Professor Tan Sri Dato' Dr. LIN See-Yan 1
Qualification BA, BA(Hons), MPA(Finance), AM(Bus. Econs), Ph.D(Econs), C.Stat, C.Sci. Hon.Ph.D(Economics), Hon.Dr.Economics, FRSS, FIBM, FMII(Hon), FMIM, FMEA Working Experience A banker for most of his professional life, Prof. Lin is a Harvard educated economist & a British Chartered Scientist. After his undergraduate studies at the University of Malaya in Singapore, he graduated with 3 advanced degrees from Harvard University, including a Ph.D in economics. Schooled in philosophy & mathematics, Dr. Lin is Malaysia s first UK Chartered Statistician. Dr. Lin is currently an independent strategic and financial consultant. Prior to 1998, he was Chairman and Chief Executive Officer of the diversified Pacific Bank Group and for 14 years previously, Deputy Governor of Bank Negara Malaysia (Central Bank of Malaysia) where he served as a central banker for 34 years. He continues to serve the public interest, including Member, Competition Appeal Tribunal, as well as Member of key Ministry of Higher Education Committees on national education issues including the Putrajaya Higher Education Task Force; and Economic Advisor, Associated Chinese Chambers of Commerce and Industry of Malaysia. He was advisor to all Prime Ministers and Ministers of Finance of Malaysia. He served as an expert on many international study groups & on foreign central banks (including IMF, World Bank and UN agencies), as well as on the Asian Shadow Finance Regulatory Committee. In addition, he sits on the Boards of a diverse group of publicly listed and private companies, & social enterprises as well as of universities & foundations in ASEAN5 nations. Prof. Lin is Chairman Emeritus, Harvard Graduate School Alumni Association Council at Harvard University and for the past 18 years President, Harvard Club of Malaysia. He is the author of: The Global Economy in Turbulent Times, 2015 (Wiley) and a columnist at the Star national newspaper. His forthcoming book: Turbulence in Trying Times. What are we to do is being published by Pearson in September 2017. 2
The World is STILL a Scary Place In the Face of Fear, we have a Choice Let Hope be our Defence against Despair Prof. Tan Sri Lin See-Yan July 25, 2017 3
I. Outlook for the World Economy OECD - 1 st time growth synchronised US: most robust Europe: Improving Japan: Inching in right direction BRICS China & India: steady Russia ) still Brazil ) in South Africa ) trouble MINT India: OK Nigeria: Not OK Mexico, Indonesia, Turkey: needs work 4
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Should We Worry? Yes, Start Getting to be Concerned 6
Omen or Coincidence? Trump Bump? PE (S&P500) : 18.5 (L-Tav 15.8) PE (forward) : > 20 7
II. Asia : Growth steady but OK : ASEAN growth moderating (around 5%) But, ineffective as a group II. Malaysia- Prospects for the Real the Economy? - As Fundamentally Strong as They Say It is? - Growth Masks Growing Signs of Fatigue - Focus Too Narrowly on Short-term Growth - Current Drivers Not Robust or Reliable Enough 8
III. Metrics to Look-out For: MALAYSIA A. Sources of Real Growth *1. Disconnect between financial markets & fundamentals 12 13 14 15 16 17 *2.a. Consumption vs 8 7 7 6 6 6 Investment 23 13 11 6½ 4½ 4 *2.b. Manufacturing vs 5 4 6 5 4½ 4 Construction 19 11 12 8 7½ 8 # i. systemically weaker ii. raises debt; crimps spending iii. Drag on future demand & growth ø 1. Shifting from PCs & E&E mfg. 2. New : smart devices; wireless tech, IOTs & cloud, autos S-Cs *3. Govt/SOEs vs Crowding-out : Insufficient Competition - 7 of Top 10 on Bursa; 75% of value *** All low productivity (poor Total Factor Productivity - TFP) Beware of impact of Creative Destruction/Disruption 9
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Impact of the Variable US$ 11
C. Exchange Rate vis-à-vis US$ - Very Weak Ringgit RM/US$ S$ Bt RMB US$ IDR End 2013-6.8% 3.28 2.59 5.40 10.0 7.39 0.54 14-6.1% 3.50 2.65 5.43 10.6 7.81 0.56 15-18.6% 4.29 3.03 6.36 11.9 9.14 0.66) -23-16½ 16-4.3% 4.49 3.10 5.51 12.5 9.05 0.65) (-15) (-16) - 36% (2013-16) -15 +1-15½ -16-12 (2015-16) -27 +20-28 -25-29 (2005-16) ** Urgent Need to Instil CONFIDENCE 12
D. Structural Reforms * Secular Stagnation economy needs to be re-structured Mfg vs Services * Weak Ringgit Not the Answer * Labour needs overhaul * Income Distribution: to rebalance wages/profits labour share : 42% GDP (low) wage level : low * Taxes incidence reform * Debt getting too much (1.64xGNI), too high (90-110% GDP) 13
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The Challenge : Raise TFP Time to fix the system 15
The Way ahead gets tougher So, just 16