Monday, February 09, 2015

The politics of Presidential jets

Just a few days ago, the President of Indonesia made his maiden official trip overseas. He chose Malaysia as his first stop.

This, if you ask me, is an honor and perhaps the highest respect which reflects the strong relationship between Malaysia and Indonesia since we established diplomatic relations on 10 October 1957.

But it was another part of his arrival which caught some of us by surprise. He arrived in the state-owned USD 91 mil Presidential jet, a Boeing 737-800. This aircraft which comes with a USD27 mil cabin interior was delivered in 2014 to the Government.

Yeah, Indonesia has a Government jet too.

And yet, some of us are of the opinion that despite stable and positive economic conditions here, the Malaysian Government should not own or use business jets that are currently made available for use by His Majesty the Yang di-Pertuan Agong and Heads of our states, the Prime Minister and his Cabinet, as well as senior Government officials.
At times, I think we overlooked the fact that Obama has a Presidential jet despite the national debt of USD18 trillion, or Japan owns an Air Force One even though the country has a public debt that is twice its GDP (public debt per capita of about RM300,000 per person).

If anyone read international papers or portals during the World Economic Forum, you will notice a piece of news that did not appear locally in Malaysian sites or media for unknown reasons.

The Newsweek's headline on 19 January 2015 caught my attention - "Private jets descent on Davos for World Economic Forum". Did you know that approximately 550 business and government jets flew into the region for the Forum (CNN's site says 1,700 planes, but you get the point)? And there were nearly 200-300 helicopter flights from Zurich airport to Davos.

A quick research online showed that Togo in West Africa, with a population the size of Selangor, has a Government jet for its President, a state in India - Andhra Pradesh - has a business jet and chopper for its Chief Minister, Namibia has a Learjet 75 jet for its President and Belarus, whose GDP per capita is on par with Pahang, has a Presidential jet too.

Surely, there is a reason why Government leaders around the world travel in chartered or Government owned jets.

We should look at the bigger picture and understand the fact that we can’t expect Government leaders to wait and sit around in airports or wait for multiple connecting flights while some simply shuttle in to the nearest airport.

Let us not forget that times have changed and there are many international events or summits such as the World Economic Forum, the OIC summit, the G20, the East Asia Summit, APEC, ASEAN and the dozens of bilateral visits that leaders make to strengthen diplomatic relations and to boost investments or trade.

There are also unfortunate, 11tih hour events like aviation crisis, international negotiations, State funerals and others which make commercial flights (be it via passenger planes or chartered planes) become challenging and complicated especially in terms of flight time and delays.

With the demanding, hectic schedules and travels, both international and domestic, Governments today simply cannot forgo the convenience of official aircrafts. It is high time that we grow up and look beyond petty politics.

Wednesday, February 04, 2015

Numbers don't lie

During a briefing session to economists and media reps in Putrajaya International Convention Centre on 20 Jan 2015 that was held after Prime Minister's Special Address Budget 2015 2.0, a couple of words from Bank Negara Governor Tan Sri Zeti Aziz caught my attention.

I mean, she is the world's best central banker. Every word that she says carries more weight than any other individual in Malaysia and we should pay attention.

In her reply to a few questions on Malaysian Ringgit's performance against the US Dollar, Tan Sri said:

  • "Of course, when we built up our reserves, we were criticized for accumulation of too much reserves which were far in excess of those required by a country of our size... and this is what reserves are for, that is why we built up buffers."
  • "......the ringgit should strengthen to reflect our underlying fundamentals which remain solid and strong"

She is right. Just compare the two Press Releases by the Bank - one issued in 1999, another just a couple of weeks ago (summarized below)

22 Oct 1999 (
  • as at 15 Oct 1999, international reserves amounted to RM113.9 billion or USD29.9 billion
  • adequate to finance 6.2 months of retained imports.

8 Jan 2015 (
  • as at 31 Dec 2014, the international reserves amounted to RM405.5 billion or USD116.0 billion
  • sufficient to finance 8.4 months of retained imports

Countries must maintain a healthy level of reserves to protect themselves against shocks and external economic crises. Today, our reserves have grown almost 4 times since 1999 and can cover 8.4 months of retained imports which makes us almost as strong as India’s import cover.

I did a quick check on IMF's spreadsheet on official reserve assets and other foreign currency assets. Out of all the reporting countries, based on the consolidated official and confirmed November 2014 statistics, Malaysia has
  • the 9th largest international reserves in Asia and
  • the 18th largest international reserves in the world

Hisham (@econsmalaysia) is right. The turnover of foreign currency market transactions averaged at USD241.1 bil monthly in 2014. Speculation, if true, at USD1.4 bil (less than 0.6% of total turnover) is just a drop in the ocean. It could also be easily managed by the Central Bank (costs them just 1.2% of their total reserves) and send a strong signal to speculators – pay up your losses and go home. This is the strength of our Government, Central Bank and economy.

Two weeks ago on 22 January, in Fortune magazine with a readership of 5 million globally, they said “Meanwhile, in Malaysia, an incumbent government is offering credible pledges for smarter economic management”. Four days later on 26 January, Moody’s Credit Outlook was positive again on Malaysia and I quote, “Malaysia's revised budget leaves sovereign's fiscal consolidation trend intact”.

The underlying fundamentals of our economic structure remain strong and solid. Despite the global economic conditions and challenges, we must not forget that:

  • Malaysia remains on the steady growth path at 4.5% - 5.5%
  • Inflation will come in at 2.5-3.5%, a level that is manageable
  • Najib’s message that we are committed to reduce fiscal deficit from 3.5% last year to 3.2% this year, on track to balanced budget in 2020
  • Debt to GDP will be kept below 55% of GDP (self imposed limit)
  • And most controversial of all, even if Government guaranteed debt becomes an issue, our debt to GDP ratio will come in at 70%-75% of GDP only (go find out what other countries debt to GDP ratios are)

The problem here is the Government and friendly parties own many assets especially the media. Have we used them to amplify some of these key messages? Are we or real investors so easily swayed by 1-2 media outlets when credible institutions had positive comments on the Barisan Nasional Government’s economic management skills?

The strength of our nation today was not built in a day but after years of careful balancing of economics, social and politics through both the Barisan Nasional Government’s fiscal policies and the Central Bank’s monetary policies. If I have to choose one reason to be “bersyukurlah” (I know, I don’t like it too), itis for this reason and only this. And remember, numbers don’t lie.