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
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Malaysia is in the miserable economy state. A lot of expert, economist had given their opinion, suggestion, recommendation and strategy to the government.Malaysia government still in the denial state of attitude and usual arrogant mentality. “recession won’t come we are only slow down” what a optimistic statement, when the whole is in high alert to fight for their life. It is sad to have such a government, it will bring us to hell by no time. Whatever good suggestion, recommendation, opinion and strategy need strong, decent, sincere and committed execution. Sad to say Malaysia government simply don’t and the time… Read more »
Here is a nice visual to what is going on in US market.
http://blog.mint.com/blog/finance-core/a-visual-guide-to-the-financial-crisis/
-woody
Keynesian ideas are exactly the CAUSE of the economic troubles. Japan spent and spent, and yet their depression continues. The US spends and spends, leaving them with a debt that can’t be repaid. How could people spend their way to prosperity? It’s a completely short sighted thinking. Haven’t we learned from our Asian ancestors that THRIFT is a virtue? Why are we still listening to the Keynesians whose ideology is most prevalent in Wall Street? I can’t believe how even Asians have been brainwashed by Keynesian ideas. To me, that line of thinking is nothing more than ‘something for nothing’.… Read more »
The factory that I am working in (a very large US MNC) in Penang is operating only 50% in the month of Nov / Dec alone. This will take a total of 14 days annual leaves or pays from our pockets. Those shift workers are worst! We have been been asked to brace for more tough times in the months ahead next year. I believe that the factories have to contact the labor office to get permissions to do this. They are simple hiding all the data.
And government says everything in fine. My foot.
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… Read more »
We, the government, … swear that our economy is in good shape and the global recession is not affecting us. Semuanya OK.
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… Read more »
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… Read more »
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… Read more »
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.
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… Read more »
How come we do not have ‘social security benefits’ for Malaysian UNEMPLOYED ?
US & Australia & others take cares of their unemployed for decades !
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 …
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… Read more »
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.
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… Read more »
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… Read more »
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… Read more »
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’!
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.
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?
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… Read more »
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!!!!!
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.
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… Read more »