Volume 3 Issue 31: Two-Cent Economics

A Real Economic Transformation Program

This is what a real economic transformation program looks like. The article was written by Sri Mulyani Indrawati, now the Managing Directer of the World Bank, and also a former finance minister of Indonesia. By the way, she does not need a title like "Datuk", or "Datuk Seri", or "Tan Sri" in front of her name. She is "JUST" a graduate from the University of Indonesia, with a masters and doctorate from the University of Illinois at Urbana-Champaign.

In the article, she talks about the transition phase of an economy which is trying to change itself. She gives the tip of the iceberg of Indonesia's successful transformation from Suharto's autocratic rule to the current administration under President Susilo Bambang Yudhoyono.

Recently, I also shared an article about the rise of Indonesia as an economic powerhouse. From Sri Mulyani's article, you can see that Indonesia focused a lot more on the "doing" than the "talking", which is what Malaysia has been sending Idris Jala out to do. Just as an example:

In Indonesia, we signed a hundred laws in less than 18 months, covering everything from media freedom to elections, corruption, decentralization, and anti-trust rules. We ratified new public-finance legislation and ensured the independence of the country’s central bank. 

New leaders must also expect and manage setbacks. In post-revolutionary times, expectations are high, and the obstacles to meeting them are enormous. I know from personal experience that we did not always have the luxury of getting the best outcomes. We had to compromise and settle for the best possible results. 

Security threats are among the most serious setbacks in transitions. Nationalistic sentiment is strong, and politicians and interest groups can exploit it. Often, the security forces are holdovers from the old regime, and there is no independent judicial system. Reforms will take time, and the old bureaucracies may not be able to implement them. 

In Indonesia, we used various innovations to work around such dilemmas. For example, we appointed an independent judge to take over the bankruptcy and corruption courts, because career judges were too tainted. Likewise, when we started cash-for-work programs as part of our pro-poor agenda, we asked communities to run these initiatives.

This is what real reforms should look like. Not just talking and talking and talking but no actual doing. I highly recommend that you read the whole article.

Volume 3 Issue 30: Two-Cent Economics

Male Organ and Economic Growth: Does Size Matter?

I knew some day this was bound to happen. Someone actually followed through with this research (pdf).

Here is part of the abstract:

This paper explores the link between economic development and penile length between 1960 and 1985... The size of male organ is found to have an inverse U-shaped relationship with the level of GDP in 1985. It can alone explain over 15% of the variation in GDP. The GDP maximizing size is around 13.5 centimetres, and a collapse in economic development is identified as the size of male organ exceeds 16 centimetres.

Yup. You read it right. Of course, correlation is not causality and all that gibberish, so don't try to jump the gun.

If your curiosity is getting ahead of you, here is a link on the average sizes of male organs across countries. Somehow this quote comes to mind:

If you think you are too big for small things, then you are too small for big things.

Obama, The Quiet American?

This is an awesome article. Another reason why I like Project-Syndicate. Just see here:

From the outset of his presidency, Obama’s defense of a liberal trade regime has been inadequate. He has said repeatedly that exports are good for the US: they create jobs. But US exports are other nations’ imports, so Obama’s argument amounts to telling others to lose their jobs. He needs to remind Americans that imports are also good: he can surely ask his audience to think of jobs in the UPS cargo planes, freight trains, and trucks that carry imports into the American interior.

The main problem, however, is that Obama has been unable to confront, and put to rest, US labor unions’ fear-driven hostility to trade. Nor has he been willing to confront the business lobbies that are willing to hold the Doha Round hostage in order to extract ever more concessions by other countries, even though they know that the trade talks are about to be sucked into the Bermuda Triangle of the 2012 US presidential election.

Volume 3 Issue 30: Intelligent Investing

Pity the Policymakers

I just really like the analogy given by El-Erian here when describing the situation in the Eurozone:

I don’t know about you, but whenever I am in an airplane experiencing turbulence, I draw comfort from the belief that the pilots sitting behind the cockpit’s closed door know what to do. I would feel very differently if, through an open door, I observed pilots who were frustrated at the poor responsiveness of the plane’s controls, arguing about their next step, and getting no help whatsoever from the operator’s manuals.

So it is unsettling that policymakers in many Western economies today resemble the second group of pilots. This perception reflects not only the contradictory pronouncements and behavior of policymakers, but also the extent to which economic outcomes have consistently fallen short of their expectations.

Looks like tough times ahead. But remember this:

Be fearful when others are greedy, and be greedy when others are fearful. 

Lunch Break Reading: How to Marry Rich in China

There really is a market for everything. Now there is a class in China that teaches women how to get hitched with rich men. Read here and here.

Malaysia Sending Maids to Indonesia?

While it would seem absurd to some of you when I suggest this at this point, I don't think it's that completely far-fetched. I have brought this up with some of you, and many of you take this as a joke. Maybe, maybe not.

But read here. Does it really seem so absurd after all? Or is it something that we just shudder to think about?

Here is an excerpt:

In a commentary by the Jakarta Post on July 11, it said Malaysian leaders were laboring under an old paradigm that said a nation could have either development or democracy, but not both. “The lengths the government went to in trying to prevent and then break up the Bersih 2.0 rally in Kuala Lumpur on Saturday shows that the nation’s leaders were still not prepared to let go — even when an increasing number of Malaysians of all races have been pressing for more freedom and justice.

“We have news for them: You can be rich and free at the same time,” the editorial wrote.

Adnan was quoted as having said that the Malaysian government feared that visits to the country by Indonesians might fall if the former did not provide full explanations to the latter, citing Indonesia’s importance to Malaysia’a economy.

Indonesia is after all, one of Southeast Asia’s sexiest economies currently, and is dubbed as the “New China” in this region, thanks to its booming middle-class and young population. Indonesian workers also play a prominent role in Malaysia’s economy, especially in labor-intensive sectors. Equally important are Malaysian businesses in Indonesia, which range from the financial services to the plantation and mining sectors.

No doubt, economics is a trump card for Indonesia to wield its influence on Malaysia. By 2015, Indonesia’s economy is expected to account for half of the Association of Southeast Asia Nations’ (ASEAN) gross domestic product (GDP). That makes Indonesia the member country to lead the region.

Volume 3 Issue 29: Two-Cent Economics

Rubbish Analysis on the Ringgit

According to this Bloomberg article, the Ringgit is weakening due to concerns over the Euro debt crisis. Here is an excerpt from one of CIMB's currency strategist, no less:

“Risk-appetite is on the low side as debt issues in Europe are still plaguing Asian currencies,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “Malaysia’s inflation data may not have much impact.”

I don't know how he makes up these reasons but let us have a look at the Ringgit's performance against the USD and EUR:

USDMYR

EURMYR

Over the past year or so, the Ringgit has been appreciating strongly. The Euro debt crisis has been around since early 2010, and if you look at the EURMYR, the Ringgit appreciated very strongly against the EUR in the first half of 2010, which actually suggests that the worry was much worse at that point in time. So, this mambo jumbo over the Ringgit's depreciation is pure hogwash.

Could the reason be as simple as "the Ringgit is overvalued"? It is high time that the Ringgit corrected itself. With the slew of unimpressive economic data of late, there is absolutely no surprise that the demand for the Ringgit should subside. GDP growth in 2Q 2011 will quite likely be unimpressive too.

I guess my point is, sometimes, we can't just take the "advice" of analysts at face value. Besides, what does the Euro debt crisis have to do with the Ringgit vs the USD? Try to apply some skepticism in reading some of these analysis. Try to ask, "Does this actually make sense?". It will do you a lot of good in helping you to keep your money safe. 

Volume 3 Issue 29: Intelligent Investing

Singapore Has Highest Concentration of Millionaires

I want to say I am surprised to find this out, but given the asset prices and the growth of Singapore's economy, I wouldn't say it is too surprising. What I found surprising was that about 15% of Singapore's households are millionaires. This means that if you walk past 10 families down Orchard Road, at least one of them should be a millionaire. OK, maybe the rich people don't hang out at Orchard Road, but you know what I mean.

What is even more suprising is that the 2nd ranked country, Switzerland, is a huge distance away from Singapore, with "only" 9.9% of its households being millionaires.

The funny thing is, the people in Singapore don't think of this as a big deal. In fact, some of them see this as a huge problem:

However, Singapore’s median household income remains at a modest $5,700 per month, according to the Department of Statistics. This starkly illustrates a growing income gap, one of the biggest problems facing the country today. Singapore already has the second-highest Gini co-efficient in the developed world, behind only Hong Kong. The Gini co-efficient is a measure of income disparity, and it is indeed alarming that income is distributed more unequally in our country than even India or China.

Another problem that comes with having a “wealthy population” is a high cost of living. In a 2010 survey of 214 cities by consulting firm Mercer, Singapore ranked as the 11th most expensive city in the world for expatriates, on a par with Oslo and more expensive than New York.

Read the full article here.

Google+ Pwns Facebook

P/S: Anyone who wants to get in on Google+, just drop me a note.

Sound Advice on Critical Thinking

Who Is More Badass?

This may or may not turn into a regular thing, but I saw these 2 news side by side today and the thought just occurred to me.

Badass No.1: President Obama storms out of debt talks

Usually seen as very soft in nature (especially recently), this is very uncharacteristic and will most certainly be seen as a gutsy move by the president. It will probably be analyzed for weeks, and if he gets his plans pushed through, it will be discussed for months or even years.

Badass No. 2: Woman severs penis of estranged husband

Ouch. 'Nuff said.

A New World Architecture

I suppose this is a follow-up from yesterday's post on "Democracy as an Economic Liability".

Here is an article from George Soros (a considerably big name in a small place like this). Some excerpts:

The system cannot survive in its present form, and the US has more to lose by not being in the forefront of reforming it. The US is still in a position to lead the world, but, without far-sighted leadership, its relative position is likely to continue to erode. It can no longer impose its will on others, as George W. Bush’s administration sought to do, but it could lead a cooperative effort to involve both the developed and the developing world, thereby reestablishing American leadership in an acceptable form.

The alternative is frightening, because a declining superpower losing both political and economic dominance but still preserving military supremacy is a dangerous mix. We used to be reassured by the generalization that democratic countries seek peace. After the Bush presidency, that rule no longer holds, if it ever did.

Who's afraid of the big bad wolf?

The Migrant's Eye - by Shaun Tan

I had posted another article written by Shaun Tan before. He was a finalist in the 2011 World Bank International Essay Competition on Youth Migration. Here is is essay entitled, "The Migrant's Eye" (pdf). If you don't want to download the pdf, you can read the article here from the Malaysian Insider.

You can also go to the essay competition website. They do have some really good essays there.

How The iPhone Widens The US Trade Deficit With China

Warning: Proceed with caution. The article is probably more for the economically inclined.

For those of you who are still hung up on the US-China trade imbalance, here is a nice article to show why the US is attacking a straw man they created. By the way, Krugman did it too. Read here.

Note: I found this article long ago and I had been saving it for a more in depth discussion, but seeing as the issue is fast losing its relevance (maybe), I decided to post it up, mainly to keep it on record, in case I need to look for it again in the future.

Is Democracy An Economic Liability?

A question many of us would not ask 10-20 years ago. But as we witness the slow death of some of the Western democracies, and the rapid rise of China, I think this question will become a huge debate topic in the next 50 years or so.

Read here for some thoughts from The Economist.

Volume 3 Issue 28: Intelligent Investing

Spain's KLIA

You'd think that this problem is one of its kind in the world. I am talking about the huge distance between Malaysia's main airport and the city. Then I found out about Tokyo's Narita Airport. It is located about 80 km away from Tokyo. The KLIA is located about 60 km from the city. And in Spain, its Ciudad Real Central airport is located in the middle of the desert, in a town boasting 72,000 people, about 140 miles (about 225 km) away from Madrid. It is one of Spain's largest and most modern airport. The best part about it is, it is almost empty.

Read here for more.

Guess what else does it have in common with KLIA? The Central, as it is also known, was supposed to cost US$620 million to build, but the costs ran up to more than US$1 billion in the end. Ring any bells?

And now, Spain is in deep shit over its debt and deficit problems. Is Malaysia going to go there? What will it take? Are mega-projects the way to go again? 

Volume 3 Issue 28: Two-Cent Economics

Singapore's Bus System Lottery

Singapore's Future MRT Map

Awesome article on how to FURTHER improve Singapore's bus system:

The government of the city state of Singapore—11m public transport journeys a day, average commute time 35 minutes—is planning to pilot an incentive scheme later this year to do exactly that. Commuters will earn credit for each journey taken (triple credit for off-peak journeys) to earn a chance of cash prizes in weekly lotteries.

Singapore's public transport system should be one of the wonders of the world. I know it is not perfect. If you think about it, nothing is. But if anyone of you really tried public transport in Malaysia and then compare it with that of Singapore, you will totally understand what I mean. Refer to my previous article. In Malaysia, you can barely get into a cab without being ripped off. That's not even public transport.

Volume 3 Issue 27: Two-Cent Economics

The Malaysian Resignation?

I only recently came across this blogger, who has some pretty interesting posts in general.

However, this most recent one caught my eye. He wrote about the 3 degrees of mediocrity and his examples were pretty entertaining. Here is part of his conversation with a cab driver in Malaysia:

“Negara kita ada angkasawan!  Negara lain mana ada.  Indonesia ada? Singapura ada? Thailand ada? Ini bermakna Malaysia lagi hebat dari negara lain!”

[Our country had an astronaut.  Other countries don’t.  Does Indonesia have one? Does Singapore have? Does Thailand have?  It means Malaysia is better than other countries!]

But what I want to put across is the fact that when I read it, I actually chuckled, and was entertained. But two seconds later, I did a double-take and realized that the only reason I was entertained was because the examples were true.

What is so wrong about that? It just shows how long the rot has been going on in Malaysia. It has gone on for so long that many of us have accepted the problem, and we even think of it as a joke. The normal reaction would probably have been outrage, or at the least, disgust.

Now, I am just outraged that I didn't feel that way the first time. What has become of us?

18 Attributes of Highly Effective Liars

Read here.

Most of it seemed pretty intuitive. But I guess it's pretty good to know. If you know who is a good liar, there's a pretty good chance you would know who is a bad one.

No Child's Play (repost)

Just reposting this, for those of you who have not read it. It describes my experience coaching chess to children and the obstacles faced. Suggestions with the issues raised are helpful.

Volume 3 Issue 27: Intelligent Investing

The Main Streeter Portfolio (30 June 2011)

Here are the  updates to the portfolio for the quarter ending 30 June 2011. No transactions for this quarter.

1 Mar 2011
4,000 shares of HARISON purchased @ RM2.98

31 Mar 2011
4,000 x HARISON
Market Price: RM3.35
Cash Balance: RM88,008.48
NAV per share: RM1.0141

30 Jun 2011
4,000 x HARISON
Market Price: RM3.88
Cash Balance: RM88,008.48
NAV per share: RM1.0353

Disclaimer: All company analyses, including the paper portfolio that appear in this newsletter are derived from facts gathered from various sources and the contributors' personal opinions and for education purposes. It is NOT an invitation to deal in securities, and especially not a recommendation for buying or selling any stock. The contributor(s) do not guarantee the accuracy of the facts being presented. The accuracy of such facts are only as reliable as the sources that they are obtained from. Please consult your investment advisers before acting on any information provided by the analyses here. The authors most likely have interests in the stocks that are discussed in this website.

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