1. Oil price has plummeted from a high USD140 per bbl to USD53 per bbl in less than 3 months. OPEC has cut down its production in view of the global economic slow down.
2. Because of the low oil price, many exploration and development work have been re-evaluated. This will cause capex reduction by operators and consequently affect service companies. The investment made in reactivating "cold" rigs and aged boats will be in vain.
3. US consumption of retail goods have declined in lieu of paying off high mortgages and credit card debts. The average household now spends close to 70% just to pay off debt. The overspending in US above its mean is a clear cut example of how capitalism and the 'invisible hand' that corrects the market have failed.
4. Detroit has failed to secure USD25B stimulus package to help the ailing auto industries. This in return further dampened market confidence and reduced the Dow Jones by another 6% last night. Japan's Nikkei lost 7% and HK lost 5.5%. Japanese exports declined by7%, the biggest in decades. Trade deficit in Japan is absolutely abnormal.
5. There are over 1.5M jobs lost over the last few months in the US. Rolls Royce has announced its job cut plan recently.
5. Property value will go south due to foreclosures in the US. Property market has always been a good indication of how healthy the market is. Except nothing less in Malaysia as well.
6. Because Asia has been prudent and learned her lesson from 98', the cash-rich Asian countries are not feeling it just yet. That doesn't mean a slow down is not in order. Already we have seen drops in traveling, hotel occupancy, retail business and such.
7. Malaysia is in a better shape, but is not out of the dog house just yet. Viable projects cannot be shelved. Projects will benefit the construction industry and attract investors. The reduction in EPF monthly contribution is not a viable option for the long run.
8. What Malaysia needs is creating value. We are merely making patches for the leaks, but the big flood will come. We have yet to have a strong second engine of growth and oil revenue is not sustainable for the next 20-30 years.
9. Space programs should be shelved for now. Archways and bullet trains can wait. Subsidies have to be reduced. Tax cut could work to reinvigorate local spending. Corporate taxes and wind fall taxes could be studied and expand to businesses shielded from the recession or enjoying subsidized fuel or electricity.
10. The RM7B is too important for a few people to decide where it goes. The National Economic Action Council and other agencies and groups should sit together and ensure that every cent in the stimulus package is put to good use. Parliament should also form a special committee to be part of it, similar to how Congress and President-Elect Obama are handling it. This committee must also include corporate chiefs, leading CEOs and senior economists, not just politicians. Malaysia is eager to know how this money is spent.
11. We need to exit from failed investments abroad (especially the ones in the US) and reorganize our foreign portfolio. It's not a bad idea to pump money into the ailing banks in the US as they will recover from this in the next 5-10 years. The banks are projected to receive at least half of the USD700B stimulus package.
12. The food industry should be monitored and ensure that recession would not hamper food production and price.
13. This is also a good time to study sustainability projects, such as power generation from waste, alternative energy generation. Cost optimization for running the Government (fed, state and local) could also be studied and implemented. Skype and video conferencing should be encouraged. Travels should be reduced unless totally necessary.
14. It's also not a bad idea to scrutinize how zakat money has been spent. An audited account should be made public, if it hasn't. Zakat money will definitely help out the poor & needy to cope with rising food prices.
15. All eyes are on Dato' Seri Najib, our soon-to-be 6th Prime Minister. This single economic challenge will, without a doubt, define his prime ministership. We should all give him our fullest support, despite political affiliation. Malaysia must remain vigil. Get productivity up and stop changing road names....
Mahathir & Institusi Sultan Teruk Dihina
4 hours ago