I finally found a bit of time to write again, something I really enjoy doing but so restricted by the numerous priorities in life. One principle I am still trying to instil is "no excuses", which makes sense for me to continue doing something I enjoy. It just takes a spur of the moment to get things started.
It's been quite awhile, February actually, since I last wrote anything about the economy or investing. It's been over a year back in Malaysia, about 1.5 years since completing my degree. My journey in Malaysia has just restarted in full swing. There is something about this country where I always have the vision it could overcome all the difficulties and barriers, becoming a strong and safe country. The country has talent, resources and is well positioned to achieve anything. Changes are being made right at this moment, to reinvent and restructure the entire country. Malaysians hate it when being compared to Singapore, citing the country is much smaller and easier to manage. Those people need to break out of this excuse or we will continue to remain behind. The difference between the two is not the oil and gas fields, rubber trees, oil palm trees or population, it's the people. Any country can go forward if they have the right people in place. Here are a few areas the country needs to improve if there is any hope for the future.
Education is by far the most area for any country to go forward. The standard of education Malaysia is relatively low and this is hampering the progress and productivity of this country significantly. If there is one thing we can learn from the developed countries we are trying to become, it's having an educated population. This country needs more contribution from the locals, but it's quite evident a lot of talent have left for abroad, causing the quality of employment market to fall. We need big changes in this country and it has to start now.
Malaysia has come so far since the Asian Financial Crisis in 1997, with a strong financial system with good ties with the world. It's quite safe to say Malaysia is 'globalised' in terms of trade and tourism, we are a well known country. GDP is growing at a steadily above 5% , foreign investment has increased and the government initiatives to transform Malaysia into a high income economy looks very encouraging. Despite this, the people in Malaysia need to look beyond the borders of the country to truly understand how to develop this country.
Before Malaysia declares itself a developed country in the future, there are many critical issues that need to be addressed. Like I mentioned above, the standard and coverage of education needs a lot of improvement. The standard of curriculum in schools have dropped so much since many years ago. Malaysia's once admirable Universiti Malaya has lost its prestige as a top university. Tertiary students are flocking to foreign based institutions in great numbers. Primary and secondary school education needs to be looked into seriously, the quality of of SPM holders have dropped tremendously and would definitely lose out in the international scene. We need to benchmark the level of our education very closely against international standards to increase the value of human capital in the country. The recent report on unemployed graduates is a flashing indicator on the severity of the decline in quality of graduates in the country.
The current situation in the country is not favourable, we actually lack the resources to educate the population. The two key important subjects of Mathematics and English are not up an acceptable level and this is slowing down the development on of the country. It's absolutely critical more attention is given to address this problem or vision 2020 will continue to remain a dream. Reverting teaching in Mathematics and Science to Bahasa Malaysia is a disastrous policy, taking a few steps backwards from where we currently are. Bahasa Malaysia would be a key language for this country in years to come, but mastering this language alone would leave us trailing behind in terms of an international language. The Malaysia Education Blueprint launched this year has made big plans to improve the education system, I really hope there is enough commitment to push this through.
Going international is something all entrepreneurs and businesspeople need to think about all the time. I read an article a few years back highlighting the lack of well known Malaysian names or brands in the international scene. With the exception of the two airlines and a few companies like Genting, Sime Darby and Petronas, Malaysian companies are still very much domestic based. A good example is CIMB Group. It was a Malaysia investment bank, but it has now transformed itself to an ASEAN universal bank. It's simple mathematics, Malaysia has a population of 28 million, ASEAN has 600 million. Looking beyond the borders can be very rewarding. Despite being Asia Pacific's largest investment bank, CIMB Group is not known in Australia and was recently ridiculed by the press when bidding for RBS' assets. It takes extraordinary effort and intelligence to bring companies overseas. Malaysians need to grow beyond being a Jagguh Kampung (national champion), we need to go global.
When the head of IMF Christine Lagarde visited Malaysia recently, she pointed out the three areas the country needs to focus on. Foreign Direct Investment (FDI), Debt to GDP ratio and inequality.Malaysia's inequality of wealth stems from the gap between the educated and the less well educated (academically and financially), again reaffirming the need to improve the coverage of education to the entire population. The problem is getting deeper by the day as there is a huge proportion of the population is snot getting sufficient level of education to have enough value in the employment market. Inequality CANNOT be solved by distributions by the government. Recently, the government has given a lot of funding such as the 1M RM 500 vouchers and payment of bonuses to civil servants to supposedly each the burden of the rakyat. Giving money to people will not teach them anything, in fact it will make them poorer as most of them will fail to understand the value of money and continue to depend on the government. The priority now is to teach Malaysians HOW to fish, not giving them fish. To develop human capital in this country, education whether formal or informal is the only way. We need to grow more SMEs and encourage more entrepreneurs by boosting investment in this segment as well helping the existing businesses to get to the next level. Quoted from Lagarde “These inequalities must be on the radar of the authorities now because when a country develops very fast, as it would be for Malaysia in the next eight years, you don’t want to leave people behind".
The inequality in this country also stems from the increase in housing prices. Key economic areas in the country has seen huge surges in prices of properties, making it unaffordable for the middle class and below. Housing prices started to surge after 2009 and it's not a coincidence it's just after the start of the global financial crisis, where money is flooding the market. There's a lot of money in the market, why? Because the government is trying to keep the economy afloat. It's is helping but the middle class is getting destroyed. The wealth transfer in this country is pretty severe, the concentration of the upper class is increasing and this is usually bad for any country. It can lead to economic and social unrest. The people who own the majority of the assets in the country is quite concentrated and this is an ongoing problem . The government can distribute as much money it want, but at the end of the day, money is eventually spent and paid to the owners of the assets who provide the goods and services. And yes, the owners are usually the rich people.
In the US, the single largest cost to the government in terms of tax revenues are tax deductions that are property related. When I read about this, it drew me immediately to Robert Kiyosaki's principle of understanding debt and taxes. It would not be surprising if this is the case in Malaysia as well. The fact is the very people who understand and use debt and taxes to their advantage are the wealthier people today, and it is the 'game' for the financially educated. Debt essentially increases returns for investors as having 'good debt' creates value. The use of debt increases the liquidity in the market and this eventually finds its place in properties and pushes prices higher. If that isn't enough, the reduction of taxes through property related deductions transfer even more wealth to investors. On one side, money is flowing to owners of property from the public through rental income and rising property prices and the other side, money is flowing in from the government through tax deductions. The wealth transfer is enormous, something needs to be done by the government.
Drawing similarities again to the US situation of the current 'fiscal cliff', Malaysia cannot continue increasing the debt levels, currently limited by a ceiling of 55%. Although a breach of the 55% level wouldn't be a catastrophe for the country, it needs to be adhered to or else we might be ending up like some Eurozone countries with Debt to GDP hovering about 100% or much more (Greece: 175%). Like Lagarde mentioned, controlling debt is one of the most important areas. She cites Malaysia's debt as reasonably high. The government may have shown the people money is being spent on transformation programmes but how well the money is being spent or allocated would continue to raise questions. Transparency is this country is deliberately not discussed here as it would a whole other issue.
There is no short of issues in this countries being discussed every day, especially with the GE coming up. There is also no short of 'stories' on certain negative things that have happened in this country in the past. Any discussion on Malaysia politics today would either end up as a joke or anger. For people who are angry with what is going, thank you for caring for this country. But please do yourself and the rest of the country a favour by making changes starting from yourself. For people who have given up on this country for whatever reason, no one will blame you, but still do your part for this country. Thank you for reading.
'I need to change before things start to change'
The photo on top is an incredible place called Banjaran Hotpsrings in Perak which I found out through a UK show when I was in Australia. How ironic.
~deyao~
