Power play

Electricity tariffs went up.

Thank goodness, or else my price (un)expectations theory suggests that worse price distortions in the future will be forthcoming. And hating the less than 7-day policy time frame between announcement and implementation.

One of the main reasons why tariffs have gone up, is to erm...make sure we'd be more efficient in its use. But have we really done any better than say.... 1989?

Apparently not... as a nation, we generate less GDP per KWH compared to 2 DECADES AGO (graph below)! How did no one see this coming?

But really for a proper indicator of efficiency you should normalize by population. So erm... Amount of national output per capita consumption of electricity. *To read...it says that the amount of electricity consumed by one person in a year, generates "x" amount of national GDP*

Quite frankly.... I have no idea why we are as inefficient with energy use for so long... I'm sure there's got to be a good reason. I mean we are no better than 1989 Malaysians when it comes to electricity savings!

You are my candy, girl

Another 20 sen/kilogram got removed from the domestic sugar subsidy programme.

After some investigation, I have to say that sugar consumption per capita varies a lot by countries [see graph]. And its not income dependent. A typical Japanese consumes the same amount of sugar as someone from Haiti!

Among the other surprising findings - hopefullythe International Sugar Organization has got the data for consumption right - is that Singaporeans consume even more sugar than us over-subsidized Malaysians! Might just send this data to PEMANDU just to see their reaction. One hypothesis that springs to mind is that as the influx of Malaysians to Singapore continues to increase, they bring with them their sugar addiction.

In any case, Malaysia is seriously on the wrong side scale. Whether or not Malaysians respond to price effects (i.e.  find a better substitute or altogether forego sugar consumption) remains to be seen - not enough data to confirm otherwise, since last year. At present, according to the latest CPI weights, sugar consumption is around 0.25% of the total basket; the other component that's likely going to get directly affected - Food from Cafes and Restaurants - is another 2.95% of the total basket.

Watching it like a hawk

[Post is going to contain a bit more theory than usual]

Was in Singapore over the weekend (not for the elections), so postings were put on hold.

The main story back home, I guess, was the monetary policy decision on Thursday. And I did call the sudden change in Bank Negara's stance a month or two ago.

Is it the right thing to do, though?

I'd like to think so, mainly because the over-subsidized economy is very sensitive to price increases (i.e. % changes in Malaysia are significantly smaller than our regional neighbours) and its really easy for upward price expectations to be entrenched.

It's not practical for consumers to keep money in bank accounts which do not keep up with the pace of inflation (negative real interest rate - first reading of it in March since 2008). If anything, its going to pick up further if enough people have an inkling of this and purchase assets to hedge against inflation *cough* real estate/stock market speculators *cough*.

But having said that, monetary tools can only control the demand push side of the equation. And typically, since food and fuel are so essential to everyday consumption, interest rate decisions can hardly affect the demand for those goods.

So the correct measure of inflation in this regard, would be the Core CPI. And that, while accelerating, is not too far off from historical trend (yet). The counter to that particular argument is the actual acceleration of that Index, which can really, really entrench upward expectation.

So if I were to judge, I think BNM may be a bit over-cautious with this, especially with many, many bad things happening overseas. But I can sympathize with inflation hawks that its a lot better to deal with future inflation if you stop it now rather than later.

And no, it's not because of her reappointment before you ask.

You got 1Mail

Data above is for end-2010.

This was probably a policy mis-step. And the response was pretty evident. Especially considering that outside of KL, the average broadband penetration rate is some 50% of total households.

I guess making it voluntary helps - who can imagine paying for another mail service (which the Government could probably read anyway).

Health and wealth

Most overseas Malaysians (I think) crave for their cheap, tasty - but unhealthy - local food every so often. And Malaysians in general, associate food as being a huge part of their culture. So really this comes as a surprise, more so that it didn't attract a lot of public backlash.

Anyhow a quick check of the stats in the World Health Organization website suggests that Malaysians aren't really that overweight in comparison. And before anyone asks...yes, you can find the highest concentration of fat people in the United States (after the Pacific Islanders).... 4 out of 5 male Americans are obese! 

But lets test the old Chinese adage where a wider wasteline is a sign of prosperity.
This of course means digging through wealth and obesity data.

And the results are startling...

It seems like Malaysia and Singapore - even with the easy access to tasty, greasy food are below the global trend. This of course begs the next question - what do you do with the kids who actually 'fail' (is there a fail mark) in the BMI?

Oh, I can think of other (just as good) reasons to get rid of the sugar subsidies other than this, but more on that later.

Charity begins at home ...for some

Dammit. I'm sure most overseas graduate workers in Malaysia - like me - are annoyed by this new policy. More so that it's currently tax-filing month. *click on graph to enlarge*

Back in 2009, that 15% tax rate would be mid-range OECD (stats aren't updated for 2010 just yet). But the new wave of fiscal austerity measures in the developed world would inch those comparative numbers up. I can imagine the US, Ireland, France, Spain, Portugal and Greece - among others - would have revised their tax rates upwards within the last two years.

But still...dammit. :(

The magic number?

Generally, economists like a specific number - a magic number, so to speak - to tell them how best to describe the situation. Failing which, there are always the local authorities who would be generous enough to draw that demarcation line for the rest of us.

Anyway, I don't know whether anyone else noticed, but there's a lot of emphasis on that RM3,000 per month wage lately... (am referring to the new credit card rules and the 100% loan given to prospective home buyers below that income threshold). But maybe it's just me reading too many Bank Negara reports.

From the chart above, that's a lot of people who are going to get affected (over 3 million households from the looks of it)... Am expecting slight changes in aggregate consumption and savings patterns in the near-term.

And before anyone asks, Malaysia's average household size in 2010 is around 4.3. But let's leave demographics for another day.