The global recession is already creeping up on us with the spectre of job losses looming. Already, we hear multinational corporations here slowing down production, asking workers to take annual leave and going for planned shutdowns. No bonus, no increments, etc…
That’s not surprising. US third quarter 2008 economic growth was already in negative territory: – 0.5 per cent (preliminary figure). Personal consumption in the States was down by 3.7 per cent – and that could worsen – while retail sales fell 15 per cent. Housing prices there are expected to slide further. US unemployment could soar to 8.5-9.0 per cent by the end of 2009.
That’s grim reading, isn’t it? It would be foolish to think Malaysia can be spared, especially when traditionally, 20 per cent of Malaysia’s exports have gone to the United States – 12 per cent to the giant US electronic multinationals – while Europe is also sucked into the maelstrom.
Blog reader Drachen mocks the thinking in some circles:
Nah, Anil! Don’t be a Chicken Little! Malaysia’s economy has STRONG FUNDAMENTALS! We are managed by SUPERIOR LEADERSHIP! NOTHING will affect our growth and prosperity! We can take ANYTHING the world can throw at us! We are IMMUNE! Let’s all go back to sleep! HAHAHA!
We are talking of a recession in Malaysia that could be worse than that of 1997, which was essentially triggered by a regional financial crisis. In contrast, the coming recession would be more akin to what we experienced in 1986, when exports weakened and commodity prices slumped, sparking job losses.
Read this Bloomberg report, which warns of job cuts next year among US electronic firms in Malaysia:
SALES by US electronics makers in Malaysia will fall this year and next as a global recession saps demand for Dell Inc computers and other devices, the head of an industry group said.
Electronics manufacturers in the Southeast Asian nation will probably have to cut jobs next year after reducing overtime and letting workers take longer Christmas holidays this year to lower costs, said Wong Siew Hai, chairman of the Kuala Lumpur-based American Malaysian Chamber of Commerce’s electronics industry group. Full article here.
In addition to falling global demand, Malaysian export earnings will falter as oil and palm oil prices have plunged.
We need to come up with a national retrenchment fund fast and create more employment opportunities. We also have to radically restructure our low-wage economy, which has suppressed local wages by importing migrant workers and widened income disparities. Jeyakumar Devaraj suggests that the Public Works Department could hire temporary local workers to handle pump-priming infrastructure projects to enhance the multiplier effects on the local economy.
Faced with the looming crisis, I wrote this piece for IPS:
ECONOMY-MALAYSIA: Job Losses Feared as Recession Bites
By Anil Netto
PENANG, Nov 26 (IPS) – The global economic slowdown is slowly creeping onto Malaysian shores leaving many worried about the impact it will have on workers.
Although Malaysia’s financial institutions and banks are in better shape than they were during the East Asian financial crisis in 1997, the economy is already feeling the effects of the recession in the West.
Economic growth for the country is projected at 3.5 percent for next year but even that could be optimistic. Some analysts are not ruling out an economic contraction and there is growing concern that workers, both Malaysian and migrants, could be vulnerable. Full article here
Aiyah, why must you frighten us with your bad news. Take it easy lah brother.
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“Recession? What recession? Job losses? What job losses? Malaysia will be sheltered against all these recessionary impact. There is nothing to worry, all these are just the work of the opposition members trying to discredit the government…” so said my incoming PM… aiyoh, saya rasa takut lah… apa bolih buat?
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Nah, Anil! Don’t be a Chicken Little! Malaysia’s economy has STRONG FUNDAMENTALS! We are managed by SUPERIOR LEADERSHIP! NOTHING will affect our growth and prosperity! We can take ANYTHING the world can throw at us! We are IMMUNE! Let’s all go back to sleep! HAHAHA!
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Expected since May this year, only the wisdom finance minister said we are not impacted.
For those who got extra money, this is the opps to invest .. share , unit trust and currency ..
Singapore, Japan and Germany already decalred they hitting the tecnical recession .. but we still do nothing ..
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Anil,
problem is the type of Keynesian strategy some are suggesting (“create more employment opportunities” or “Public Works Department could hire temporary local workers”) will not work down here due to the massive leakages in government spending.
For instance, have you heard of the 5mil retraining fund? Has any tender been launched? How will it be managed? Which criteria for benefiting from it? As usual, the federal government knows how to spend. How to spend it wisely is however yet to be acquired.
I believe a cut in income tax, gst or oil tax would help more than cosmetic loan to Valuecap or near-compulsory EPF cut.
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I’m glued to Bloomberg practically every evening till late night.
Within my amature knowledge on economics. Malaysian including the UMNO Malaysian heading for very bad time. It’s time that we look around & come to sense.
Our National Leaders usually give confidence by putting nice colours without any basic foundation or fundementals. Very inconsistance in their statement.
We need to be vigilant.
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whether we like it or not, next year will be a very difficult year.
Our country’s exports and earnings will fall. That is for sure. Many companies will have to close shop or downsize their operations. Our stock market fall below 700 points by Q1 2009.
THE WORSE IS YET TO COME!!!!!!!!!!!!!!
SO BE PREPARED MALAYSIANS!!!!!
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So far I do not think most employees are worried. But many employers I spoke to were quite worried. When US, Singapore,Japan, Europe and China buys less from Malaysia, what do you get? Very simple, that is lower production and less revenue for coy which need to reduce production hours and hence employ less staff or worst, retrench staff.
One way to mitigate the export mkt is to increase local consumption. But can we get our people’s confidence up so much to spend their very little money that they have?
We might be less trouble than US but we definitely are not without troubles.
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is it any worse than we getting a murder suspect as a (leader who has) the chief judge, chief attorney and chief polis (beholden to him) and we can’t do anything about it?
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Spend spend spend. THe more we spend, the ringgit will go lower as we deplete our reserves. UMNO finance chaps have no idea how to handle the economy.
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Yo bro Anil, don’t worry. We have a ‘very special’ breed of GOONS here with superb IQ! Nothing can touch our ‘bolihland’.
They always keep things on the ‘UP’ side. 24-7, 365 days a year!
Eg. the petrol price increase of 78 cts within 24 hrs and after the couple of decreases, daily items are ‘STILL ON THE UP’!
Heard from the grapevine our incoming ‘no.1′ man is still very capable of ‘UPPING’!
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Hello Anil,
Yes the recession is coming and Msia will not be spared, even though the propaganda machine is in place running its spin about sparing Malaysia.
EU is starting to feel the heat, esp with countries doing car production. Car production is slowing down, workers are being asked to voluntarily stay home and even though oil prices have gone down, what is transport without a place of work to go to every morning?
Example
http://www.independent.co.uk/news/business/news/gm-to-cut-production-in-europe-by-40000-vehicles-as-sales-slide-954604.html
Even New York Times covered an issue where Nissan cars were held in New York ports because auto car dealers can no longer afford to store cars they cannot sell.
http://www.nytimes.com/2008/11/19/business/economy/19ports.html
It’s a domino effect, China is also cutting down production on basic materials like plastic,cuts down its demand on steel.
http://www.iht.com/articles/2008/11/10/business/mine.php
It can only get worse before getting better.
The sooner the gov admits this, the better. Elsewhere govs are bailing out financial institutions, announcing long term investment in public structures – what is Msia’s plan?
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The BN government sings
Beautifully the leaders think
Out of tune in most people ears
Painting strong economic fundamentals
They are just fooling with our tax money
Our economy isn’t standing alone
It has to challenge into world markets too
Exporting it to the countries………..
When fair trade packages exist
When major developed countries are in troubles
We can’t call the ghost-busters to clean up the mess
There is no way to find ghosts stomping the ground
It is the corruption and greed that dwell the wealth
Big companies fall asking for financial assistance
Spending and expanding beyond its capabilities
Finally the shaky ground breaks the foundations
And we have our leaders singing out of tune
Of economic reality in our shores
And what we hear
Talking ways to control sins
When it doesn’t happen over 50 years ago
Don’t the leaders learn anything at all?
The economic downturn will arrive
The government leaders shouldn’t lie
Don’t issue social statements any more
It is now back to bread and butter issues
Money, money, and more money………
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What Anil is highlighting is really serious, what ever said and done. We in Malaysia have to look at US and Europe as the LEADING INDICATORS. We will be severely hit about 9-18 months after the US has been hit. Simple logic – US is our main trading partner. For Example, from the time the Silicon Wafer built starts to the time it reaches the Dell or Acer Computer is about 12-16 weeks. Hence there is a 3 month lag, from forecast order to hitting the market.
So the same way, after US is hit, orders will slow down, and by the time, the factories start to slow down, and retrenchment starts, it would be easily 6-9 months.
Late last year when I found that many China factories were already slowing down. Among the Global Procurement/Sourcing faternity, one could see the disaster coming as early as Q1 2008. By Q2 it was certain as several manufacturing sectors started to have zero OT.
To cut the story short, we will start to see the real hit with less money in the pocket sometime after CNY 2009. Jan 09 pay packets will be smaller as many Bayan Lepas plants are having extended Christmas-New Year breaks. Fresh from insiders, I was told that (a US electronics giant) is planning a 20 day shut-down. Then whole cycle starts! Default laons etc etc etc.
In Jan 2008, I did tell and advise my US counterparts not to go for any hedging for raw materials beyond One month-to-month basis, as I was expecting a major drop by Q2, 2008, that was what exactly happened.
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Anil, You see these indicators la.
Even If you are form 3 drop-out also can understand. Why can’t
the F_Minister cannot ha?
1. Less demand —> Less Sale
2. Less Sale —> Less Production
3. Less Production —> Less workforce
4. Less workforce —> Less Public Cash Flow
5. Less Cash Flow —> Less Purchasing power
6. Than Start back at No.1
Less workforce = Option.1 Retrenchment, 2.Close Shop lo.
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Dear Anil,well said.The Bolehland’s federal guomen seems to be very complacent and they are still in a state of denial syndrome.
First of all, I wish to salute the good job done by the Bank Negara’s Governor for her prudent management of the country’s financial situation.
The recent rate cut is a timely move, however the Bank Negara must act tough against the banks who do not comply with the move by announcing the necessary reciprocal moves as soon as possible.They are burdening the public and trying to squeeze more blood from the borrowers.These banks must be told to play their social role in this difficult time.
More drastic rate cut by Bank Negara is definitely needed before the full impact hit Bolehland. Otherwise, it will be a full scale recession,staring from first quarter 2009. The growth rate could drop to the level 0.5 to 1.5%.Najib and his team of think-tank is too optimistic, for sure.
The federal guomen must take bold steps to handle the foreign labour’s phenomenon as hundreds of thousands of local Bolehlanders will be retrenched in a couple of months.
The whole market will be badly affected. The bonus will be cut or there may be no bonus at all. It will definitely be a gloomy X’mas in 2008 and also a lack lustre New Year as well as Chinese New Year in 2009.
The Fed Guomen must lower the petrol price (to RM1.20 per litre) and the highway toll rate slashed 30-50% immediately, otherwise it will be too late when the gigantic tsunami waves hit Bolehland in the very soon future.
I must say the fed guomen is too slow in action. Pathetic.
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There is absolutely nothing to worry about. Our finance minister is has Industrial Ecomonics degree obtained way back in the 1980′s and he is very successful in financial terms…
On top of that, our TDM, the world’s most intelligent investor, has ,,,
… Also, TDM, who is our great saviour during the 97 financial crisis, will once again, be our ecomonic miracle angel. He can do no wrong. Any disaster or crisis is the result of someone’s action, not that of TDM…our greatest PM who the gift of the tongue of a …
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How come we do not have ‘social security benefits’ for Malaysian UNEMPLOYED ?
US & Australia & others take cares of their unemployed for decades !
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mahathir deliberately brought in foreign labour 2 keep wages of msians artificially low
deputy finance minstrel yakcop said bolehland is not in recession n will never b in recession( dont 4get 2 read his lips)
umno-bn govt can spend people’s money 2 try stimulate economy. but, since no transparency n open tender/contracts, billions (could be) siphoned off …
… cannot run clean govt even if he tried cos of his image n d greed of umno-bn …
umno-bn media – rtm tv3, ntv7, the local …papers – will try 2 paint rosy pix
but, suffering rakyat will feel d painful truth
2009 will c the pain of d poor bring down corrupt umno-bn regime
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What to worry? Our jobless Malaysians can still selling nasi lemak, bicycle, VCD, etc. to foreign workers for decent living.
Foreign workers will be our second biggest employer for local people after the governmet.
Give them a datukship to appreciate their contribution to our rice bowl.
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Hi Anil,
Outsourcing is still the key! Businesses in the US and Europe are sending their IT dept. and A/C depts to Asia. M’sia is still in the position to offer attractive incentives to them as compared to Vietnam, India, China and the Philippines. Even S’pore & Japanese companies are looking to us to assist them in cutting costs. True most products made here for export will not sell much during Christmas but there will still be buyers with lots of cash ie Russia, China.
We still need to tighthen our belts but the outlook may not be as glum as expected for us.
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The non-transparent “stimulus package” which the government is proposing is unlikely to make much impact on the broader economy. And its primarily due to the system created by government.
Contracts are parcelled out to Well-connected cronies rather than open to any capable bidder. Before work has even started, a large chunk of the inflated contract value has already been cornered for the crony’s pockets, and lost to the overall economy. Maybe the crony wife’s jewellery dealer will have a big smile.
When the work actually starts, Infrastructure projects nowadays generate few Malaysian jobs – because of the over-dependence on foreign labour. We are just creating jobs for Indonesian and Bangladesh unskilled labour.
So, gentlemen, the RM 7 Billion stimulus package is likely to have negligible efffect in terms of really feeding needed cash into the economy.
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Russia & China will not be our Buyers. Oil 30% of what it was before so oil exporter Russia is quaking at its knees. Electronic subcontracting, textile orders in China all dwindling. Layoff in China – they will buy their own products. The rich ones will buy Japan, USA, Europe ok.
So we genuine Malaysian better be prepared to stretch our savings to cover for next year’s expenses at very least. And I hope the police will not waste their energies on politicians but to take care of the Rakyat’s safety and securities.
Once the foreigners lost their jobs, not excluding some Malaysian,crime of all degrees will be short in supply. Unless Govt sends them back to their own countries first. Otherwise we taxpayers are subsidising them, medically, infrastructurally and risking unnecessary crimes….not all but some….
I hope that BN and PR can work together to get the Rakyat protected economically and safety-wise. BN alone is already bankrupt in ideas. No risk management plans from Govt.
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We, the government, … swear that our economy is in good shape and the global recession is not affecting us. Semuanya OK.
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I am teaching a course called Analyzing Current Economic Issues to pre-u/post SPM students.
I love teaching economics because you can never run out of material and practical discussion topics. Everything is economics-related, from the impending recession to your (and my) decision to get out of bed this morning (to face more bad news).
This current financial crisis is providing me and my students with excellent material to learn from. It is a huge challenge to answer questions about why economies grow and falter and sometimes fail, and why politicians talk about “free markets” and then manage to (or are forced/expected to) intervene/interfere as much as they possibly can.
Anyways, rest assured that at least 200 Malaysian youth will be following the economic crisis step by step and learning the real truth behind the headlines.
Cheers, Moaz
ps. Anil, you are invited as a guest speaker, anytime you like. m
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