Jobs don't drop from the sky #2

I met a pair of father and son who work in the Penang South Reclamation (PSR) project.

The father, Pakcik Ismail, had served in the military for 15 years before becoming a fisherman.

The livelihood of a fisherman was tough – even for an ex-soldier. Income was unstable, catch was unpredictable.

“Kalau tak pi laut, siapa nak bagi duit? Nasib kerja laut,” he said.

Pakcik was a fisherman for almost 20 years, living off the mercy of the sea. Then he found his current job with PSR, and has never failed to receive his salary every month in the past 5 years.

His son, Mat, began following him to the sea in his teens.

Didn’t want to resign his life to the sea, Mat worked in various jobs and eventually became a driver. However, he lost that and became unemployed for six months.

That was a dark period for him, his wife, and their two children. Mat struggled to provide for them.

“Tak mampu bagi apa yang mereka mahu. Rasa pahit,” he said. Relatable to many breadwinners who recently lost their job due to the pandemic.

The turning point came when Mat found his present employment in the PSR project. He can now provide for this family and has an EPF account – something which he had never had.

Pakcik and Mat told me that they were glad to have found jobs other than fishing. I asked them, why?

Both of them went silent for a while before Pakcik began to speak again.

He told me that during one of their fishing trips many years ago, Mat fell into the sea and almost drown. Their boat was hit by strong waves and Mat tripped over.

Pakcik Ismail quickly threw a rope into the sea for Mat to pull himself back. He shouted helplessly directing Mat to grab the lifeline.

Being bombarded by strong waves, Mat was struggling to get hold of the rope.

“Telan air sampai tak larat telan.”

Luckily, Mat managed to grab the rope and pulled himself back into the boat. That was the single most terrifying experience the father and son had.

That’s why Mat wished for his children to further their studies so that they don’t have to be fishermen. His eldest son wanted to be a doctor.

“Takkan ikut life kita lagi,” he said.

Pakcik Ismail interjected, “Harap-harap projek PSR ini on lah. Ini untuk masa depan anak cucu kita.”

Covid-19 has destroyed thousands of jobs, why is Penang Forum stopping job creation?

Penang Forum members have been lobbying hard to cancel development projects that can generate thousands of new job opportunities in Penang.

Their latest statement opposing the Penang South Reclamation (PSR), penned by Khoo Salma, is a disappointing piece, not only because it contains many misleading information but also of its disregard for the wellbeing of Penangites and the future of Penang.[1]

What is misleading? Many, but I shall just point to the one with misleading impression that the State Government is not developing Seberang Perai or optimising mainland for industrial expansion.

The impression is misleading because out of the 10 industrial parks developed by the State Government, 9 of them are located at Seberang Perai.

For further expansion of industrial development, another 1,156 acres of new lots on the mainland were identified for industrial use on top of the initial 2,898 acres that have been allocated.[2]

State Government is optimising the mainland for the state’s economic development, contrary to the false impression given by Penang Forum.

Now, back to job creation.

Generating new jobs is especially important during the current Covid-19 crisis when many Penangites are suffering from retrenchment.

Many are hoping that their savings can last until the crisis is over.

The PSR and the Penang Transport Master Plan (PTMP) have been identified by the Penang Socio-Economic Recovery Consultative Council – comprises of industrial leaders and state leaders – as key recovery drivers to create jobs and stimulate the state’s economy through domestic investment.[3]

I have spoken to those involved in PSR and PTMP and was told that more than 100 Penangites are currently employed for the two projects. That means hundred of families have food on their table because of these projects.

Will Penang Forum be happy when a hundred families go hungry due to the cancellation of the projects as the result of the NGO’s lobby?

I was also told that the first three years of the reclamation will generate another 5,000 new jobs in Penang, which include job opportunities with stable income for the fishermen in the PSR area.

37% of the participants at the walk-in job interview held on 24 April 2021 were fishermen looking for new job opportunities provided by PSR.[4] These chances for a more stable life will be ruined if the PSR is cancelled.

What is Penang Forum trying to prove by wanting to stop job creation in Penang? What do they gain when Penangites have no jobs? 

References

[1]https://www.nst.com.my/opinion/letters/2021/05/689811/penang-south-reclamation-who-does-it-serve
 

[2]https://www.buletinmutiara.com/penang-govt-to-ensure-adequate-supply-of-industrial-lands/ and https://www.freemalaysiatoday.com/category/nation/2019/05/02/with-land-for-industries-running-out-we-sorely-need-3-island-project-says-chow/
 

[3]https://www.malaymail.com/news/malaysia/2021/02/17/penang-transport-master-plan-part-of-covid-19-recovery-efforts-says-state-e/1950528
 

[4]https://www.facebook.com/pusatperkhidmatansetempatnelayan/posts/4110184375711596

Penang, a gazelle or lion?

Three-time Pulitzer Prize winner Thomas Friedman recounted a story about gazelle and lion in his best-selling book, The World Is Flat:

“Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn’t matter whether you are a lion or a gazelle: when the sun comes up, you’d better be running.”

Friedman was writing in the early 2000s, describing the rising competitiveness in a globalising world.

The inclusion of China into the World Trade Organization in 2001 has significantly reconfigured the global supply chain and redirected the flow of international investments.

The global economic shift has severely affected Penang, with the number of multinational corporations reduced from 63 firms in 1994 to 23 by 2004, with employment plunged by 69 per cent.[1] 

In 2001 alone, more than 12,000 high-tech jobs disappeared from Penang.[2] 

The change of the state government in 2008 has set Penang on a ten-year recovery phase, culminated in the historic high receipt of manufacturing investments of RM16.9 billion in 2019.[3] 

Penang has also emerged consecutively as the top exporting state in the country in 2019 (RM284 billion) and 2020 (RM310 billion).[4]

Nonetheless, every morning, the gazelle and lion have to outrun each other. China will not cease to be a formidable competitor while Malaysia’s southeast Asian neighbours are rapidly joining the ranks.

An obvious example is Vietnam, listed as the eighth best country for investment in 2019, while Malaysia lags behind at the thirteenth place.[5] The World Bank’s Human Capital Index 2020 reported that Vietnam has surpassed Malaysia by 24 positions.[6]

Besides investment incentives and human capital, the availability of vast undeveloped land in neighbouring countries is an advantage over Penang.

Penang is the second smallest state in Malaysia, with more than 50 per cent of the island comprising hilly terrains – unfit for industrial expansion. The George Town heritage zone will not be flattened for industrialisation.

That’s why out of the ten existing industrial parks in the state, only one at the island (Bayan Lepas free industrial zone) with the other nine located at the mainland (Mak Mandin, Perai, Seberang Jaya, Bukit Tengah, Bukit Minyak, Penang Science Park, Penang Science Park North, Batu Kawan Industrial Park 1 and Batu Kawan Industrial Park 2).[7]

The 1,173ha of industrial land allocated in Batu Kawan was left only with 80ha in 2019.[8]  Critics of PSR such as Penang Forum’s Khoo Salma who repetitively say there is plenty of room for industrial expansion at Seberang Perai are either misinformed or ignorant.[9]

With the rising regional competitiveness and the lack of strategic land to attract investors, will Penang return into the dark period of the early 2000s?

Given the geographical constraint, it is only logical for the land-strapped state to embark on the Penang South Reclamation (PSR) project, reclaiming new land bank for industrial, commercial, and residential development.

This strategy has proven feasible for Penang, with 1,120 acres of land reclaimed for industrial expansion and other development along the coast from the Penang Bridge to Batu Maung since the 1970s.[10] 

Foreign investments have generated more than 380,000 jobs in Penang over the past four decades, making up almost half of the state’s labour force.[11] The PSR project is estimated to create more than 300,000 new job opportunities in the following decades to come.

The criticism of the PSR project as a threat to the environment is misguided. There are fancy land reclamation projects for the rich and wealthy, but there are also land reclamation projects for a state’s survival. PSR is in the latter category.

In the same way, there is a difference between mining natural resources to build diesel engines and mining them to manufacture solar panels. Both have environmental impact, but let’s not be misguided by seeing them in the same category.

Development through strategic land reclamation for survival is not only evident in Penang’s own history but also seen in the Netherlands, Denmark, Hong Kong, and Singapore.

In the end, it doesn’t matter whether Penang is a gazelle or lion: when the sun comes up, Penang better be running.

References

[1]Kok, Onn Ting. (2016). How Does The Rise of China Affect Malaysia's Electronic and Electrical Sector? PhD thesis submitted to the University of East Anglia, 2016. Retrieved from https://ueaeprints.uea.ac.uk/id/eprint/59625/

[2]https://www.bloomberg.com/news/articles/2001-10-21/has-penang-lost-its-pizzazz

[3https://www.buletinmutiara.com/penang-hits-record-high-investments/

[4]https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=488&bul_id=eG1DdElEMDhXUFdvK3RCWHd0b2dvQT09&menu_id=azJjRWpYL0VBYU90TVhpclByWjdMQT09

[5]https://www.malaysiakini.com/news/492507

[6]World Bank Group. (2020). The Human Capital Index 2020 Update: Human Capital in the Time of COVID-19. World Bank. Retrieved from https://openknowledge.worldbank.org/handle/10986/34432

[7]https://investpenang.gov.my/penang-strives-to-drive-industry-forward/

[8]https://www.freemalaysiatoday.com/category/nation/2019/05/02/with-land-for-industries-running-out-we-sorely-need-3-island-project-says-chow/

[9]https://www.nst.com.my/opinion/letters/2021/05/689811/penang-south-reclamation-who-does-it-serve

[10]https://www.buletinmutiara.com/linear-waterfront-pdc-to-call-for-proposals/

[11]Mahbar, Zabidi. (16 July 2019). Malaysian Investment Development Authority's Deputy Chief Executive Officer II's welcoming speech at Penang Domestic Investment Seminar, 16 July 2019, at Olive Tree Hotel, Penang. Retrieved from https://www.mida.gov.my/wp-content/uploads/2020/07/20190717092147_Welcoming-Speech_Penang-Investment-Seminar-2019Final-1.pdf

Will Malaysia Baharu surpass economic expectations again?

Earlier last year, 22 economists projected Malaysia’s gross domestic product (GDP) to be 4.3%.[1] By the second quarter, our GDP hit 4.9%, surprising the market and outperforming economist expectation.[2]

For the overall 2019 economic gain, the RAM Ratings fixed their estimation at 4.6%, corresponding to the projection by Malaysian Institute of Economic Research and the World Bank.[3] This number still outperformed the 4.3% projected by said 22 economists.

For 2020, several readings indicate that Malaysia’s GDP will be in the realm of 4.3% to 4.8%.[4] Will Malaysia under Pakatan Harapan be able to pull through another economic surprise in 2020, outperforming expectation?

Global economy is currently affected by the escalated tension in the middle east. Coupled with the uncertainty of US-China trade war, the market remains volatile and investors are cautious. Political instability stemmed from local racial unrest and rising extremist threat will further erode traders’ confidence in Malaysia market. Along with the rise of regional competition, it'll be a very challenging year for Penang and Malaysia.

Nevertheless, studies from the AllianceDBS Research show that the various upcoming infrastructural projects such as Penang Transport Master Plan, East Coast Rail Link, and Pan Borneo Highway will boost the country’s economy to a projected growth of 4.5%.[5]

Despite criticism from anti-development NGOs, these projects will generate dynamism in the market to ensure that graduates get employed, parents can put their children in school, and working adults can provide for their elderly parents.

Anti-development NGOs say that it's the government's responsibility to manage the economy. However, when development plans such as the Penang South Islands and Penang Hills cable car services were unveiled, these NGOs object and demand for their cancellation without providing better alternative. 

The world doesn't stop for us. If we continue to waste time with those anti-development NGOs, Malaysia will regress from being a developing nation to an underdeveloped wasteland.

True, each project must be examined. However, there is a huge difference between constructive critique that fine-tune development plans and idly complaint.
 

Malaysia’s GDP growth will likely be sustained above 4% in 2020, given the various initiatives introduced in Budget 2020. Whether will it surpass economist expectation again is still an open question, depending on how those upcoming infrastructure projects pan out.

Reference

[1]https://www.bloomberg.com/news/articles/2019-05-16/malaysia-s-economic-growth-slows-as-exports-investments-slide

[2]https://www.nst.com.my/business/2019/08/513518/strong-gdp-growth-continues-highlight-malaysias-resilience-mof

[3]https://www.nst.com.my/business/2019/10/530888/malaysias-rm145-trillion-economy-grow-46pc-year-ram, https://www.malaymail.com/news/malaysia/2019/07/29/mier-revises-2019-gdp-growth-forecast-upward-to-4.6pc/1775745, https://www.malaymail.com/news/malaysia/2019/07/01/world-bank-expects-malaysias-gdp-to-grow-4.6pc/1767049

[4]https://www.theedgemarkets.com/article/gross-domestic-product-growth-slow-43-2020-%E2%80%94-marc,https://www.theborneopost.com/2020/01/05/malaysia-gearing-up-for-2020/, https://themalaysianreserve.com/2020/01/07/malaysia-can-achieve-4-5-growth-this-year/

[5]https://www.malaymail.com/news/money/2020/01/06/domestic-demand-to-support-malaysias-2020-growth-says-alliance-dbs/1825109

Malaysia needs high-skilled jobs for our youths

From 2010 to 2017, more than 170,000 graduates entered the workforce annually. However, there were only 98,000 high-skilled employment gains in that period, according to Bank Negara.[1]

That means, out of 10 graduates, more than 4 were employed below their qualification.

Murray Hunter recently pointed out that youth unemployment reached almost 60 per cent of the 504,000 unemployed.[2]

Underemployment and youth unemployment are urgent issues that need solution. The remedy lies in our education system, economic policy, and response to global market condition.

After more than 60 years under Barisan Nasional, is our country’s competitiveness robust? Are our education system and social and cultural upbringing preparing our youths to be productively employed? Is our country attracting enough investment that generate high-value jobs?

As the statistics above shown, the answer to these questions is sadly, ‘No, no, and no.’

In 1965, Malaysia’s GDP per capita was US$310 while South Korea's was US$108. Our economic productivity was about 65 per cent more than South Korean.

Fast forward to 53 years later, in 2018, our GDP per capita was US$11,239, while South Korea’s was US$31,363. They have surpassed us by 179 per cent.[3]

In the past, Vietnam used to be backward compared to Malaysia. Today, Vietnam ranked nine spots above Malaysia in World Bank’s Human Capital Index.[4]

The US News and World Report has recently named Vietnam as the eighth best country for investment with Malaysia as the thirteenth.[5]

The global market economy doesn’t wait for anyone. Either we improve our competitive advantage or be left behind.

For a state like Penang, with zero natural resources, there is no time to lose. The state has to leverage on its growing manufacturing and services sectors.

The plans to reclaim new land bank for industrial and commercial expansion and to build an integrated transport infrastructure can help to reduce underemployment and youth unemployment. We have high-skilled graduates. What we lack are high-skilled jobs.

Macau’s newly launched Light Rail Transit (LRT) is a good example. The LRT project has created more than 500 employment opportunities and provided platform for knowledge transfer to develop local workforce.[6]

References

[1] http://www.bnm.gov.my/files/publication/ar/en/2018/cp01_001_box.pdf

[2] https://www.malaymail.com/news/what-you-think/2019/09/10/malaysia-faces-youth-unemployment-crisis-murray-hunter/1789238

[3] https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=2018&locations=KR-MY&start=1960

[4] https://photius.com/rankings/human_capital_index_country_rankings_2018.html

[5] https://www.malaysiakini.com/news/492507

[6] https://macaunews.mo/mtr-hires-over-570-staff-for-lrt-operation-git-chief/

Pakatan Harapan government reduced inflation by 84%

Malaysians are eager to know what has Pakatan Harapan (PH) government has accomplished since May 9, while the opposition has gone on its propaganda spree, telling the world that the government has not improved the country’s economy. Latest being MCA’s Wee Ka Siong who condescendingly urged the finance minister Lim Guan Eng to work his magic.

In general, Malaysians are patient and understand that the new government needs time to improve the economy. No economist or politician can fix the RM1 trillion indebted economy overnight or over a year or two.

The past six months, however, have shown signs of significant improvement. For one, our inflation rate has been reduced by 84%. The average inflation rate from June to October 2017 was 3.6%, which is very high compared to the same period this year, at 0.56%.

Figure 1: Comparison of average inflation rate in the period of June to October 2017 and June to October 2018.

Average inflation rate under BN government (June-October 2017)	Average inflation rate under PH government (June-October 2018)	Difference
3.6%	0.56%	-84%

The current opposition, the then government, has engineered an economy model that had confiscated much from the people, the dark side of the so-called “Najibnomics.” Let me explain.

The Goods and Services Tax (GST) introduced in April 2015 had enabled the government to tax every single transaction in the country, except certain zero-rated and exempted products. By the end of the year, the BN government has collected RM27 billion. The following year, GST has channelled RM41 billion to the government. 

How GST works is that the more expensive goods and services become, the more collection will be made. 6% of a RM100 item is RM6, while 6% of a RM150 item is RM9. In order to collect more, prices need to be inflated. Government can manipulate prices in the economy to extract more tax money. "By a continuing process of inflation,” as John Maynard Keynes wrote, “government can confiscate, secretly and unobserved, an important part of the wealth of their citizens."

But how to gradually inflate prices in the economy?

One way to do that is to make volatile an essential commodity. When the price of that commodity becomes unpredictable, the prices in the economy will increase to curb losses or anticipate higher production cost. So, what is that commodity in Malaysia? Petrol.

That is why five months before the introduction of GST, the BN administration ended oil subsidies, allowing market forces to make volatile the price of that commodity.

The plan worked, the volatility of petrol prices gradually increased inflation. By February 2016, our inflation rate hit 4.2%, which later overtaken by 4.9% in March 2017, the highest inflation increase since 2009. GST collection in 2017 was RM44 billion, highest since its implementation. Citizens’ wealth was confiscated secretly and unobserved.

Of course, the volatility of petrol prices is not the sole factor for inflation. Other factors such as currency devaluation had a role too. The point is that the volatility of petrol, an essential commodity, exposed our economy to high destability risk.

When we look back the past five years, it seems that inflation was an imperative in Najibnomics. The Nobel Laureate Friedrich von Hayek is right,“Economic history is largely a history of inflation, usually inflation that is engineered by government for the gain of government.” Malaysia’s average inflation rate from 2013 to 2017 was higher than our neighbours and some advanced economies.

Figure 2: Comparison of average inflation rate from 2013 to 2017 among several countries.

Country	Average inflation rate (2013-2017)
Brunei	-0.2%
Singapore	0.68%
Thailand	0.82%
Japan	0.88%
Germany	0.92%
United States of America	1.32%
Malaysia	2.65%

The downside of inflation is not confined only to confiscation of people’s money by the government but also increases welfare spending and reduces the value of our savings and Employees Provident Fund (EPF). This is horrifying as we work our whole life with the hope to enjoy retirement but only to realise that the value of our savings and EPF have shrunk.

The PH government’s policy has managed to temporarily slow down inflation. By fixing the price of RON95 and diesel, the new government has reduced the volatility of prices in the economy.

On top of that, the switch from GST to Sales and Services Tax (SST) with the three-month tax-less interval has reduced tax collection and thus increased people’s disposable income by RM22 billion. These two measures have stabilised the market and show a drastic difference between the inflation rates before and after the 14th general election. 

Figure 3: Comparison of inflation rate between before and after the 14th general election (GE14).

Before GE14	After GE14
January 2.7%	June 0.8%
February 1.4%	July 0.9%
March 1.3%	August 0.2%
April 1.4%	September 0.3%
May 1.8%	October 0.6%
Average: 1.72%	Average: 0.56%

PH has proven its ability to stabilize the economy, reduce inflation, protects our savings and EPF, and abolished Najibnomics. “Low and stable inflation,” as noted by Ben Bernanke, “is an important accomplishment that will continue to bring significant benefits.”

Notwithstanding those who cannot see the improvement, it is nothing short of magical to have our inflation rate reduced by 84% in the past five months by the new government.