I think, and most people believe that the big "r" is just around the corner. I over heard people say the governor is ready to raise the interest rate...However I believe the governor doesnt think that way. She has been sticking to the rate for quite some time regardless of the situation, even when the US was cutting the rate, she kept the rate firm, and this time I believe she is not going to increase the rate. Why??? Because she had learned from 97 crisis to not to choke the economy when it is gasping for air!
I hope the governor can be more creative this time, forget about the oil price, dont just focus on the financial levers and switches, look at other things like how to contain the prices by neutralizing the demand by supplying enough to the market.How to channel the excess liquidity to higher return instruments without raising the rates, or conceptually how should we ease the demand bottleneck without raising the rates?
I believe there are many other mechanisms that can be used to ease the demand congestion that propel the price higher. In the US mainly, they prefer to tweak the rates lever simply because thats the only system that "they" control.But for us, there are many other things that we can do to cushion the freefall. Just like the oil price hike. Oil price shooting through the roof is not a problem to us, as we are making tonnes of money out of it. Our problem is that we dont have enough money for the development programs. That's why immediately after the subsidy restructuring, government announced an additional allocation of 30BilRM for the RMK9 initiatives.But is it wise eliminating the oil subsidy for the sake of growth as eliminating the subsidy itself is a huge drawback to the growth of the economy? The worst case is that even though we get back our RM625/Year, we have to pay more for other things. For instance the price of nasi ayam in my neighbourhood had been raised from 3.50 to 4.50, of course this one was the effect of compounding together with the rice price increase. So lets go back to the problem which was, the gov dont have enough money for development project! And the easiest way out was, take it from the subsidy!?
Why dont they think of a more adventurous move, like why dont we establish another petronas to double up the nation income so that we dont have to eliminate the subsidy or even why dont we set up another mof companies to dig out our minerals as commodity prices are exploding so that we dont have to eliminate the subsidy, or why dont we restructure the government operating costs so that we dont have to eliminate the subsidy, or why dont we raise a Sukuk or even initiating a PFI so that we can keep the subsidy or get a soft loan, which is very much better than raising the inflation rate for no reason! There are so many options out there that could be explored and saved our subsidy and spared us from this unnecessary inflation!!!
Hope the governor will think deep and wide this time, before she blunder unnecessarily!
Thursday, July 3, 2008
Unfolding the recession?
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6 comments:
I thought the govt has already formed a giant plantation conglomerate of 3 GLCs into Sime Darby Plantation. This could be the one that you mentioned, another income generating vehicle. Are we 'enjoying' anything from the commodities' income (palm oils)?
Urgh.. many tough words and radical ideas... but in some paragraphs I'm not even sure if you really understood what inflation or recession are all about though. And it is as if it can be as simple as that..
This giant was formed from existing companies, so there is no additional income from it and it is a public listed company, government dont have the veto there. We need to "add" new income from what we already have now to support the subsidy, and a public listed company is out of the question as Khazanah portion is not as big as the one in Petronas. May be Khazanah/MoF should create a national palm oil company or national minerals company which also can leverage from the commodity price hike...
Thanks for the comment.
In a nutshell, nobody can be sure of anything...
Because the parameters are infinity. Only a different level of confidence.
tweaking interest rates in the US is effective as the society consumption is very much sensitive to interest rate (i.e credit society). We are getting there,but not as yet. So Zeti can still afford not to tweak the rates.But not until inflation is in the region of 7%-8%
Malaysian companies have started opening up oil palm plantations elsewhere because we got no more feasible land for it except may be Sarawak. Why, why and why? CPO price is getting closer to RM4000 per tonne. It was sold at roughly RM1500 per tonne about 6 years ago. And coupled with the fact that our palm oil quality is much better than other vege-oils, the future for this commodity is very, very great. And because of that biodiesel project from palm olein has been shelved, 'tak sempat panas ponggong pun'. As such, I fully subscribe the idea of MoF setting up a national palm oil company. Radical? may be but I don't think so.
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