Malaysia Economy In The Global Environment - An economic landscape

By Tan Thai Soon

The intention of this site is to provides some insights and the contrasting views on the economic policies and measures, and to highlight issues that would affect local and foreign investors in Malaysia. The following are some interesting topics and challenging issues that related to Malaysia economy:

• The rise and fall of the Keynesian fiscal policy and the Friedman monetary policy;
• The see-saw views of nationalization and privatization;
• The understanding of deflation and inflation;
• The equation of rate of interest, saving and reinvestment.
  
• The issues of capital control, free flotation or currency manipulation;
• The short term financial assistance and long term wealth creation and preservation;
• The issues on global competition and international co-operation through joint-venture and strategic alliances;
• The post independent New Economic Policy and Strategic Proactive Economic Policy in the global environment;
• The development of traditional argro-industry and new bio technology;
• The development of industrialize economy and knowledge economy, particularly the creativity and innovation;
• The current rate of unemployment and the long term human capital management, in term of education, training, skill and professional development.

The globalization of the world economy, together with the current world economic crisis, give the policy makers a challenging tasks in this challenging times. There are many issues need to be resolved and discussed, particularly the Malaysia economy landscape need a structural change to ensure economic sustainability. Many leaders know there is a "need to change" to be competitive in the global environment:

• Datuk Seri nazir Razak calls for more strategic proactive response to crisis by "review the New Economic Policy" (New Straits Times, Feb 4, 2009)
• Tan Sri Muhyiddin Yassin agrees to gradually liberalise policies to "provide new avenues for foreign and local investors" to come and invest in Malaysia, but insisted this would not revamp the mainstay of the NEP (New Straits Times, Feb 11, 2009)
• Steven Wong, the assistant director of ISIS Malaysia argued that "one cannot afford to subscribe to economic policies that merely cater to the moment, we must think about tomorrow" (The Star, Feb 9, 2009)
• I believe the present or future leadership will have the "courage to change" to ensure economic sustainability. The role of the government is to create a "strategic proactive policy". On the other hand, government link companies and non-government link companies should play a more active roles to help the society through corporate social responsibility.
  

As a final notes, the success of any economy will depend on a good economic structure and policy. However, other factors such as social and political factors are equally important.

Managing Business In Good Times and Bad Times - Malaysian Experience (Part 2)

By Tan Thai Soon

Super Cash Payout Vs Reinvestment

1.Introduction
The recent issues on super cash payout on "Wall Street bonus" provide a good lesson for many organizations in managing business during good times and bad times.

2. Super Cash Payout
2.1. Financial companies in New York city paid cash bonuses of US$18.4 billion in 2008 despite of record losses suffered by many financial institution.

2.2. U.S. president Barack Obama refers the hug bonuses payout by the banks represent "the height of irresponsibility"

2.3. Some observers argued that such payment system during good times and in turbulent times is not helping the institutions in the short run and long run.

2.4. Some argue the "need of change" in compensation system. I believe "Yes They Can" under the leadership of U.S. president Barack Obama.

3. Reinvestment Model-Malaysian Experience
3.1. Public Bank Berhad (PBB), one of the largest listed non-government linked corporation on Bursa Malaysia. Its financial performance on profit after tax ranging from RM330 million (1995) to RM1,450 million (2005), including a profit after tax of RM51 million in 1998 during Asia financial crisis (Datuk Paddy Bowie, 2006, p.265). In 2008 financial year end, an unaudited , PBB posted a pre-tax profit of RM3.38 billion (Business Times, Jan 20, 2009).

3.2. PBB claim to be "one of the best capitalised" bank in Malaysian, from 1980 (RM 20 million) to 2006 (RM 3.42 billion), this was done via regular bonus issues to shareholders and through the exercise of the employees' share options (Datuk Paddy Bowie, 2006, pp254-255). If a sharehoder invest RM1,000 in 1000 shares in PBB in 1967, " to-date it would have yield close to RM1.2 million for you" (Datuk Paddy Bowie, 2006, p.181).

3.3. PBB's reinvestment model benefits the bank and its stakehoders, particularly the sharehoders and employees. The bank is able to increase its market capitalisation through bonus issues, while preserve its cash reserve for expansion. As for shareholders and employees, their shareholding in PBB increased, they may decide to keep the additional shares or to liquid it in some other date through stock market.

4. Conclusion
The success story of PBB came with many contributing factors. However, the strategy of reinvestment model is a critical factor. The experience of PBB provides a good lesson to many local institutions in managing business during good times for the bad times. It is not so fortunate for some institutions in Malaysia, they need constant government assistance and restructuring during both good times and bad times.


Reference
Datuk Paddy Bowie (2006) Teh Hong Piow, A Banking Thoroughbred, Public Bank Berhad, Kuala Lumpur.