Including contingent liabilities (guarantees), our national debt till 2012 could be up to RM1.743 trillion (Thanks to Pak Sako from Centre of Policy Initiatives). That is a TRILLION more than the current published debt. Most of our debt are internal, and approximately RM444 billion can be attributed to construction and housing (according to an official from Bank Negara). The office vacancy rate in Klang Valley is 23% for Q1 2013 according to the NAPIC (National Property Information Centre) Commercial Stock report, or could be up to 40% according to another officer.
Why does the construction/housing/office debt matters to the average Malaysian?
Here are a few quotes from my favourite Fed Governor Dr Janet Yellen of SF in 2005 expressing concerns over the housing bubble in the US:
" ...there are downside risks to economic growth relating to the housing market. This sector has been a key source of strength in the current expansion, and the concern is that, if house prices fell, the negative impact on household wealth could lead to a pullback in consumer spending. Certainly, analyses do indicate that house prices are abnormally high—that there is a "bubble" element, even accounting for factors that would support high house prices, such as low mortgage interest rates. So a reversal is certainly a possibility. Moreover, even the portion of house prices that is explained by low mortgage rates is at risk."Read more at http://www.calculatedriskblog.com/#p3IJWqTiB9b0pE4t.99
And in 2006, about "ghost towns" in the West
According to some of our contacts elsewhere in this Federal Reserve District, data like these are actually "behind the curve," and they're willing to bet that things will get worse before they get better. For example, a major home builder has told me that the share of unsold homes has topped 80 percent in some of the new subdivisions around Phoenix and Las Vegas, which he labeled the new "ghost towns" of the West.Read more at http://www.calculatedriskblog.com/#p3IJWqTiB9b0pE4t.99
The scene certainly appears surreal when we drive by new housing estates around the Klang Valley, Penang, and the Iskandar region. What does this continual trajectory mean to our national economic progress?
IMF MD Christine Lagarde had denoted the unhealthiness of over our national economy specifying 3 key concerns - FDI, high debt and inequality. She had instructed six remedies:
1) The need to attract more FDIs
2) National policies that are disrupting the free market
3) GLCs that are impeding the competitiveness of the private sector
4) Acknowledging total national debt - including all contingent liabilities
5) Regional cooperation
6) Liberalizing the economy
APEC will be held at Bali this coming October, and the TPPA is expected to be concluded by then, in time for President Obama visit to Malaysia. Would the internal provisions cover item 2,3, and 4? The content of the negotiations are held in secret.
My prediction is that these items will be excluded, and the TPPA agreement signed. This would not bode well for our national economy, as a further liberalization of our service sector will phase out our domestic players and increase cost to our already over-taxed consumers. I hope that our government realizes the unintended consequence of this Agreement, and will ensure that measures to protect our economic sovereignty are instilled into the agreement.
Interesting events which happened this week:
1) China had propose to back the yuan with gold.
2) Ex-President Jimmy Carter praises Edward Snowden
3) Detroit filled for bankrupcy
4) Prime Minister Yingluck rice subsidy is costing 8% of the Thai budget, with 17 million tonnes as reserve.
Each of the above items are worthy of a post!
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