Money is flowing out of Malaysia at an alarming speed! Despite the "denial syndrome" of some local economists trying to find reasons and tell us to keep cool and ignore the alarm, the immediate question is still intact: How to reverse the flow as soon as possible? Can a solution be found in the New economic Model?
Issue 795 of The Edge Malaysia printed edition for the week of 1-7 March 2010 has a striking headline of "Reversing the Flow" for its cover story. I see this as a follow up report after UBS economist Jon Anderson's report titled "Malaysia - Another Bizarre Story". In fact, there was already a Special Report in Issue 789 of The Edge Malaysia titled "Malaysia: How Bizarre?" responding directly to Jon's report, which you can read its online version here.
Publicly available data from Bank Negara reveals it is no doubt true that Malaysia has, in the recent years, been squeezed by double outflow of money from:
- Slowdown in foreign direct investments (FDI) to the country
- Surge in investments to overseas by local companies
While some pointed the excuse for the sharp plunge of Malaysia's forex reserves in 2009 to the global recession, the 2nd opinion argued that during the same period, neighbouring economies in Thailand, China, Taiwan, Singapore, Hong Kong, etc. were all in fact enjoying an upliftment in forex reserves!
Local companies going out of the border and invest in overseas could be viewed as a good sign from certain angle, as it shows the growth and competitiveness of the companies, as well as reaping benefits to the shareholders upon success. However, some has observed that most of the money invested in overseas remains at overseas, and not bringing back to Malaysia, yet. This is not good to the development of local economy. This kind of overseas investment also impacts the local job market, as the investment and business development activities might create job opportunities abroad, but not locally.
At the same time, we saw recently some well-known tycoons sold off their local business which they have developed for decades, and invest the proceeds overseas. Is this a migration move that never come back? Not a good sign either.
I am not an economist, but as a small investor, I care about the economic weather very much. As a worker, I also care about the local industry and job market growth trend. So, I am very keen to know how the government will respond the issue and reverse the flow as soon as possible, before it is too late.
