Thursday, 15 February 2007

Why Can’t We Have Better Press Corp (NST Edition)?*

For three days last week, NST trumpeted the tremendous revival of our economy. I first blogged about it here after their second headline of the week, voicing my dismay at the quality and sophistication of our mainstream media, as well as my opinion on what truly matters for the economy now.


So what is my take after all three headlines?


Basically, my opinion remains. After reading the headlines, you should say – “so?!” Let’s look at two of the main issues, first on the best ever share market activities in 10 years, and second on the landmark RM1 trillion total trade number.


KLSE index back to pre-crisis level – Yay?


So what can we say about the current share market condition? I am no expert in financial market issues, but the recent rally in the KLSE is by no mean unique. Many countries are having similar experience, largely due to excess liquidity (cheap money) in the global market thanks to (amongst others) Japan. I will not go into details regarding this (and all the talk about potential disorderly unwinding of the yen carry trade and yada yada), but the point is this – Malaysia is not unique.


In fact, if you are willing to look at simple statistics, you will notice that Malaysia is a laggard when is comes to ‘rebounding back to pre-crisis level’. I did a quick check and compared Malaysia to the rest of the region; we are basically the last to recover from the crisis, measured by share market indices. Refer to the graph below (guide: it is normalised to Feb-97 readings, roughly the pre-crisis peak. So, when the country lines hit 100 again, it has ‘recovered’).



What do we have?


Basically Singapore and South Korea recovered in 1999, two years after. Indonesia in early 2004 and even Philippines is faster. I forgot to add Thailand, but you get the picture. Taking 10 years to recover is not really something we should be proud of.


Gigantic Trade Numbers! Wait, what about US-Malaysia FTA?


Perhaps the biggest irony is that the day NST ran an overly optimistic message on our international trade prowess is also the same day that Malaysia took a step backward in securing a potential leap in ensuring the growth of its trade and economy in general.


The 9th of February marked the failure of the 5th round of discussion for a US-Malaysia Free Trade Agreement. US is the single largest trading partner and third largest FDI source for Malaysia and the FTA is expected to give tremendous benefits for both nations economically.


DBS Group Research ran a report on this, and provided an instructive account on why the agreement is not working out:


“Affirmative action vs “National Treatment”

While many issues have been resolved in the four negotiations already conducted, an important stumbling block remains: policies that are inconsistent with the principle of “National Treatment”, one of the core principles of all global trade agreements. The National Treatment principle requires each side to offer the other treatment no less favorable than what it accords its own citizens/companies. Malaysia’s affirmative action policies, which favour ethnic Malays, are difficult to reconcile with the principle of National Treatment, which is key to important FTA chapters like government procurement, trade in cross border services, investment, labour and competition. Indeed, FTA negotiations with New Zealand have been suspended due to problems in these areas. Likewise between Malaysia and Australia, where FTA negotiations have become deadlocked.


Only if our press will highlight the concerns of the future of our economy rather than wasting our precious national consciousness on silly numbers.


Another sigh.


Elanor


* after Brad DeLong


3 comments:

Jeffrey, HL said...

Hi, Elanor, I copied and pasted some of your article in here:http://sahamas.net/forum20/
I hope I have your permission.
With credit a link to your blog of course. Great stuff!!

Jeffrey

Elanor said...

sure thing Jeffrey, but do note that my comment is not specialist in nature - so it might appear childish for a Bursa specific forum :)

Hi&Lo said...

Elanor,

you took so much trouble to illuminate us. Thanks.

Gong Xi Fa Xai!