Egypt : The Next President

The whole world need kids like this

10 Things I Want to Eat Before I Die

1. Cronuts

Half donut, half croissant. More info here

2. Black truffle risotto

Made with one of the most expensive ingredients in the world.

3. Beef Wellington

Beef fillet coated with pate and puff pastry. Classic English cuisine

4. Peking duck

One of the must try dishes of China. Crisp skin to die for.

5.Shark fin soup

Gordon Ramsey describes it as "tasteless, chewy rubber", but I really want to try it.

6. Sea urchin sushi

It has a soft, buttery texture that delightfully seems to melt in your mouth.

7. Butter poached lobster

A staple at fine restaurant across the United States

8. Kopi Luwak

Beans of coffee berries that have been eaten and excreted by civet, a cat like animal that is native to Sumatra area.

9. Gold Leaf

Definitely, the best way to splurge and waste your money

10. Haggis

A traditional Scottish dish, made with  the heart, liver and lungs of sheep, minced with onion, oatmeal, suet, spices, salt and stock and encased in the animal’s stomach.

How international oil price fluctuations affect Malaysian government’s fiscal positions?

Abstract

Malaysian government fiscal dependency on oil revenues from its national oil company, PETONAS, and huge government expenditure on fuel subsidies to its citizens has major influences on the country’s fiscal policy agenda. On average, almost 35% of the Malaysian government revenues come from tax and dividend payments from PETRONAS, and averagely, 7% of the government revenue is spent on fuel subsidy. Since oil profit and fuels subsidies payments depend heavily on international oil price, this paper estimates how international oil prices volatility affect Malaysian government’s fiscal position and ultimately, how high dependency on PETRONAS’s revenue to finance government budget affect the whole economy in general. The interactions between volatility of international oil prices from 2000 to 2011 and government budgets, in term of energy subsidies, and oil revenues have been analyzed to study the effect. The main results show that there are direct relationships between changes in oil price and 1) PETRONAS revenue 2) government revenue 3) government expenditure (in term of fuel subsidies payment) and 4) government debt. Additional analysis reveals that large fuel subsidies payment and high dependency on PETRONAS’s revenue to finance government budget have negative impact on Malaysian economic growth since both of these components are very susceptible to oil price shocks. In order for Malaysia to prevent the volatility effects of oil prices and avoid mismanagement of its natural resource revenues, it will need to make significant decision by increasing its tax base, reducing its fuel subsidies and establishing sovereign wealth fund to properly manage country’s natural resources.

For full paper, visit: http://sdrv.ms/T5ii0l 

The Time Has Come For Malaysia to End Ethnic Discrimination in Its Education System

Malaysian population consists of three major ethnic groups, namely Malays, who are indigenous to Malaysia, and the ethnic Chinese and Indians who were brought in large numbers by the British during the colonial era. During that time, a large majority of the Malays live in the rural areas and have been segregated from economic development. Whereas, the Malaysian Chinese and Indian that live primarily in the urban area have had a better education since the majority of the schools built by the British were in the urban areas. Due to large inequality in education between ethnic groups, the government at that time believed that it is best to give special privileges towards Malays ethnic group in order to restore racial equality. Article 153 of the Constitution allows special privileges and quotas for the Malays in the civil service, public scholarship and public education. This special privileges generally have help Malays to have better education and to escape poverty, however this reverse discrimination is not appropriate anymore  since its deprived other ethnic minority and hinders the true potential for Malaysia to fully develop its human capital.

According to Watson (1980), “the most striking educational discrimination in favor of the Malays has taken place at tertiary level”. More than 80% of admissions into public universities are reserved for the Malays and the government even established one university (MARA University of Technology) with a student population of 170,000 just for Malay only (Human Rights Foundation, 2011). In 2010 National Budget, RM 2.8 billion was allocated for student’s assistance scholarships but only 5% were estimated to be received by non-Malay students (Ministryof Finance , 2010). These discriminational policies are actually threatening Malaysia’s future development because it not only segregated its citizen but also crated racial tension between ethnic groups. Furthermore, it has terribly failed to eradicate the poverty among low income Malay since most of the scholarships and tertiary educational opportunities were concentrated within the wealthy Malays group (Mukherjee and Sarjit, 1985).

Quality needs equality. If Malaysia is going to be successful in economic growth, the government must implement a massive reform in educational system to ensure that all of its citizens have equal access to education so that it can develop better human capital that can fulfill high skilled labor demand in the country. Ethnic quotas and discrimination should be eliminated at all educational levels to ensure stable racial relation among all ethnic groups can be preserved. Educational policies in the future should be geared more towards the poor and disadvantaged of all ethnic groups. It also should emphasize educational improvement, especially in rural and poor urban areas where the economically disadvantaged are most often situated. Currently, Malaysian government has spent billions of dollars to send students to study abroad. Instead of investing heavily in sponsoring students to study overseas, it would seem more practical to construct more higher-education facilities in Malaysia to encourage students to attend universities at home, thus saving significant foreign exchange. With more quality universities at home, there would be less need for giving Malays preferential scholarship treatment, further fostering local human capital and national unity among all ethnic groups.

Works Cited

Human Rights Foundation. (2011). Institutional Racism and Religious freedom in Malaysia: prepared for US State Department.

Ministryof Finance . (2010). BUDGET 2010 Malaysia Highlights .

Mukherjee, H., & Sarjit, J. (1985). Education and Social Policy: The Malaysian Case. Prospects, XV(2), 289-300.

Watson, J. (1980). Education and Cultural Pluralism in South East Asia, with Special Reference to Peninsular Malaysia. Comparative Education, 16(2), 139-158.

Local Innovation: Key for Malaysia to Escape Middle Income Trap

In 1970’s, almost half of Malaysian still lived below the poverty line with a GDP per capita of around $USD 390. Currently, GDP per capita has reached more than $USD 10,000 and less than 1% of Malaysians live below the international poverty line of $1.25 per day (World Bank, 2011). Huge growth rate between 1980s and 1990s that averaging at 9% per year has successfully transformed its economy from a poor, agriculture based economy into a modern, upper-middle income country. However, from 2000 onwards, Malaysia’s economic growth started to decline and its GDP per capita remained stagnant at middle-income level. Countries such as Taiwan, Korea and Singapore that have relatively same GDP per capita level with Malaysia in the early 1970s have overtaken Malaysian in term of economic growth and successfully put their countries at high-income level status. Therefore, Malaysia needs to reform its economy in order to escape from middle-income trap that could transform the country into high-income nation.

Research done by Foxley and Sossdorf (2011), that examine the successful cases of Korea, Finland, Spain and Ireland to escape middle income trap has identified four main factors that enable these countries to transform from middle income to high income economy: 1) good macroenomic management 2) flexible exchange rates and labour markets 3) high rate of investment in education and innovation 4) stable political and social condition. Malaysia seems to fulfill all the requirements mentioned above except for investment in education and innovation.   Malaysia’s main economic  growth contributor relies heavily on export-oriented manufacturing supported by foreign investment. Malaysia’s local companies have not done enough innovation to add value to their products. Report done by World Bank (2010) that examnie the innovation growth in Malaysia found that there is a huge decline in private investment in Malaysia from mid-1990s onwards and R&D spending stays low, at about 0.6% of GDP (compared to 3.5% in South Korea). Malaysia’s educational policy that is racially biased where it discriminates Chinese and Indian racial minority admission to public universities hinders the true potential for Malaysia to fully develop its human capital. 

If Malaysia is going to escape the middle-income trap, the government must implement a massive reform in educational and research institution.  Strengthening the education system by giving equal access to all people is important to enable Malaysia to have better human capital that can fulfill high skilled labor demand that can drive innovation in the country. Instead of relying from foreign firms’ technology, Malaysia should innovate locally in order to maintain sustainable growth in the future. Unlike in Taiwan and South Korea, there are only a few industries in Malaysia that has become world-class industries. As stated by Foxley & Sossdorf, (2011), South Korea successes in achieving high income status are largely due to its local innovation successes that have been able to create homegrown, internationally competitive industries. South Korea for example has more than 15 companies listed as Fortune Global 500 Company whereas Malaysia only has one, which is PETRONAS, Malaysian national Oil and Gas Company.  Government can help to foster local innovation by channeling more financial resources to local start-up companies and other potentially innovative firms. Economic Transformation Programme, a Malaysian government initiative that have been introduced in 2010 to attract private investments in national key economic areas such as oil and gas, financial services, and manufacturing might help to resolve this issue.

Works Cited

Foxley, A., & Sossdorf, F. (2011). Making the Transition: From Middle-Income to Advanced Economies. Washington DC: Carnegie Endownment.

Hazri, H. (2011, January 26). Malaysia’s Middle-Income Trap. In Asia .

 World Bank . (2010). Malaysia Economic Monitor: Growth through Innovation. Thailand : The World Bank .

World Bank. (2011). World Development Indicators. World Bank.

How Effective is Malaysian Capital Control Policy in Handling 1997-1998 Financial Crisis?

Financial crisis in Asia during 1997-1998 have created a huge economic downturn for South East Asian economy, particularly in Thailand, Indonesia, and Malaysia. Thailand and Indonesia were forced to follow IMF policies to handle the financial crisis in return for IMF’s financial assistance. These countries were obliged to float their exchange rates, increase interest rates, tighten their fiscal policy, shut down troubled banks and liberalize their capital account (Stiglitz, 2002).  However, Malaysia took a very different path in handling the financial crisis. Instead of relying on IMF financial assistance, Mahathir Mohammad, Malaysia’s prime minister at that time reduced interest rate, imposed strict capital controls, and fixed the exchange rate at RM 3.80 against the US dollar. Malaysian economic policies were seen as “radical” and many economists at that time criticize Malaysia’s decision to abandon IMF measures. On the contrary, Malaysia’s choice to impose capital control have able the country to recover faster and stronger compare to Indonesia and Thailand.    

Stiglitz (2002) argues that imposing capital controls was an effective way to stabilize the economy at that time and he criticizes the IMF decision to interfere with Thailand’s economic policy. He argues that the interventions of IMF in the Thailand economy that force it to liberalize its capital account have dampened the economic recovery process in the country.  IMF utilized similar measures that they have done in Latin America to improve Thailand and Indonesia economic condition, but the situation is not exactly the same. Most of IMF measures have negative effect for targeting countries. For example, IMF has forced Thailand and Indonesia to increase their interest rate. Alas, increasing these countries’ interest rate has dampened the consumption demand in these countries and makes matters worse. High interest rates implementation have put many firms and businesses to be in high levels" of indebtedness because the cost to borrow money has become more expensive. This has led to reduce in investment in most of the major driver of economy in the country.

Malaysia’s decision that was very contrary with Thailand and Indonesia, which is to reduce interest rate instead of increasing it and to suspend capital account, have revived the domestic demand in the country. Malaysia’s capital control policy put an end to speculative activities in the currency and stops the investment rush to exit the country. Due to the effective capital control policy in handling 1997-1198 Asian financial crisis, Malaysia was able to recover faster and stronger compare to other Asian crisis economies such as Indonesia and Thailand. Malaysia has accumulated large surpluses from the external current account allowing an accumulation of international reserves. Unemployment in the country has steadily declined, and inflation remained low (Meesook, et al., 2001). The econometric analysis presented by Kaplan and Rodrik (2001) that compare the control of capital in Malaysia with the International Monetary Fund’s policies in other countries are consistent with the conclusion that control of capital was the best response to the crisis at that time.  

Bibliography

Kaplan, E., & Rodrik, D. (2001). Did the Malaysian Capital Controls Work? NBER Working Paper, No. w8142.

Meesook, K., Lee, I. H., Liu, O., Khatri, Y., Tamirisa, N., Moore, M., et al. (2001). Malaysia: From Crisis to Recovery. International Monetary Fund.

Stiglitz, J. E. (2002). The East Asia crisis: how IMF policies brought the world to the verge of a global meltdown. In J. E. Stiglitz, Globalization and its Discontents (pp. 89-132). New York : Norton.

Book Review: The Travels of A T-Shirt in the Global Economy

Pietra Rivoli in this book explicates the story of producing a piece of T shirt to be sold in America in term of politics, economic and social issues. She was intrigued to investigate this issue when she attended a demonstration against globalization in Georgetown University. Rivoli began her investigation with a $5.99 T-shirt that she bought at Walgreen and literally she unveiled the story behind the production of that T-shirt. Rivoli starts by tracking down the printing manufacturer of that T-shirt and this leads her to Lubbock, Texas, the place where the cotton of that T-shirt probably originates. In Part I of the book, Rivoli reveal the historical detail of American cotton industry. According to Rivoli, the American cotton industry has been strongly subsidized by the government and this is one of the reason that explain why America are still of the top cotton producer in the world. Besides high subsidy, the efficiency and entrepreneurship of the cotton farmer in the US also is one of the factor that contribute to this achievement.

After Texas, the cotton that has been harvested was shipped to China. The competitive advantage that China has in term of cheap and huge labor supply, and obedience of their worker put China as the ideal place for textile industry.  Also, the implementation of hukou class system in China that prevents rural people in China to migrate to city has created a huge supply of excess labor. This excess of labor has been place in construction and textile industry. Although, the working condition there is bad and their right is limited but according to Rivoli in a way, the migration of the worker from farm to textile industry has created a sense of freedom to these workers.   

Surprisingly, after travelling to another part of the world, China, the travel of Ravoli’s unfinished (without graphics) T-shirt continues to Miami or New York City. Here, her T-shirt was printed with graphics by the wholesaler or retailer and ready to be traded into the market. The reason why the T-shirt was completed in United States, rather than China is because of complex trade rules involving quota system that shape clothing and trade with China. Finished T-shirts are likely to be more quotas restricted than unfinished T-shirts, so the importer have to import unfinished T-shirts to enable them to have bigger quota and revenues.

Rivoli also discusses the role of politics in the T-shirt trading process. She explains the responsibility of politicians at Washington D.C and how they affect the trade movement of clothing industry in the United States.  Due to incredible complicated special-interest rules, political affairs and trade policies, the travel of Rivoli’s t-shirt get a little bit complex here. Although the United States textile industry is declining, it continues to be very dominant because of the implementation of quota limits, high tariffs, and political influence by the policy makers here in D.C. For example, a bias and nonflexible quota system restricts the quantity of Chinese clothing items that can be imported into the United States. Indeed, Chinese imports are among those most profoundly controlled. The United States clothing trade policies are heavily influenced by representative of textile and apparel organization that want to protect the local textile industry from cheap imports from developing country that can jeopardize small American communities. 

Rivoli argues that the globalization of textile industry to compete in free trade is good for everyone. For Americans, the inflow of cheap T-shirt into the country will boost their purchasing powers and incomes. For developing countries, the emergence of new factories will provide employment sand eliminate poverty that can heighten their living status. However, Rivoli also clarify that free trade “may not be the best course” in the short run because local community will be negatively affected.

The next stage of Rivoli’s T-shirt will be textile recycling. Once American consumers are done with their T-shirts, they usually will donate them to charitable organizations such as Goodwill or the Salvation Army to be recycled, in this case to Tanzania. In other cases, if the T-shirt was ragged or else damaged, it will be predestined to be shredded. Later it will be used as raw material for furniture padding and throw rugs all over the world. Finally, landfill will be the last final stop for the T-shirt.