DIFFICULT TIME AHEAD FOR MALAYSIA

Before we dive into the Malaysia's economy, we shall look at the performance of other countries that directly influence our financial state. America, albeit the growth turmoil had recovered but it happened at extremely slow pace. The US Gross Domestic Product (GDP) has slowed from 2.4% in 2010 to 2% in 2011 and 1.6% in the first half of 2012. The economist forecast only 1.5% growth for this year. If the trend continues, the economist warned that US shall fall back into recession.

As for the Europe, the 17 nation euro zone manage to grow at about 0.3% in the second quarter after 18 months contractions, thanks to the revival of German. China, our largest market has its GDP fallen to 7.6% in the first half of this year. Singapore forecast the growth between 2.5% to 3.5% for this year. Last year Singapore's GDP stands by only 1.3%.

Recently the Ringgit lost as much as 0.4% to 3.272 per US dollar, its weakest since June 2010. It is estimated that it could reach to 3.3. against the dollar over the next six months. With slower import from our counterparts, Malaysia's earnings shall decreases and it will significantly affecting the economy due to the slower demand. The recent subsidies rationalisation may help the government to cope with the account deficits albeit small amount for the overall effect. The government need to act fast by not just focusing on the savings but also finding a new market abroad and revenues to cushion the impact.

RUMOURS ON THE GOVERNMENT EXIT FOR THE AVIATION SECTOR

Hot talks about selling the Malaysian Airlines (MAS) has resurfaced recently but with no concrete or affirmative response from the government of Malaysia. It is anticipated that such moves is inspired by the turnaround stories of Japan Airlines and Philippines Airlines which succeeded to make good profits after years in losses making.

Many of the industry experts opine that it was the right time for the government to let go MAS due to poor performance and continuous losses. However, as mentioned by Minister in the Prime Minister's Department Datuk Seri Idris Jala, the selling price must be calibrated at the most reasonable price as the public money is involved.

The government ownership in MAS comprises of two main players which are Khazanah Nasional Berhad (69.37%@11.59 billion shares)) and Employee Provident Fund (EPF) account for 1.04% or 174.21 million shares.

But it is not all gloom and bleak pictures of the current MAS performance. Indeed, MAS did some improvements but the yields for every flights are not encouraging. The merits of privatisation of MAS must consider the impact that it may impose to the nearly 20,000 employees, the credibility of the buyers to improve MAS turnaround and the most appropriate price to sell. To date, MAS is valued at some RM5.26 billion.

NAJIB'S FATES IN UMNO

After the intense election period ended, The Prime Minister spent most of his time in Putrajaya, perhaps to reflect and to rethink the outcome of the polls. Barisan may be seen to maintain their grip as a government but  won by a simple majority.

Barisan won 133 seats but fewer than the 2008, 138 seats. The issue that will cropped up in the UMNO upcoming assembly would be whether Najib will take a full responsibility as what had happened during Pak Lah tenure. Various Umno leaders have been issuing statements asking for a no contest for the post of the party president and the deputy president to avoid split.

Still, some argued that such statement may hinder the democracy principle practice by the party. On the contrary, Najib had announced that all posts are open to challenge. The new Umno electoral system with 140,000 delegates will decide on the new Umno leadership line-up. Therefore, telling others not to contest under the new scheme would be redundant as it just need a simple nomination to qualify for the post contest. Needless to say, thorny roads lies ahead for Umno as the outcomes of polls has changed the political landscape into an uphill battle.

THE MASSIVE INFRASTRUCTURE: MRT CONSTRUCTION IN MALAYSIA AFTER THE 13TH GENERAL ELECTION

The sight of barricades and heavy machinery is common in Kuala Lumpur. The crawling and the inconvenience caused is the price for the country's most costly infrastructure project: the Klang Valley My Rapid Transit (MRT).

The 51km project is being built at a cost of RM22.2 billion and will be ready between 2016 to 2017. Feasibility studies on the second line has been completed and waiting for green light from the newly formed cabinet. Line 2 is much bigger than the first line. Initial estimates peg the Line 2 at RM24.9 billion once the line is extended from Serdang to Putrajaya. The studies showed that 20% more people or 550,000 passengers a day will commute via line 2 as opposed to 460,000 to line1.

The burning  questions that the government need to address is the increase strain on its fiscal position. A lot of promises were made in the run-up to the general election and  the financial issue will be in the spotlight by economist. It is reported that the cost to fulfil the Barisan Nasional manifesto will be ballooned  nearly RM12.5 billion. Spin off and benefits of better transportation system has to be weighed against such hindrance. 

Source:The Star, 18 / 05 / 2013