Reboot Langkawi?

 The “Jewel of Kedah” is losing its shine – the number of visitors to Langkawi has been shrinking since September 2023. It will miss its targeted visitor arrivals for 2023 by at least half a million. Since September, it had on a month-on-month drop of almost 20% compared to 2022 (this is according to the Langkawi Development Authority). These monthly tabulations comprised arrivals at the jetty, marinas, airport and sea port in Langkawi. There is a “great need” to rebuild Langkawi’s image as a global island hideaway.

The first thing foreign guests ask upon checking in is whether they can wear bikinis or short pants at beaches. Many are worried about being publicly castigated for it.

In September, Tourism, Arts, and Culture Minister told the Dewan Rakyat that his ministry had received reports about non-Muslim travellers to Langkawi being stopped from buying alcohol and wearing shorts in public, besides other complaints about high food prices there. However, Kedah Mentri Besar dismissed these complaints as baseless.

An even bigger fiscal barrier is the cost of flights. If you bring your whole family from Kuala Lumpur to Langkawi, the flight tickets alone can cost over RM3,000, almost twice the cost during pre-pandemic times. The declining number of visitors to Langkawi is a stark contrast to 2022 scenario when the island saw a buoyant recovery after Covid-19 pandemic restrictions were lifted with 2,581,605 arrivals recorded.

Many are angry with the negative publicity. But the state government is in a quandary – to impose strict Islamic regulations like Kelantan or be more progressive like Qatar or Dubai. Unless they get this picture clear and promote accordingly, Langkawi will be a forgotten island! There is always Phuket or Bali for foreigners. So, what’s so special about Langkawi?

Reference:

Reboot Langkawi as island paradise, Arnold Loh, The Star, 18 November 2023

Growth in 2023 Moderates to 3.7%

Slower global trade, the global tech downcycle, geopolitical tensions and tighter monetary policies globally had weighed down Malaysia’s gross domestic product (GDP) growth for the fourth quarter of 2023. The quarter’s GDP growth at 3% came in lower than the 3.4% advance projection released last month, and compared with the 3.3% expansion in the preceding quarter, according to Bank Negara.

The quarter’s slower-than-expected growth had also weighed on the whole year’s GDP growth figure, coming in at 3.7% compared to 8.7% in 2022.

The economy was supported by resilient domestic demand that rose 5.2% in the fourth quarter which helped cushion the 3.2% decline in Malaysia’s trade, as exports softened on the back of cooling global demand. Stronger growth of between 4% and 5% in 2024 is expected.  The government is also determined to narrow the fiscal deficit to 4.3% in 2024.

Economists are expecting that GDP growth might pick up and improve in 2024, premised upon any change in the above external factors – such as the normalising of demand from a global tech recovery. They also note the resiliency of the local economy in the fourth quarter amid these external weaknesses, namely, the support from domestic demand. However, there are some others warning that external demand will continue to be weak this year and that trading nations should brace for a prolonged slowdown.

The Socio-Economic Research Centre expects a 3.5% to 4% economic growth in the first quarter of 2024, supported by festive spending and stronger tourist arrivals amid preparations for the fasting month of Ramadan. GDP to grow by 4.5% in 2024, aided by a gradual recovery in exports and continued growth in domestic demand. Both fiscal and monetary policies would remain supportive of the economy. Private consumption to grow by 4.3% to 4.6% in 2024 compared with these historical figures of 4.7% in 2023, 11.2% in 2022 and 7.1% per annum from 2011-2019.

The US economy will moderate due to the lag impact of higher interest rates. China’s economy is expected to remain lacklustre in the first half of the year, mainly due to weak property market conditions. Renewed inflation risks and the adverse climate change would weaken the global economic momentum.

The electrical and electronics exports (which account for around 38% of Malaysia’s total exports) would be buoyed by higher demand. The global semiconductor sales are projected to rebound strongly by 13.1% this year versus an estimated decline of 9.4% in 2023 (according to RHB Research). Overall, RHB Research keeps its GDP forecast at 4.6% for 2024.

The Statistics Department notes that Malaysia’s slower GDP growth in 2023 is in tandem with other Asean countries which also reported moderate growth. Singapore’s economic growth slowed to 1.1% in 2023 from 3.8% in 2022, while Indonesia’s growth moderated to 5.1% from 5.3% and the Philippines expanded 5.6% as compared with 7.6% previously.

China expanded further at 5.2% from 3% in 2022 while the United States increased to 2.5% from 1.9% in 2022.

The government agency notes that Malaysia registered a current account surplus of RM253.4mil in the fourth quarter of 2023, supported by the travel component. For 2023, the country’s current account surplus stood at RM22.8bil, as compared to RM55.1bil a year ago, a 40% decline while the financial account recorded a net outflow of RM18.9bil against a net inflow of RM12.4bil in 2022. That’s a negative outflow of about RM6.5 billion. And with negative real interest rate against the US, the Ringgit will be under pressure. So, if we improve our fundamentals---growth rate, inflation, trade balance, positive net inflow of funds, then we will have a positive outlook and a brighter future for the Ringgit. 

Reference:

Growth in 2023 to moderate to 3.7%, Daniel Khoo, The Star, 17 February 2024

Will CPO Hit Above RM4,200 Per Tonne Soon?

Crude palm oil (CPO) stockpiles are likely to fall below two million tonnes by the end of February, potentially pushing the commodity’s prices higher in the near term. Maybank Investment Bank (Maybank IB) Research has projected that CPO prices would briefly rise above RM4,200 per tonne within February and March before settling at lower levels in the second half (2H) of 2024.

The Malaysian Palm Oil Board (MPOB) showed January stockpile hit a six-month low at 2.02 million tonnes, down 12% month-on-month and 11% year-on-year (y-o-y), on seasonal decline in output, while exports remained resilient ahead of Ramadhan demand.

Source: https://en.wikipedia.org

Meanwhile, Hong Leong Investment Bank (HLIB) Research maintained its CPO price forecast at RM4,000 per tonne for 2024 and RM3,800 per tonne for 2025. It said it expected El Nino’s impact on palm production and prices to kick in around mid-2024.

HLIB Research kept its “neutral” stance on the sector, given the absence of notable demand catalyst.  Kenanga Research was also “neutral” on the plantation sector, noting its valuation at 1.2 times price-to-book should be supportive against further substantial downside. But it added that there was no strong upside lift either. Kenanga Research maintained its forecast for average CPO price at RM3,800 per tonnes for 2024-2025. The growth in palm oil supply had moderated on falling yields, largely on ageing trees as well as slower new planting.

This is not sustainable. We need to focus on productivity and automate processes while understanding current markets and developing new ones. The EU will be biased against palm oil for various reasons. We could engage and neutralise sentiments or find other solutions. The initiative lies with private and government sectors and also other major suppliers like Indonesia working together with us.

Reference:

CPO likely to hit above RM4,200 per tonne soon, The Star, 15 February 2024

Should it be a Bumi or National Economic Agenda?

When the Malay Economic Action Council (MTEM) was asked why multiethnic Malaysia should pay for another bumiputra-only development agenda, two stories were suggested:

First was of an honest, accomplished expert in his field, who was leading the Malaysian operations of a multinational corporation. He then ventured to build, what he had hoped would be, a successful bumiputra firm in that field. But after sinking RM30mil into a factory and even selling his products in overseas markets, he could not get enough government contracts even though he offered competitive prices. But because he did not get enough government contracts, he had to shut down the factory, which he had built in his hometown to give the local youth jobs.

Source: https://mtem.my/

The second story is of a bumiputra entrepreneur who invented a form of lithium technology that could be used in electric vehicles. But after filling out countless application forms, the entrepreneur just could not get enough funding from Malaysian agencies or state corporations to turn his invention into something commercially viable. This is despite the slew of government programmes and initiatives designed to help budding bumiputra entrepreneurs.

As they illustrate, they (MTEM) say Malaysia needs another bumi-focused economic policy because the previous ones had failed to achieve their aims despite the fact that they were overseen by governments that were Malay and bumiputra-centric.

Some 3,000 participants are expected to attend the three-day congress on 29 February, which will focus on, among other things, new technologies that are expected to be developed over the next decade as well as the performance of agencies that were set up and entrusted to champion the bumiputra agenda since the first congress in 1965.

However, since initiatives to help uplift bumiputras economically have been around for more than 50 years with the introduction of the New Economic Policy (NEP) in 1971 – and given that other sectors such as schools and hospitals are also in dire need of funds – rumblings remain as to whether Malaysia still needs more of these policies.

In 2022, the median household monthly income for a bumiputra household was RM 5,793 while for an Indian family it was RM 6,627 and RM 8,167 for Chinese families. According to the 12th Malaysia Plan (12MP) while bumiputras made up 65.1% of all households in 2019, 71.4% of them were in the B40 (lower) income group. Although Chinese households accounted for 25.9% of total national households, 39.2% of them were in the T20 (top income) group and 19.5% were in the B40 group.

The longest and most familiar bumiputra economic agenda is the second prong of the NEP after its primary objective of wiping out poverty regardless of ethnic group, gender or creed. The NEP’s second aim was “to restructure society by eliminating the identification of race with economic function”.

This would be done through quotas, reservations and other forms of special treatment for the community. According to the 12MP, 39.1% of medium, small, and micro enterprises are bumiputra. But of that number, 82.8% are at the micro level with low value-added products and services earning less than RM300,000 a year.

The attaining of 30% of all corporate equity has been an obsession. 

It then became a distribution of rents – IPOs, shares, licenses, permits, APs, contracts. These are pure rents. Not even the means to create rents. And rents are not sustainable and their preservation is distortionary. Most of these rents went to a small, well-connected group of people who were unable to use these to make more profits.

Another big reason why past policies have failed genuine entrepreneurs are factors like corruption, patronage, cronyism and the Ali Baba culture.

We are in the cycle of renew, re-set and repeat. It takes courage to make so-called bumi agenda, a national economic agenda. We need to have an “Oversight Group” from Parliament to monitor corruption, collusion or cronyism for any policy initiative and to review progress of specific goals. Otherwise, we will continue to do more talking with little or no positive outcome!

Reference:

Why another bumi economic agenda? Sheridan Mahavera, The Star, 18 February 2024

Water Recreation Park “Strictly for Muslims”?

A water park near Sungai Petani has generated ripples of interest not only for its recreational attractions but due to an odd feature – it limits the use of its pools to Muslims only. The Vibes reported that a staff member of the Park reasoned that the facility is small and the management caters to local villagers in the nearby Kuala Muda area who are predominantly Muslims. Non-Muslims are welcome but are not to use the pools. 

The Berangan Aqua Park is located at Kampung Kelang Makau, which is surrounded by tranquil padi fields and cottage homes. It is classified as a tourism product on the Internet. Netizens have also apparently branded it as "Muslim only".  A video posted on YouTube to promote the park describes it as 'Taman Tema Air Muslim Pertama di Utara Semenanjung Malaysia' (first Muslim water theme park in northern Peninsular Malaysia). 

The water park was launched in 2021. It was reported in September that year that the facility was designed to handle up to 50,000 visitors annually. The owner is a diversified local company called the Berangan Group. The chairperson reportedly told Sinar Harian that the daily capacity was about 100 to 130 persons whereas during the Covid-19 pandemic it was restricted to 30 and 50 persons daily. The theme park is nestled in a semi-rural village setting.

Source: https://en.wikipedia.org

Instead of opposing the move of a water theme park restricting entry of non-Muslims to its pool facility by branding it racist, lawyer and social activists Siti Kasim has welcomed the move. The outspoken social critic justified that this would allow others to enjoy public facilities unfettered by what the conservative elements think. After all, she contended that having a Muslim-only facility was great for those who wish to only mix with people of their own kind and more specifically, those who shared the same ideology of what is permissible and prohibited.

If it is restricted to Muslims only, does it go against the spirit of the formation of Malaysia as a multi-ethnic nation with strong tolerance and understanding? It may also go against the spirit of 'Madani' espoused by the Malaysian government which promotes understanding and goodwill. And do we stop here?

References:

Water recreation park raises eyebrows with ‘strictly Muslims’ policy, Ian McIntyre, The Vibes, 2 February 2024

Siti Kassim gives thumb-up for a Muslim-only water park? R. Bala, Focus Malaysia, 

5 February 2024

Hubby Storage Concept at a Mall

Bored and disinterested husband trailing behind an eager shopaholic wife at a mall is common sight in many parts of the world. The blank, vacant look across a husband or boyfriend’s face is really a sad sight. But there might be a solution, as seen in China.

A shopping mall unveiled a novel concept, which was shared on numerous social media platforms and had garnered plenty of responses. The Global Harbour mall in Shanghai has erected several glass pods for wives to leave any disgruntled husband that don't want to be dragged around shops. The picture shows a man comfortably cocooned within a glass cubicle with the essentials – TV screen, computer joystick and a very comfy-looking recliner. 

Many netizens have clamoured for this to be introduced here. Some are from the bored male fraternity. Currently, the service is free, but in future, users will be able to scan a QR code and pay a small sum for the service using their mobile phones.

Source: https://focusmalaysia.my

Some comments posted on Entrepreneur and Start Ups in Malaysia Facebook forum include:

• it was more important that the husband provides the credit card than brute strength as bag-carriers;

• what chance do marriages have if the couple cannot even spend some time together shopping; 

• a gathering spot for lost males is already in place, the Mamak shop or Kopitiam; and

• some additional features to make the contraption the perfect mini man cave could be included.

Given the enthusiasm for this from both sides of the gender divide, this little man-cubicle concept looks ripe for a start-up business. I am all for it! Just give a lock and key to the wife (or girlfriend) to collect him after a marathon shopping spree. But be prepared, the husband or boyfriend could end up fully drunk!

References:

Hubby storage concept at China mall gets netizens’ thumbs up, R. Bala, Focus Malaysia, 13 February 2024-02-14

China mall introduces ‘husband storage’ pods for shopping wives, BBC, 14 July 2017

Weakening Ringgit, No Reason to Sweat? Really?

 The ringgit’s historical low against the Singapore dollar is due to the latter tracking the movement of the US dollar. The ringgit hit a historical low at RM3.55 against the Singapore dollar on 7 February after closing at RM3.54, while also hitting RM4.76 against the greenback. Singapore manages its monetary policies via the foreign exchange, which means when the US dollar strengthens, so does the Singapore dollar. This is to prevent implications of inflationary pressure, bearing in mind that a majority of its basic necessities are imported.

Singapore also has a huge reserve (USD336.8b) and fiscal surplus, unlike Malaysia which has foreign reserves of USD110b and has been in fiscal deficit since the 1998 Asian Financial Crisis.

Source: https://www.imoney.my

If the government puts its mind to achieving fiscal discipline, will we be back on the right track? Really? The other argument is a weaker ringgit is good for exports.

What we have is negative real interest differential with the U.S. The U.S. has its Fed Fund rate at 5.25% to 5.5%. U.S. inflation rate is at 3.1%. The real interest rate is around 2.2%. For Malaysia, our OPR is at 3.0%, while annual inflation rate is at 2.5%.  The real interest rate is therefore 0.5%. So, where do you think the money will flow? From a low real interest rate environment to a higher real interest rate country, financial centres like New York or London will thrive.

And what must we do? OPR must be at 4.75% or inflation drops to 0.75%, which unlikely in the immediate term. Why? With electricity and water tariffs going up and net food imports higher, our inflation rate is likely to be at 3-4% soon. Madani Government waffles when real issues are not addressed. That’s our tragedy!

Reference:

Weakening ringgit, no reason to sweat, say experts, Lydia Nathan, The Star, 8 February 2024