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Author: Tan KW   |   Latest post: Mon, 24 Jun 2019, 6:11 PM


Culprit of Malaysia Balance of trade surplus drop - Peter Chen

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Malaysia, while registering faster economic growth in the second quarter of this year, saw its current account surplus narrowed substantially to RM2.6bil – the lowest since the 1997/98 Asian financial crisis – from RM8.7bil in the preceding quarter. On a year-on-year basis, the surplus fell by over 67%.

This is largely tied to the balance of trade, the component of the current account which has drawn the most scrutiny since late last year as the surplus dropped. Malaysia is reliant on such large surpluses, given its structure as an exports-reliant economy.

Essentially, the balance of trade is what a country earns on exports minus the import costs.
The lower goods surplus of RM18.7bil (from RM24.7bil in the previous quarter) shows the drop in exports, largely due to lower commodity prices (crude palm oil prices have been down since reaching a high of RM3,613 per tonne on April 10 last year) and the weak demand for consumer-electronics products.

There has also been a sustained services account deficit, which widened to RM3.7bil (from RM3.4bil in the previous quarter) as well as outflows in the income accounts, which widened to RM4.1bil (from RM3.8bil previously).

The current account surplus woes are amplified by the weakening ringgit, which has fallen by more than 10% since early May versus the US dollar, making imports more expensive.

Are the above the only reason for drop in export? Only lower commodity price and weak demand for consumer-elctronic product? What other factor beside above that cause the balance of payment drop by 67% .

Pos Malaysia Berhas has increase international postage rate on 15 May 2013. This has cause some Ecommerce operator scale down their operation by reducing low value item to high value item.  some have move their services to nearby country like Singapore. Some has effectively kill by Pos Malaysia by leaving the trade altogether.

File of complaint on Pos Malaysia Berhad violated  section 14 of Price Control and Anti-Profiteering Act 2011 has been move from  Domestic Trade, Cooperatives and Consumerism Ministry to  Malaysian Communications and Multimedia Commission (MCMC). This mean government no longer investigate Pos malaysia Berhad breach of section 14 of Price Control and Anti-Profiteering Act 2011 as that is not under jurisdiction of MCMC. MCMC might assess it impact on E-commerce operator.

As Malaysia Balance of trade surpus has been narrowed to RM2.6bil to from RM8.7bil. MCMC should be careful when drawn conclusion on it investigation. It is not sure Bank Negara have statistic on E-commerce from Paypal and other credit card merchant provider.

India's rupee has been devalue over pass few years but no increase in it export. thus, Malaysia should not be complacent that export will improved after a devaluation of Ringgit.

Nevertheless, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz says the current account is not likely to go into deficit due to the recovery in external demand and sequencing of large investments with high import content while the ringgit is likely to moderate versus the greenback in the medium term.

Malaysia should be proactive by leveraging on devaluation of currency to provide a competitive environment to E-commerce operator.


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  2 people like this.
Ooi Teik Bee Trade surplus is still a surplus, it is only excuse given here when the stock market is down. US, never has trade surplus, the stock market is still going up sky high. Thank you.
27/08/2013 6:44 PM
regnig What to do, that's the fund managers job to earn dollars for their clients. They have to make market up and down in order to cash out...
27/08/2013 7:18 PM
Peter Chen Hi Ooi, What is your suggestion to our government? Do nothing? or it is okay for Malaysia to be like India and Indonesia.....have twin deficit?
27/08/2013 9:31 PM
Ooi Teik Bee We have 15 years of trade surplus. It is not the issue here. I agree domestic debt is too high and also 50% of bond were purchased by foreigners. BN government is spending money like water, she has to face the consequences. It is not the trade surplus causing the problem. Please address the source of problem. Thank you.
27/08/2013 9:37 PM
Peter Chen OTB, that is still too general suggestion..... like......state: increase Balance of trade surplus. But how?

How to reduce government spending after all the promise in GE13 without getting voter civil servant angry?
27/08/2013 9:59 PM
Ooi Teik Bee The source of problem is not trade surplus. Please be specific.
27/08/2013 10:03 PM
Peter Chen Then what? Inability to suggest one?

Fuel Cost Past Through (FCPT)?
Goods & services Tax (GST)?
reduced government subsidy in Petrol and Diesel
reduced government subsidy in Sugar?
28/08/2013 8:36 AM
Peter Chen Actually, the article has one more news. Did Pos Malaysia Berhad being investigate for section 14 of Price Control and Anti-Profiteering Act 2011? did Pos Malaysia investigate by MCMC? Did Pos Malaysia Berhad disclose all this to shareholder?
28/08/2013 8:40 AM
ipomember Not all countries are depend on export to spur their GDP growth,and US is one of the example. However as for Malaysia, we are still depending on net export, so its still very important for us, we cant compare with developed country in trade surplus/deficit.
28/08/2013 9:22 AM
Peter Chen Agreed with ipomember. In fact, not all developed country able to do that. Only US able to do that because USD is global currency. However, Jim Rogers are the person who constantly criticise US policy and said it is unsustainable.
28/08/2013 9:34 AM
Peter Chen It seem they really want to do it. Except they call it subsidy "rationalisation" rather than subsidy "reduction"
29/08/2013 5:03 PM
Peter Chen Confirmed "rationalisation" of petroleum subsidy. This mean petrol price will increased from midnight today.
02/09/2013 8:45 PM


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