Category Archives: Economics

Malaysian Economy Continues to Expand, Budget Deficits Remain High

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Malaysia Growth Withstands Global Risks As Najib Boosts Spending

Gross domestic product rose 5.4 percent in the three months through June from a year earlier, after expanding a revised 4.9 percent in the previous quarter
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Prime Minister Najib Razak’s increased spending ahead of a general election that must be called by early 2013 has bolstered Southeast Asia’s third-largest economy
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Najib has raised civil servant salaries and pensions, waived school fees and increased handouts for the poor under a 232.8 billion-ringgit ($74 billion) budget this year as he works to boost support for his ruling coalition. In June, the government proposed to expand the annual allocation by 13.4 billion ringgit.

Growth of 5% in these economic times is very good news. One of the biggest risks to the Malaysian economy is increasing budget debt. The total debt is over 50% of GDP now, which is actually an acceptable figure (if annual deficits are small). But the annually deficient is extremely unsustainable at over 5% of GDP the last few years.

A total government debt level over 75% is a serious problem. Over 100% and it often leads to extreme financial harm. Japan, so far, has been an exception with huge debt loads being sustained. Japan has had a troubled economy the last few decades but has been surviving the extremely high debt much better than most countries would.

At the rate it is going Malaysia would join the extremely high government debt levels now seen in Europe and the USA in just a few years.

Related: Government Debt as Percent of GDP 1998-2010 for OECD – Make Malaysia My 2nd Home (MM2H) Statistics – Penang’s Economic Gains

Minimum Housing Prices for Foreigners Investing In Malaysia Rise to RM 1,000,000

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Excerpt from a speech by the Penang Chief Minister Lim Guan Eng, 19 April, 2012:

As a first step to protect the interests of local Malaysians, the state government is proposing to increase the minimum limit for foreign purchases of all properties from the existing level of RM 500,000 to RM1 million with a higher limit of RM 2 million for landed properties only in Penang island and retaining the present RM 500,000 limit for Permanent Residents.

In 2010 and 2011 there were 774 and 890 property transactions involving foreigners. These transactions constitute only 2.98% and 2.26% respectively of the total number of transations in Penang. However to protect the interests of locals to ensure that they enjoy priority for less expensive properties, this restriction will help to provide a level playing field since foreigners have the advantage of a higher currency.

The Penang state government stresses that we welcome foreign participation in our economy including our property market. The state government feels that foreign participation can be profitable to both Penangites and foreigners in the higher end market where they can add value by helping Penang to transform itself into an international and intelligent city.

We would like to get feedback and opinions from NGOs, property developers, foreigners and the public on this proposal. The state government hopes to implement this proposal the earliest by 1 June 2012 or the latest by 1 July 2012.

It would be good to know what percentage of the sales from RM 500,000 to RM 1,000,000 for condos, and RM 2,000,000 for landed properties were purchases by foreigners. But it seems like an overly drastic measure given a 2.5% rate of foreign purchasers. To slow the rise in prices I believe increasing the downpayment requirements (including the extremely minimal downpayment requirements on housing in the process of being built. To be effective this should be done on all purchases (not just foreigners).

Without more focused data on the foreign purchases in the ranges being targeted however it is hard to determine what the impact of any measure could possibly be.

Participants in MM2H (as well as permanent residents) are permitted to buy/own 2 properties at the RM 500,000 minimum level; which could definitely increase the applications for that program. That could be one of the reasons this action was taken.

Related: Penang’s Economic Gains – Penang Condo Market – Considerations for Investing in Iskandar Housing

CIMB Takes Aggressive Investment Bank Actions

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CIMB is one of Malaysia large and highly rated banks (several Malaysian banks have yet to fall prey to the level of problems those in Europe and the USA have). Investment banking is a very tricky area. There are huge unnecessary profits to banks such as Goldman Sachs taking from the current investment banking situation (which is just a lousy system that pours billions into a few banks for activities not worth close to what they take).

However the USA and European banks have often set up compensation structures that encourage bad risks, and bad pricing, and bad service to customers. If CIMB falls into that trap they almost certainly would fall to the same problems all other investment banks have fallen to – which required massive taxpayer funded bailouts.

Hopefully CIMB is not going into the gambling with huge leverage aspect of “investment banking” that most of the USA and European companies have made the main factor in their operations.

If CIMB just takes a simple approach to managing investment financing deals they can take huge profits and give customers huge savings off the current lousy deals they are offered by the current limited investment banking options. I would be worried though. The temptations to create huge cash incentives that will result in the company taking on huge risks and undermining customers have been impossible for most investment banks to avoid. If the investment bank is attached to a normal bank then you run into all sorts of risks of taxpayer funded bailouts.

Related: PayPal Opens Regional Support Center in Malaysia – Malaysian Residence Pass for Talented Expats

Treasures and Books Store: Used English Language Books in Permas Jaya

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Treasures and Books Store in Permas Jaya. Johor Bahru

Treasures and Books Store in Permas Jaya. This photo is taken as you exit McDonald's.

The Treasure Store has a new name and new location. The store has moved to Permas Jaya (where the Straits View Condos are) from the Danga City Mall in Johor Bahrus’ CBD. The new Treasures and Books Store is strait ahead as you step out of the McDonald’s. It is on the same block as the Time Hotel.

It is a great book store for anyone interested in English language books in Johor Bahru (they also have Chinese language books). Books cost quite a bit in Malaysia and Singapore. I am not exactly sure why. I would imagine maybe due to tariffs of some kind, and maybe low demand. Though the book stores seem busier than the average stores in malls, not just for browsing but for purchases. There are very few used books stores (that I have seen) which is odd (since the high new book prices should stimulate the used book market.

photo of books on shelves in the store

Inside the Treasures and Books Store

The Treasures and Books Store has a great selection of “beach reading” (light, enjoyable, escapism) and also offers many used books (which saves money). And you can return books and they will buy them back (for a bit less) so if you read quite a bit you can save a lot over buying new books and just stacking them up in your room.

The store has lots of books by authors such as: John Grishham, J. K. Rowling, Jefrey Archer, Robert Ludlum, Tess Gerritsen, James Paterson, Robert Harris, Sue Grafton, Michael Crichton, Douglas Preston, Stieg Larsson, Richard North Paterson.

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Manufacturing in Malaysia: Bahru Stainless Starts Production

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Malaysia’s economic develop plans have been progressing well the last few years. Balancing the development of an economy is a tricky business and many countries slip up along the way. Good plans and policies are needed. And then good execution. Good execution requires 1) attracting investors, 2) infrastructure, 3) skilled employees, 4) the ability to get plan implemented, 5) managing the environment, 6) urban planning…

Malaysia has several key areas targeted for development, including: education, energy, health care, computer technology, finance and banking. One area of focus in the Iskandar area in Johor (southern Malaysia). Penang and Kuala Lumpor are also growing well.

Bahru Stainless (a joint venture between Acerinox Group [67% stake] a Spanish company, Nisshin Steel [30% stake] a Japanese company, and Metal One) has started production. This is exactly the type of thing that is going to determine how well Iskandar, and Malaysia do going forward.

Photo of employees inside Bahru Stainless

Employees of Bahru Stainless, Johor, Malaysia

On the 12th December the first coil in the annealing and pickling line was successfully processed, which completes Phase I of the project. The current production capacity amounts to 240,000 Mt (megatonne) a year, out of which 182,000 Mt will be cold rolled. USD 370 million has been invested so far. This event is the culmination of a long process started in 2007, with feasibility studies.

The construction of Phase II is proceeding at a good pace. This phase, which start up is scheduled for the first quarter 2013, will increase the production capacity to 400,000 Mt/year. Likewise, it will allow Bahru Stainless to produce special steel grades and thin thicknesses, which are products with more added value. The investment of the second phase is estimated in USD 310 million, including a cold rolling mill, a cold annealing and pickling line, auxiliary lines, a laboratory, and an electric substation, which in the future will also feed the electric furnaces when they will be in operation.

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City Square Mall – Johor Bahru CBD

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City Square Mall greats you as you leave the CIQ and enter Johor Bahru CBD (Central Business District). You can take the over-street crosswalk from CIQ to enter the mall without ever going to street level. City Square Mall is one of 5 fairly large malls in downtown Johor Bahru. The others are Danga City Mall, KSL Mall, Plaza Pelangi, and Holiday Plaza Mall. The S1 bus will take you between all the malls and runs about every 20 minutes between 10 AM and 8 PM (and less frequently earlier and later in the day).

photo of the inside of City Square Mall

City Square Mall, Johor Bahru CBD

City Square is a large, 5 story, mall that is doing quite well – the proximity to the CIQ and causeway, I am sure, help keep up traffic and therefore stores. There are a large number of clothing and fashion stores, as well as beauty salons. There is also a movie cinema with multiple screen showing the latest films.

Food offerings include: Stonegrill, Old Town Kopitiam, Kinsahi, Papparich, Sushi King and Teh Sarabat Cafe. There is only one, small, grocery store.

View Larger Map

I find it somewhat amusing how un-user-friendly shopping mall website are, like City Square (it at least has photos of some of the stores). Though I would be more annoyed if I actually wanted to learn something from the site. They would be much better if they just had an RSS fee and a google search. Shopping malls spend a great deal of money providing an environment for shopping, I would certainly think they could do a much better job of providing virtual assistance with a bit of thought and effort. The internet might as well not exist, for how useless mall web sites are – that is not a good sign.

Danga City Mall in Johor Bahru

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View of Inside of Danga City Mall

Inside the Danga City Mall in JB - unfortunately the upper floors have far too many vacant store fronts.

The Danga City Mall is my favorite mall in JB. It has several very nice small restaurants and a high number of technology stores. The top floors also include a bowling alley, paintball arena and archery range. Unfortunately the mall also has quite a few empty shops. At least for now it also has my favorite store, the Treasure Store (which has lots of great used english language books): the Treasure store is moving to Permas Jaya next month.

photo of authorized Apple reseller store in Danga City Mall

Ascentouch (authorized Apple reseller) part of the large IT Valley area in Danga City Mall, JB Town.

The IT valley has the richest collection of technology stores in Johor Bahru including Samsung, Sony, HP, and Ascentouch (Authorized Apple reseller) used computer stores, computer repair, computer equipment stores. They have the normal assortment of phone stores and internet providers.

The restaurants offer some really good food very inexpensively. Two of my favorite are JB Station Kopitiam and Agena Sea (which moved next to the exhibit hall recently). On the lowest level there are about 8 good restaurant choices including Hokka Hokka Japanese Food, A1 Cafe. And there are probably about 8 more upstairs, including a small Italian restaurant which is decent (and better than I would think it could be for such a small location) though the seats are not very comfortable (more suited to drinking than eating). There is also a small grocery store that has some things but it would be better if it were a bit larger.

photo of the bowling alley

Bowling alley in the Danga City Mall - there is also a paintball arena.

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PayPal Opens Regional Support Center in Malaysia

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PayPal announced it will open a new regional customer support center in Malaysia. The site opens with 200 employees and they may hire up to 300 more employees over the next 3 years. PayPal’s new facility will offer service and support for customers across Southeast Asia as well as provide operational support for PayPal’s global payment service.

Based in Kuala Lumpur, PayPal’s new customer support center is currently hiring for a wide range of positions including customer service, merchant support and other operational support roles. PayPal is now accepting resumes from experienced applicants (I had added a link to apply but their job site is so lame I removed it – hopefully Paypal isn’t as backward as their job site makes it appear, or those jobs might not last long).

“PayPal is experiencing phenomenal growth in the Asia Pacific region and this new support center demonstrates our commitment to offering a safe, secure online payment platform to millions of customers across the region, especially in Southeast Asia,” said John McCabe, senior vice president of global customer service and operations, PayPal. “We chose Malaysia because of its highly-skilled, globally competitive and multilingual workforce, in addition to a world-class business environment and technology infrastructure.”

“We believe their decision to put up a major regional facility here is a strong endorsement of Malaysia as a vibrant hub for the high-technology industry. As an MSC Malaysia-status company, PayPal is an important and strategic partner to us, as we move towards realising our nation’s goal of becoming an innovative digital economy,” said Datuk Ghazali, CEO of Multimedia Development Corporation (MDeC).

Kuala Lumpur joins the other customer support locations for Paypal: Shanghai, China; Chandler, Arizona, USA; Omaha, Nebraska, USA; Dublin, Ireland; Berlin, Germany.

Adding jobs such as these in the key growth areas of technology and financial services is important for Malaysia’s economic plan. Attracting these companies to locate here is important. And keeping them here and having them add jobs will be a big factor in the future of the Malaysian economy.

It is also important to build the economy in multiple areas, targeting: Johor, Penang, Sarawak and Kuala Lumpor makes sense to me. And given the success in Kuala Lumpor already, I would really try and focus on adding jobs elsewhere whenever possible. Still, gains in Kuala Lumpor are a very positive sign. And targeting several industries is also wise, good targets for Malaysia: internet technology, finance (especially in the areas of back office support for Singapore and Islamic finance), energy, manufacturing, health care and education. Advancing the progress on the residence pass for talented expats would be a big help for Malaysia’s economic future.

Related: Penang’s Economic Gains – The Investment Potential for Iskandar is Attracting Interest from Great Britain – Penang Condo Market

Giving Back to Malaysia – Helping with Education Expenses

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photo of students at Tunku-Putra school

Students at Tunku-Putra secondary school along with teachers and representative from the charity club.

When I was planning my move to South East Asia (I hadn’t settled on Malaysia yet) I tried to read as much online as I could. One of the places I decided I wanted to visit to see if I could live there was Langkawi. Langkawi doesn’t have much information available online, especially on how an expat can live there. There are not many rental options. So I diligently looked for everything I could find.

One of the things I found was a reference to a charity helping pay school fees for some children in Langkawi. Education in Malaysia is not free and many families find it financially difficult to meet the costs associated with sending their child/children to school. Helping a child get an education seemed like the kind of thing that was worthwhile (I knew I wanted to contribute in some ways to where ever I settled down). I also knew it was easy to get busy and not get these kind of things taken care of. So I arranged to contribute before I went to Langkawi. I did so and was able to sponsor one child this last year.

Last week I received a report that he has graduated from Tunku Putra secondary school and is looking forward to college. The program, by the Charity Club Langkawi, Kedah was able to fully sponsor 41 Schoolchildren in Langkawi in 2011.

The Charity Club Langkawi “are being referred to a growing pool of young people who are very bright and are not able to attend, or drop out of, university because of lack of available funds.” It seems to me the charity club does great work. If you are an expat in Malaysia consider contributing. You can also sponsor a family or contribute in other ways if you prefer. If you know of similar clubs in Johor Bahru, or elsewhere in Malaysia, and a comment below.

I ended up not staying in Langkawi. It is worth considering but the rental options are very limited. There also isn’t much going on. But it has great beaches and wonderful food. I decided on Johor Bahru instead.

Related: Giving More Than Money to Charity – You Can Help Reduce Extreme Poverty – 100th Entrepreneur Loan