, this would reduce global poverty by more than all the aid and development programs do. The doors to prosperity would be opened for many poor migrants, and the world as a whole would be better off. That doesn’t mean that individual countries would all benefit, or that individual groups of people would. Migration is a political issue and an issue with tradeoffs.

And most times migration is not because of economic reasons but political. If you bomb Afghanistan, Libya, Iraq and Syria, shouldn’t you expect displaced people to migrate to a more stable nation? So, the developed world has to realise that “boat” people are not just because of syndicates or gangs but due to political upheaval in affected countries left by the Western world. Sort that and we have a more just world.

Reference:

Why we should care about inequality, The World Bank, 30 March 2012

How Should We Fight Monopoly Capitalism?

 The global economy is dominated by huge corporations. These huge businesses wield enormous power, crossing borders, avoiding laws and taxes, compelling governments to compete with each other for investment. The biggest corporations have captured eye-watering wealth, which far outweighs the economic power of most countries on earth. And that wealth and power is only growing.

As the world is battered by a cost of living crisis, still recovering from the worst pandemic in a century, and struggling to cope with the effects of disastrous climate change, the profits of the biggest 500 firms on the planet nearly doubled, exceeding $3 trillion in 2021. Their combined income amounted to an almost unimaginable $38 trillion – equivalent to nearly 40% of the entire world economy. That’s more than the GDP of all but the very richest countries in the world combined.

The combined income of just the five biggest corporations in the world was more than the income of the poorest 2 billion people put together – one-quarter of the world’s population. One single corporation – Walmart – earned more than half a trillion dollars. That’s more than $1.5 billion every day, exceeding the GDP of even wealthy countries like Austria or Norway. Meanwhile, Apple, the most profitable private corporation in the world, saw its profits rocket by 65% to $95 billion.

These riches aren’t accidental. These gigantic corporations have captured the economy, giving them the power to set prices, in sectors including food and energy. So while food and energy costs rise dramatically for ordinary people, corporations in those sectors are under no pressure to lower prices even as their profits spiral into the stratosphere.

Corporate concentration is growing, with those at the very top acquiring rivals. Just in the world of Big Tech – one of the richest sectors of the economy – the five biggest firms, Google, Amazon, Facebook, Apple, Microsoft, have bought out over 1,000 companies over two decades, and until 2022 no regulator, anywhere, stopped even one of them.

The problem is particularly acute in the US, where recent research finds that the top 1% of corporations account for a truly astonishing 81% of business sales and 97% of business assets. More worrying still, the top 0.1% alone accounts for 88% of corporate assets and 66% of sales. But the same trend can be seen across Europe and much of the world. And here too, the growth in corporate power has been met, at least until recently, with little action. Of 8,000 proposed business mergers the European Commission was notified of since 1990, only 30 (less than 0.4%) were blocked.

Part of the problem lies with the rules of the global economy – rules often designed by the very corporations who benefit from them. This in turn hand more power to these same corporations in a vicious circle. Some of these rules, have allowed and even encouraged corporations to put profiteering and speculation ahead of their supposed purpose, whether that’s making medicines or producing food. Far from encouraging creativity and innovation, monopoly power has stifled it.

So monopoly capitalism doesn’t simply drive higher prices, it shifts wealth far more fundamentally from the 99% to the 1%. And from poorer to rich nations, driving huge inequality. It is shifting power – undermining democracy and making it harder to achieve policies needed to deal with, for instance, climate change. Indeed, monopoly capitalism entails the capture of decision-making by and for elite private interests. Only by reclaiming, breaking, decentralising and dispersing this power can we hope to make democratic decisions which meet the public interest.

That gravitation to a single company in an industry not unique to the U.S., Europe, China or India but also for us in Malaysia. For example, power generation is now in the hands of TNB. This was the situation before privatization. For all the rhetoric, TNB has got its way on power generation. We, as consumers, are at their mercy! The Government will have to increase tariff at the behest of TNB, since there are no substantive alternative provider of power. And this is despite TNB having profits of RM4 billion or more each year. The same is true for sugar, flour, rice or airports. Failed monopolies like LRTs or MRTs are Government-owned. That’s because its social pricing strategy or a failed business model. If we believe in good governance then business monopolies have to be divested or new licenses are issued. More competition is always good for the industry and the consumer.

Reference:

Monopoly capitalism – what is it and how do we fight it? Global Justice Now, 21 March 2023

Eight Habits That Will Damage Your Brain

You pull out the key to open your house. You unlock the door and get inside. Then several hours later you're looking for the key and wondering where it is. And you discover that you have left it behind on the door. Has this happened to you?

A Russian psychologist, Bluma Zeigarnik and her friends went out for dinner to a restaurant. They had a lovely meal. Guess what the highlight was? It was the service. More specifically, their waiter. He had an amazing memory. So as everybody placed their orders, he remembered every little detail, without writing anything down. He remembered who ordered what. And how they wanted it. Zeigarnik and her friends were all amazed by the waiter's memory.

After the meal, they were driving back when Zeigarnik discovered that she had left her jacket behind in the restaurant. So she turned around, drove back to the restaurant and sought out that friendly waiter who she knew would be happy to help her locate her jacket. Imagine her horror though when she found the waiter, but the waiter didn't even recognize her. What happened?

It got Zeigarnik thinking. And her research then showed how our brain tends to work. When a task is completed, our brain hits the delete button. And our memory gets wiped clean. Our short term memory struggles with space to retain information. So it keeps only the unfinished tasks alive. And the minute a task is completed it hits the delete button. And that's why waiters at restaurants will remember every little detail of your order. But only until the bill is made. That’s why when we photocopy a document, we pick up the copy and walk away, leaving the original behind. This has come to be known as the Zeigarnik effect. A term that describes how our short-term memory deletes completed tasks. Fascinating, isn't it?

The Zeigarnik effect might explain why at a bank’s ATM, you are required to pull your card out before collecting the cash. They know Zeigarnik will be at play and once you collect the cash, the task is finished and good chance you will forget to take your card back.

The director of the George Washington University School of Medicine argues that the brain of an older person is more practical than is commonly believed. For an older person, the interaction of the right and left hemispheres of the brain becomes harmonious, which expands our creative possibilities. That is why among people over 60 years of age you can find many personalities who have just started their creative activities.

Of course, the brain is no longer as fast as it was in youth. However, it gains in flexibility.  Therefore, with age, we are more likely to make the right decisions and are less exposed to negative emotions. The peak of human intellectual activity occurs around the age of 70, when the brain begins to function at full strength. Some countries have leaders above 70, Joe Biden for example.

The characteristics of the brain between the ages of 60 and 80:-

 1. Neurons in the brain do not die, as everyone around assumes. The connections between them simply disappear if one does not engage in mental work.

 2. Distraction and forgetfulness arise due to an overabundance of information. Therefore, it is not necessary for you to concentrate your whole life on unnecessary trifles.

 3. From the age of 60, a person, when making decisions, does not use one hemisphere at the same time, like young people, but both.

 4. Conclusion: if a person leads a healthy lifestyle, moves, has viable physical activity and is fully mentally active, intellectual abilities do NOT decrease with age, they simply GROW, reaching a peak at the age of 80-90 years.

 So do not be afraid of old age. Strive to develop intellectually. Learn new crafts, make music, learn to play musical instruments, paint pictures! Take an interest in life, meet and communicate with friends, plan for the future, travel as best you can. Do not forget to go to shops, shows.  Don't stay alone, it's destructive to anyone.  Live with the thought: all good things are still ahead of me!

Reference:

The Zeigarnik Effect, 8 habits that damage your brain, New England Journal of Medicine

Foreign Investments Drive EPF Dividends?

The Employees Provident Fund is set to announce its first quarter performance over the next three to six weeks. Of interest is the performance of its overseas assets, in particular foreign equities. 

Given that return on investments (ROI) from its foreign investments are significantly above that of its domestic investments, dividends from the EPF would have been much lower had the provident fund not decisively diversified more of its investment assets overseas just over a decade ago.From 13% of its portfolio outside Malaysia in 2011 to 20% in 2013 and 28% in 2017, the EPF had targeted to have at least 32% of its assets overseas since 2017. The 32% threshold was passed in 2020, with the EPF having 36% of its assets abroad in 2022, slightly lower than 37% of its total investment assets in 2021. (See Chart 1.)

The EPF, in its 2021 annual report, described overseas assets as “critical contributors to the EPF’s investment income”. That year, foreign investments contributed to a record high of 56% of the EPF’s gross investment income while making up only 37% of its total investment assets, which stood at RM1.01 trillion in 2021. (See Chart 2.)

Income netted from its overseas investments was enough to pay 3.4% to 4.1% dividends in the year the EPF announced the headline-grabbing 6.1% dividend (conventional) for 2021, our back-of-the-envelope calculation shows.

The ROI for foreign assets in 2021 was 9.97% — double the 4.76% for its domestic assets — and the highest in at least three years, possibly enhanced as the ringgit weakened versus the US dollar (see Chart 3). The ROI from foreign-listed equities alone was even higher at 10.44%, according to EPF data.

For the layman, a 30-year-old member who has saved up RM100,000 with the EPF would see that money double to RM200,000 by the age of 42 to 44 if EPF dividends were to average at 5% to 6% per annum over the 12-to-14-year period and thereafter have RM400,000 saved up by the time he or she is 54 to 58 years old at that same rate. If dividends were to fall to just 3% to 4%, however, that 30-year-old with RM100,000 savings would only be able to grow that to RM200,000 when he or she is between the age of 48 and 54 — making it tougher to meet the EPF’s recommended basic savings of RM240,000 by age 55. (See graphic.)

When announcing the higher-than-expected 6.1% dividend for 2021 in March 2022, EPF CEO told reporters that the EPF had brought back RM22 billion from its overseas investments “that had been built up over quite a number of years” — some prematurely to meet liquidity needs to satisfy Covid-19-related withdrawals. This was to avoid rattling the local market, where the EPF is already a hefty investor.

It is not immediately known if the EPF also did premature selling of foreign assets in 2020 in preparation for liquidity needs from Covid-19-related withdrawals, given that the i-Sinar withdrawals (which saw RM58.7 billion prematurely taken out from the EPF in 2021) were first proposed in November 2020 when Budget 2021 was tabled, even though criteria for withdrawals up to RM60,000 each were only lifted in February 2021.

ROI for foreign investments remained high at 9.27% in 2022 (above 6.2% of overall ROI) when the EPF’s foreign investments contributed 45% (56% in 2021) to gross investment income even as its proportion to total assets eased to 36% (from 37% in 2021).

The impact of the lack of higher returns from foreign income can, for instance, be seen in the lower dividends paid for shariah savings (4.75% dividend in 2022) compared with conventional savings (5.35% dividend in 2022). The EPF had allocated 43.6% in foreign assets for the conventional portfolio versus only 24.1% in foreign assets for its shariah portfolio. As such, the PM’s suggestion that EPF increase its domestic investments to 70% instead of the present 64% should be disregarded. It is this sort of political interference that caused the failure of many institutions including Bank Bumiputra Malaysia Berhad or Malaysia Airlines Berhad. Let the professionals run the institution.

The fund should be allowed to continue growing members’ retirement savings abroad, as guided by its strategic asset allocation, which naturally allocates most of its assets to Malaysia as its obligations to members are in ringgit. But a judicious approach requires some key criteria being met, and that the Investment Committee will have defined clearly. All this falls away, if EPF is used as a “911” rescue vehicle rather than a retirement fund, for what it was intended originally.

References:

The significance of foreign investments to EPF dividends, Cindy Yeap, The Edge Markets, 9 May 2023

Govt shouldn’t force EPF to invest heavily in Malaysia, says Shahril, KJ, Shahrul Shahabudin, FMT, 11 May 2023

How Indonesia Beat Malaysia in Hockey!

With five minutes and 20 seconds left in the final of the SEA Games men’s indoor hockey final, Indonesia took off their goalkeeper and launched power play. Malaysia were leading 3-0, and putting an extra man in attack at that stage of the match was a moment of desperation for Indonesia. Yet there was method in this madness.

Indonesia scored three goals in three minutes, the last goal coming two seconds from the final hooter, to send the match into a penalty shootout. Defending champions Malaysia, who were crowned Asian champions last year, lost 2-1 in the shootout, making Indonesian indoor hockey the best in Southeast Asia.

Source: https://en.wikipedia.org

One man knew that the players from Indonesia would play their hearts out, although he could never have imagined striking gold was K Dharma Raj, 51. He is being hailed as a sporting hero by the Indonesian media. Dharma Raj is the technical director of Federasi Hockey Indonesia (FHI) and a former coach who had turned the Malaysian men’s and women’s senior teams, as well as the junior squads, into a feared force.

Since the men’s and women’s teams were not gold medal prospects, FHI funded their participation in Phnom Penh. Now, each member of the gold medal-winning team will receive 365 million rupiah (about RM110,000) in bonus, as well as financial rewards from the provinces they come from.

For Dharma Raj, who has been in Indonesia since 2020, the gold medal in Cambodia has been the culmination of a long journey for him and all of his players. He worked with FHI, running trials and coaching, finding and developing kids in 10 provinces, and is still on the lookout for talent in another 24 regions.

We lose the best to other nations whether it is in badminton, medicine, engineering or new cutting-edge research. Why? It is always the “push-pull” factors. We push them out and others pull them with good reward mechanisms. And many are happy that Malaysia push them out or they may not achieve the significance they deserve. 

Remember the hockey team of 1976, fourth in the world! There were all races and the best were selected. Today we have a different policy reflecting an emphasis that says – “We were unlucky”, those are the words from the present players, not mine. How could you say you were unlucky when you were still in the lead until two seconds from the final whistle? Where was your hunger to win for your country?

Reference:

The Malaysian behind Indonesia beating Malaysia for SEA Games hockey gold, Frankie D’Cruz, FMT, 9 May 2023

Is Malaysia Third on Crony-Capitalism Index?

Malaysia has been ranked third behind Russia and the Czech Republic in the latest instalment of The Economist magazine’s crony-capitalism index. The index estimates how much plutocrats profit from rent-seeking industries.

In the latest edition published on 2 May 2023, The Economist said crony capitalists’ wealth had risen from US$315 billion, or 1% of global gross domestic product (GDP), 25 years ago to US$3 trillion (RM13.37 trillion) or nearly 3% of global GDP now. It said some 65% of the increase came from America, China, India and Russia.

Overall, 40% of crony-capitalist wealth was derived from autocratic countries, and amounted to 9% of their GDP. There are some 311 billionaires around the world whose riches are largely believed to be derived from sectors which often feature “chummy” dealings with the state.

The Economist said that to calculate all this, it started with data from Forbes. The magazine had published an annual stock-take of the world’s wealthy for nearly four decades.

In 1998, it estimated that there were 209 billionaires with a total worth of US$1 trillion, equivalent to 3% of global GDP. In 2023, the publication detailed 2,640 billionaires worth US$12 trillion or 12% of GDP. Adjusting for rising prices — US$1 billion in 1998 is now equivalent to US$3.3 billion — there are 877 billionaires (at 1998 prices) with collective worth of US$9 trillion.

The Economist has classified the sources of each billionaire’s listed wealth into rent-seeking and non-rent-seeking sectors. The index suffers from a host of limitations, a few of which the Economist acknowledges, that may explain why some of the results seem so strange. 

• First, the index is likely to be biased against countries in which a large share of the economy is in the Economist‘s “rent-heavy industries,” regardless of how much rent-seeking is actually going on in those industries. 
• Second, the Economist study only looks at billionaires (a point it acknowledges). 
• Third, again as the Economist also acknowledges, the wealth of crony capitalists is sometimes hidden or dispersed. 
• Fourth, there’s the focus on personal wealth itself, as opposed to corporate wealth. The Economist notes that America does relatively well in the study because unlike other countries its “energy billionaires” barely register in the overall economy. But that is partly an accident of history: The U.S. energy industry was dominated by extremely wealthy individuals for much of its early development. 

Crony capitalism suggests someone gets a contract or concession not on merit but on connections. Thereafter, they (the crony) sells or works out a deal with the “real” deliverer of the task/transaction involved. He or she may no longer be in the project but may lend his/her name for purposes of the concession. That’s a crony who is not involved in delivery but secures a financial benefit for securing the concession/contract. Otherwise, Exxon or Mobil are also cronies. The best example of a crony and crony capitalism is the British East India Company. The large number of lobbyists (over 12,000 in Washington) testifies to corruption, cronyism and rent-seeking in the U.S.

Rent seeking does not include those persons that may have invested substantial capital improvements to a project/land. These are developers not rent seekers. Sometimes the lines get fused but a “crony” who develops the project after securing a concession or contract is not truly a crony!

The bottom line is that although lists and rankings always generate buzz, this so-called “crony-capitalism index” probably doesn’t tell us much about relative rates of crony capitalism in these countries. Perhaps rather than using some easily accessible data like the number of billionaires, it might be more fruitful to look at data that measure the actual relationships between these companies and their governments. For example, levels of state support through government-backed loans or subsidies, or the number and kind of political connections between successful firms and governments. In any event, we need to examine our own crony capitalism/rent-seeking image with more objectivity and less emotion.

References:

Malaysia ranked third on the Economist’s 2023 crony-capitalism index, Surin Murugiah, theedgemarkets.com, 3 May 2023

The Economist’s Crony Capitalism Index does not measure crony capitalism, Eden Shiffmann, www.globalanticorruptionblog.com, 31 March 2014

Is EPF Now Favoured for Savings and Investments?

With the increase in the limit of annual Employees Provident Fund (EPF) voluntary contributions from RM60,000 to RM100,000, the EPF has gone from a social security institution that helps the workforce to save for retirement to a savings and investment institution. That’s according to one economist.

Since EPF’s establishment in 1951, employees had to contribute 11% of their income to the pension fund, while employers paid 13% towards the savings of employees earning RM5,000 and below, or 12% for those earning above RM5,000.

Source: www.kwsp.gov.my

The role of the institution seems to have changed. The increase in the voluntary contribution limit, employees or informal workers can save more and enjoy around 5% dividends for conventional and syariah savings every year, which is similar to that of investment banks, Permodalan Nasional Berhad (PNB) and Tabung Haji. But unlike the existing savings and investment institutions, employees and informal workers can only withdraw 30% of their savings via Account 2, while withdrawals are restricted in Account 1 until the account holder turns 50.

EPF’s dividend of 5.35% for conventional savings and 4.75% for syariah savings in 2022, was higher than Tabung Haji (forecast of 2.75% to 3.1%) and PNB (4.6%). The increase in the voluntary contribution limit will benefit EPF, i.e. it has more funds for investments.

In allowing the increase in the annual limit of EPF voluntary contributions, the Prime Minister said it is in line with the changing employment landscape, which has seen an increase in informal jobs and jobs that can generate large but inconsistent incomes.

The PM further said the government also provides an additional contribution of RM500 to almost two million members of the target group, namely those aged 40 to 55 years and those who have savings of RM10,000 and below in Account 1. The additional contribution is intended to help members with low savings accelerate the accumulation of their retirement savings.

To facilitate and encourage members to make voluntary contributions, EPF has introduced a new function on its app, for seamless payment of voluntary contributions to members’ i-Akaun since July 2022. With the addition on the app, EPF has received favourable response, and as of Jan 31 2023, more than 315,702 members have taken advantage of this facility, with a total contribution amount of RM527,700,000. Under-60 self-employed members who have no fixed income or are outside the labour force, such as housewives, can choose to contribute voluntarily at any time according to their ability under the i-Saraan Programme. As an incentive to encourage this group to save under i-Saraan, the government provides a contribution of 15% of the total contribution, subject to the annual incentive limit, which has been increased from RM250 to RM300 for each contributor through the announcement of Budget 2023.

A total of 291,743 members made voluntary contributions under the i-Saraan programme, with a total amount of government incentives of RM33,210,000 having been credited into members’ Akaun 1.

EPF must remain a retirement fund.  The increase in limit (RM60,000 to RM100,000) improves EPF’s liquidity and members return compared to banks and other institutions. In fact, it is better if there is no upper limit. That will be a testimony to confidence in the institution. And EPF has so far shown its ability to invest wisely. Hopefully, the Government will not use it (EPF) as a conduit for some political agenda.

Reference:

With self-contribution cap raised to RM100,000 per year, EPF is now favoured for savings and investments, Arina Musthafa, The Sun Daily, 12 April 2023

Job and Income Security Fears

Job security and income stability are factors that continue to cause anxiety among people globally. Economic uncertainties, inflationary pressures and emerging technology trends are pointing towards more job losses in the near future. The impact is one employees’ current and future financial positions.

About 80% of respondents of a recent survey have postponed their plans to retire early because of this likely financial situation. Many could be forced to work beyond the age of 60 to weather the rising cost of living issue. 

The “2023 Workmonitor’’ survey by Randstad highlights the workforce’s latest sentiment and perceptions of the local job market. The survey attracted 750 respondents from Malaysia.

Anxiety is growing as a result of a number of high-profile retrenchments which included many white-collar roles in technology companies in 2022. About 65% of respondents will not accept a job if it does not offer a significantly higher salary.

People are actively looking for additional jobs to support their ability to pay for essential services and pursue their desired lifestyle. Nearly 40% of respondents have quit their jobs due to low wages and 34% say they are thinking about resigning so that they can find a better-paying job to overcome the rising cost of living predicament

Many have resorted to starting their own business or taking on delivery jobs that provide an additional source of income. In uncertain times, we have to adjust to circumstances, curtail expenditure and look at new possible sources of income.

Reference:

Job and income security fears, B.K. Sidhu, The Star, 15 April 2023

BNM’s OPR is Up!

Bank Negara Malaysia raised its overnight policy rate (OPR) by 25 basis points to 3% on 3 May from 2.75% previously. The ceiling and floor rates of the corridor of OPR is now 3.25% and 2.75% respectively.

With Covid-19 over, there is less funds used for a stimulus or accommodative stance. Further, the economy has strengthened and a too accommodative policy will leave inflation elevated and exchange rate depressed.

Source: https://en.wikipedia.org

The central bank had paused its rate hike cycle at its January and March policy meeting but raised 100 bps or 1% between May and November 2022, primarily due to a surge in inflation. Headline inflation and core inflation has moderated in 2023, averaging between 2.8% - 3.8%. However, core inflation may remain elevated with firm demand conditions. Price control and subsidies assist in ameliorating any upward pressure.

China’s rebound provides hope for better growth for the region. But geo-political tensions, market risks and higher rates by other central banks may dampen GDP growth.

The majority of economists had viewed a pause of the OPR increase. The former Finance Minister, Lim Guan Eng had urged BNM not to raise rates. His reasoning was that MSMEs will be impacted by rising costs and a squeeze on profit margins. Any business that cannot navigate a rate of 3% - 5% should not be in business. 

Meanwhile, savers will welcome the move as well as importers of food items and other finished goods. This (OPR increase) will suggest USD to RM rate to narrow and provide a reasonable exchange rate for travel, education and trade. Hopefully, BNM stays the course and uses its wisdom to monitor inflation and accommodate growth.

Reference:

BNM raises OPR to 3% in surprise move, FMT Business, 3 May 2023

The Ecosystem of Israel’s Foodtech Sector

The World Bank estimates that the global food and agriculture industry is valued at over $8 trillion and makes up more than 10% of the global GDP. That’s huge for innovation and technology.

Foodtech covers an array of areas that includes nutrition, packaging, food safety, processing systems, cultured meat, novel ingredients, retail and restaurant tech, health and wellness, and alternative proteins.

Israel is home to over 400 foodtech companies, around half of which were founded in the last five years. 

Source:https://en.wikipedia.org

The foodtech sector, requires expertise from multiple fields such as chemistry, biology, physics, artificial intelligence, robotics, computer vision and more.

But it takes more than just having the knowhow and the right group of people to form a successful foodtech company, entrepreneurs need to look at foodtech as a sector. The classic Israeli entrepreneur would target investment-attractive fields such as cyber and fintech, but in recent years, entrepreneurs have a growing desire to generate an impact on the environment and humanity’s health. 

Israeli foodtech has become an appetising prospect for global investors, attracting money from some of the world’s largest food corporations such as Coca-Cola, Mars, Mondelez, Tyson Foods, Nestlé, Danone, AB inBev, Starbucks, PepsiCo, McDonalds, Heineken and Unilever. 

At the end of 2022, Future Meat Technologies, which produces cultured meat, secured $347 million, marking the largest investment in the foodtech start-up industry in Israel. Israeli cultured meat Aleph Farms has completed a $105 million Series B financing round led by the Growth Fund of L Catterton. Remilk, which produces animal-free milk and dairy products by generating milk proteins via a microbial fermentation process, raised $120 million this year in its Series B – the single largest investment in a cow-free dairy company to date. 

According to a recent report by The Good Food Institute (GFI) Israel, the Israeli alternative protein sector alone raised $623 million in 2022, a 450 percent increase from 2020’s $114 million. Israel came second, behind the US, in terms of total value of investments secured. There are more than 100 alternative protein companies in Israel – over 40% are considered start-ups with breakthrough technology that could shape the future of protein, according to the GFI Israel report.

According to Invest in Israel, a report by the Ministry of Economy and Industry, the government has targeted the north of Israel and the Galilee region as the main geographic zones for government investments and via four main areas: the establishment of Israel’s first foodtech industrial compound – The National FoodTech Centre – in Kiryat-Shmona, the establishment of a new foodtech research centre as part of the compound in addition to the formation of the Sparks’ Fresh Start Incubator, a government-backed incubator for food technology, led by some of Israel’s largest food corporations as well as various food-tech VCs, and the ‘high salary plan’, managed by the Ministry of Economy and Industry. The plan provides subsidies to high-tech companies that employ workers at high salaries.

 

Perhaps one of the most significant and original incubators in the country is renowned The Kitchen FoodTech Hub. Founded in 2015 by the Strauss-Group as a part of the Israeli Innovation Authority incubators’ program, The Kitchen addresses global food challenges by harnessing Israel’s renowned innovation eco-system. It has raised over $222 million in capital, creating more than 250 jobs and comprises a portfolio of 22 companies across a range of foodtech areas.

According to a separate report by the Good Food Institute (GFI) Israel, and consulting multinational EY, about $450 million will be required over the next 10 years to build the infrastructure to support the local industry in the form of multidisciplinary research centres, technology transfer programs (from university labs to industry), research grants and training, and an additional $74 million should go toward building specific innovation hubs for cultivated meat, plant-based proteins, and fermentation tech start-ups. It said the Israeli government should supply 56% of this funding, or almost $291 million, and the rest will be drawn from private investments in Israel and abroad, according to the report. The researchers estimated that, through the establishment of more foodtech companies, the creation of thousands of jobs, possible future acquisitions, and foodtech exports, the government could stand to gain $8.4 billion in tax revenue.

The Israel Innovation Authority has just approved the establishment of the cultivated meat consortium, one of the biggest in the world, to invest in cell-based meat.

Together with the business sector and academia, $20.4 million will be invested in the consortium over three years, half of the sum by the government. Market sources believe that the total amount invested may eventually be more than $21.6 million.

The consortium will be led by Israel food giant Tnuva and comprise 14 companies and 10 academic laboratories. Consortium members will also include Aleph Farms, SuperMeat, the Hebrew University of Jerusalem and Tel Aviv University. One of the main aims of the consortium is to connect between academia and industry and bring academic research about cultivated meat ‘down to earth.’  Israel cultivated meat companies raised $507 million in 2021 led by Future Meat, which raised $347 million for a production plant in the US, and Aleph Farms, which raised $105 million.

The ever-growing world population requires new ways of producing food. Unless the Government is involved in funding and setting-up regional clusters, there is a gap between research and commercialisation. If we are smart we could learn from Israel.

Reference:

The ‘start-up nation’: the ecosystem of Israel’s foodtech sector, Candice Krieger, www.foodmatterslive.com, 20 April 2022

Soft Power for Language?

There are proposals to legislate many of the wishes of the Dewan Bahasa dan Pustaka (DBP), the body responsible for promoting the use of the Malay language in Malaysia.  This may go to the Cabinet for approval and become law soon.

We’re a nation caught between two or three language stools, and at least two are about to crash. Our standard of English, a language so critical to us in a competitive world, has been deteriorating. 

Source: https://id.wikipedia.org

Spoken and written English and overall education standard has dropped over the years. The standard of Bahasa Melayu, or Malay, is also moderate to poor. In the hands of social media users, much of it is pidgin Malay. A rotten hybrid of English and Malay indiscriminately used. Such usage tends to be almost exclusively among those whose command of English is poor. They may have taken many English words and Malayised them into neither English nor Malay. The order of infamy – gais, terrer, dungibap, kipidap, rekomen, eksiden, kazen, wasep, besday, eskrim, jem, rilek, kamon, femes, kol, kontek, ohsem, kondem.

You can figure out the original (ori) English words, but if you can’t, here they are: guys, terror, don’t give up, keep it up, recommend, accident, cousin, WhatsApp, birthday, ice-cream, jam, relax, come on, famous, call, contact, awesome, condemn.

Most of these words have perfectly good Malay equivalents – why terrer (for terror, colloquially meaning great) when hebat is an even nicer word? Yet these horrible words have become commonplace, especially amongst the young people. Older folks like me have less clue on the pidgin Malay. DBP, as the guardian of the language is concerned. But it must also ask why as a nation, we have failed so miserably here.

Many champions of the Malay language are happily pushing the language down people’s throats and counting it as a political victory. But some of these champions send their children overseas to enjoy benefits and privilege of languages they want to deny others.

If you’re a Malaysian and your Malay is poor, you should be a little embarrassed yourself. You may have made the effort to do what good citizens should do in a multicultural and multilingual society. You probably have tons of excuses on why the faults lie elsewhere, but you still should be concerned. DBP is coming up with major proposals in the name of safeguarding the dignity of Malay. If the proposals go through – and given the sensitive nature of it, nobody wants to be seen as against it – then we’ll see the DBP with expanded powers, workforce, budgets, associated business entities and bloated bureaucracy.

DBP’s proposals are based on French laws, but the use of such laws to justify enforcement powers makes no sense. The so-called Toubon law is a joke that does nothing except highlight the fear of the shrinking importance of French as a global language, especially at the hands of English. In many western European nations, even those with such a long and proud history such as Germany (and the various Viking kingdoms), you will find a majority of the population can speak English. Among the young, it’s close to 100%. If anybody has a reason to push back against English, it’s them (the Germans/Vikings). These are a people who’ve spent centuries warring against the English but are now pragmatic enough to know and do what’s good for their economic wellbeing.

Sodexho, a French company with half a million employees worldwide, has made English its official language. So, too, Airbus Industrie or Nissan, Rakuten etc, all from countries known to be super proud of their culture and heritage.

The English language has won hands down, doing so without any laws protecting it. This success, helped tremendously by the rise of English-speaking America as a world power. The result is that more people know Shakespeare and Mark Twain than literature of similar quality in China or India or other non-Anglo civilisations. That’s their loss!

Soft power, such as language (and the culture) help drive commerce and is often more powerful and lasting than the hard power of weapons and arms. You may hate America, but you are not going to give up Hollywood or Coca Cola. China knows that, and is working hard to expand its own soft power. So too India!

The DBP should learn how English won and became the most spoken language in the world, by the number of speakers who use it as either their first or second language. In Malaysia, English ranks second only to Malay. And we should try to emulate those who have succeeded, not those who have failed. So, it is best to pursue a two or three-language strategy, like the Scandinavian countries, and have Malaysians able to handle global trade and commerce for generations to come.

Reference:

Dewan Bahasa must learn the language of soft power, Adzhar Ibrahim, FMT, 15 April 2023