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The Sun
4 days ago
- Business
- The Sun
RM100 aid short-term spending booster but not market mover: Economists
PETALING JAYA: Prime Minister Datuk Seri Anwar Ibrahim's announcement of a one‑off RM100 cash handout has lifted sentiment in consumer‑related stocks, but economists caution that the impact on actual spending and equity performance may be fleeting, with deeper structural challenges still weighing on the economy. The initiative, worth RM2 billion, is designed to provide relief to households and channel spending into local goods and services. However, views among analysts and economists are mixed – some highlight modest gains for low‑income groups and small businesses, while others warn the measure may do little to shift broader market fundamentals. Center for Market Education chief executive Dr Carmelo Ferlito was blunt in his assessment, describing the handout as neither transformative for household consumption patterns nor meaningful for equity markets. 'While the measure is costly at the aggregate level, it is not a needle‑mover at the micro level,' he told SunBiz. 'I struggle to see how RM100 can affect consumption patterns in any sensible way. Economically, it hardly has any logic behind it and appears to have more of a political flavour.' Ferlito also raised concerns over the potential inflationary effects of injecting cash into the economy, particularly if such policies become frequent. 'Monetary injections are the real cause of inflation, a permanent and generalised increase in prices due to the quantity of money growing faster than economic output,' he said, adding that such measures risk masking structural issues in household income and consumer demand. From a sectoral perspective, Dr Ida Yasin, economist at Universiti Putra Malaysia, said the RM100 payment is more likely to generate a temporary boost for retailers and wholesalers rather than driving sustained gains in the stock market. 'This voucher is to boost demand for goods and services in Malaysia, not so much the demand for stocks,' she said. 'Retail and wholesale demand could rise temporarily, especially in essentials like food and household goods, but most stock market movements depend on business fundamentals.' Ida stressed that the handout's impact would likely fade after its expiry in December, underscoring the short‑term nature of the initiative. 'It benefits sellers, wholesalers and producers, from vegetables to chicken, but the up‑and‑down movements in the stock market are quite normal and not directly tied to such measures,' she said. In contrast, Prof Geoffrey Williams, economist and founder of Williams Business Consultancy, sees value in the handout for low‑income households, noting its multiplier effect on domestic consumption. 'RM100 does not sound like much, but it is a 6% boost for someone on minimum wage of RM1,700. For a family of four adults in the B40 group, that's about a 6–7% rise in monthly income,' he explained. Williams estimated the RM2 billion programme could generate RM6 billion in consumption through multiplier effects, providing a small but notable stimulus to economic growth in the second half of the year. 'This will particularly help SMEs in local communities. It won't harm the fiscal deficit because it's funded by subsidy rationalisation savings,' he said. Williams also suggested the initiative could act as a pilot for a more ambitious social welfare reform. 'If this evolved into a monthly universal basic income, it could be a game‑changer for social policy. Universality reduces costs and complexity, and future versions could be made more progressive,' he added. Despite the initial rally in consumer‑linked counters on Bursa Malaysia, analysts caution that sentiment‑driven gains may not be sustainable without underlying earnings growth. Ferlito pointed to external headwinds, including global political tensions and slower economic momentum, as key drivers of investor caution. 'What emerges here is the concern about the economy slowing down due to international tensions, both political and economic,' he said, warning against overestimating the handout's role in market performance. Ida echoed this, noting that investors should watch core consumption data, such as household spending trends within GDP, to gauge any lasting effects. 'Most of the time, it depends on fundamentals rather than short‑term cash injections,' she said. With the cash handout set to conclude by year‑end, attention now turns to whether Malaysia will adopt similar measures in Budget 2026. Williams believes the government should study the current initiative's outcomes to guide future policy design. 'The most important thing is to learn lessons about the impact so that Malaysia can move to a regular monthly payment. Hopefully this can be announced in Budget 2026,' he said. For now, economists agree that while the RM100 handout provides short‑term relief and a modest consumption boost, it does little to address structural income gaps or long‑term growth prospects for consumer stocks. As markets digest the announcement, the focus will likely shift back to corporate earnings, inflation trends and global economic conditions heading into 2026.
New Straits Times
30-06-2025
- Business
- New Straits Times
CME: Interest rates should reflect market forces, not Central Bank targets
KUALA LUMPUR: Interest rates should not be seen as instruments that central banks can adjust at will, but rather as a signal of society's collective time preferences and how people value present consumption versus future needs, according to a policy paper by the Center for Market Education (CME). In the paper titled "Beyond Price Stability: The Role of Monetary Policy for Sustainable Growth and Social Welfare," CME chief executive Dr Carmelo Ferlito argues that the loan market does not determine interest rates in isolation. Instead, lending rates tend to align with what he calls the "originary interest rate" — a fundamental rate that reflects society's trade-off between current and future goods. Ferlito pointed out that in many economies, interest rates are heavily influenced by government intervention, much like price controls, warning that manipulating them can lead to economic distortions. He emphasised that efforts to fine-tune interest rates ignore the fact that economies are complex, adaptive systems that cannot be precisely directed through top-down controls. To clarify the dynamics of interest, Ferlito proposed distinguishing between three types of rates: the originary rate (OR), which reflects the collective time preferences of society; the market rate (MR), which arises from the interaction of loanable funds' supply and demand; and the central bank rate (CBR), which is administratively set for policy objectives. "The central narrative of complexity science involves viewing the social system as a complex evolving system, beyond the control of government or anyone. It is more a living entity than a mechanical entity," he said. He said economic policy should facilitate the natural development of the economy based on its own internal dynamics, rather than trying to steer or correct it using pre-set instruments. "There are no automatic mechanisms in the economic system and therefore we cannot expect policy A to deliver exactly result B within a temporal framework X," he adds. The paper described sustainable growth as economic expansion that occurs with little to no fluctuations while recognising that some degree of business cycles is inevitable. Regarding employment, Ferlito cautioned against pursuing full-employment policies through monetary stimulus, noting that jobs created through artificial means are unlikely to be long-lasting. "The new unemployment level may even be higher than the pre-stimulus situation if monetary injections encouraging demand have not only increased employment but have also stimulated the creation of new economic initiatives in the sectors so stimulated. This is why the result of inflation is worse than the problem intended to be resolved," he said. Ferlito said monetary policy should not focus exclusively or primarily on maintaining price stability, pointing out that steady consumer prices do not necessarily prevent the formation of financial bubbles. "Unstable economic conditions may develop, as they did in the 1920s, while the price level remains stable," he added. He highlighted recent monetary policy errors in advanced economies, noting that many economists may have been misled by the assumption that monetary imbalances always appear as inflation. According to Ferlito, the foundation for long-term macroeconomic stability is the alignment of the MR, NR, and OR. "Business fluctuations can be moderated if MR is allowed to seek its path toward NR and if NR is a reflection of OR," he said. To re-establish monetary stability, he called for a fundamental shift in thinking, suggesting that a truly new policy direction would require removing political control over the monetary system.
Sinar Daily
26-05-2025
- Business
- Sinar Daily
Malaysia should leverage US-China tariff pause to reposition itself
KUALA LUMPUR - The 90-day tariff pause between the United States (US) and China offers Malaysia a critical opportunity to reposition itself economically, according to economists. After their first round of talks in Switzerland over the weekend since US President Donald Trump initiated tariffs on April 2 on every country, the US and China have struck a deal to reduce reciprocal tariffs by 115 percentage points. Under the deal, the US will lower its tariff on Chinese imports from 145 per cent to 30 per cent and China will reduce its tariff on US goods from 125 per cent to 10 per cent. Dr Mohamad Idham Md Razak, a senior lecturer at Universiti Teknologi MARA's department of economics and financial studies, told Bernama that Malaysia must capitalise on this period of relative stability to diversify its trade portfolio and strengthen its economic resilience. He said key strategies include deepening ASEAN-led partnerships through the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to reduce reliance on US-China trade. "Malaysia should (also) enhance export competitiveness by attracting firms looking to diversify their supply chains, particularly in high-value sectors such as semiconductors and renewable energy, while also advancing domestic reforms to position itself as a regional production hub through improved business operations, digital infrastructure, and workforce development,' he said. He also stressed the importance of monitoring geopolitical risks and preparing for potential disruptions. He said firms need to develop contingency strategies to address possible US-China decoupling scenarios by exploring new export markets and creating supply chain buffers. "A proactive approach will help Malaysia manage trade uncertainties and seize emerging global opportunities,' he said. Commenting on the broader implications of the deal, Idham said the 90-day suspension offers temporary relief to global trade tensions and could revive activity in sectors like electronics, agriculture, and manufacturing. However, he cautioned that the pause alone does not guarantee stability. Although the 90-day period provides an opportunity for dialogue, it fails to secure lasting peace without meaningful concessions, which could lead to a resumption of the trade war while at the same time expanding limitations on technology and investment. "Malaysia should remain vigilant, as the end of the truce could lead to renewed trade tensions, disrupting regional exports and investment flows,' Mohamad Idham said. Meanwhile, Center for Market Education chief executive officer Dr Carmelo Ferlito said Malaysia should respond to the development by actively pursuing new free trade agreements (FTAS) with global partners. "Malaysia should avoid taking sides in the ongoing trade tensions and instead focus on advocating clear, consumer-benefiting free trade policies that foster innovation. "This situation presents an opportunity for Malaysia to push for new FTAS, not just to lower tariffs, but also to tackle non-tariff barriers - such as regulations and quotas - that can hinder trade. He further emphasised that the 90-day pause represents a highly positive signal. "Trump shook the table and now the players are about to sit down for a new round of cards, trying to define new rules. "Trump was not aiming at tariffs per se but at pushing other countries to negotiate with him to reshape global trade,' he said. Lee Hwok Aun, a senior fellow at the ISEAS-Yusof Ishak Institute's Malaysia Studies Programme in Singapore, said the 30 per cent tariff on China remains substantial. "It is unclear whether this reprieve will avert a US recession and wider global contagion,' he said, adding that the truce reflects domestic pressures faced by the US and China. "Countries negotiating trade deals, especially Malaysia and its Southeast Asian neighbours caught in the US-China rivalry, should proceed tactfully and bide their time while awaiting greater clarity on the direction and substance of US-China negotiations,' he said. - BERNAMA
The Star
14-05-2025
- Business
- The Star
Economists: Malaysia should leverage US-China tariff pause to reposition itself
KUALA LUMPUR: The 90-day tariff pause between the United States (US) and China offers Malaysia a critical opportunity to reposition itself economically, according to economists. After their first round of talks in Switzerland over the weekend since US President Donald Trump initiated tariffs on April 2 on every country, the US and China have struck a deal to reduce reciprocal tariffs by 115 percentage points. Under the deal, the US will lower its tariff on Chinese imports from 145 per cent to 30 per cent and China will reduce its tariff on US goods from 125 per cent to 10 per cent. Dr Mohamad Idham Md Razak, a senior lecturer at Universiti Teknologi MARA's department of economics and financial studies, told Bernama that Malaysia must capitalise on this period of relative stability to diversify its trade portfolio and strengthen its economic resilience. He said key strategies include deepening ASEAN-led partnerships through the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to reduce reliance on US-China trade. "Malaysia should (also) enhance export competitiveness by attracting firms looking to diversify their supply chains, particularly in high-value sectors such as semiconductors and renewable energy, while also advancing domestic reforms to position itself as a regional production hub through improved business operations, digital infrastructure, and workforce development,' he said. He also stressed the importance of monitoring geopolitical risks and preparing for potential disruptions. He said firms need to develop contingency strategies to address possible US-China decoupling scenarios by exploring new export markets and creating supply chain buffers. "A proactive approach will help Malaysia manage trade uncertainties and seize emerging global opportunities,' he said. Commenting on the broader implications of the deal, Idham said the 90-day suspension offers temporary relief to global trade tensions and could revive activity in sectors like electronics, agriculture, and manufacturing. However, he cautioned that the pause alone does not guarantee stability. Although the 90-day period provides an opportunity for dialogue, it fails to secure lasting peace without meaningful concessions, which could lead to a resumption of the trade war while at the same time expanding limitations on technology and investment. "Malaysia should remain vigilant, as the end of the truce could lead to renewed trade tensions, disrupting regional exports and investment flows,' Mohamad Idham said. Meanwhile, Center for Market Education chief executive officer Dr Carmelo Ferlito said Malaysia should respond to the development by actively pursuing new free trade agreements (FTAS) with global partners. "Malaysia should avoid taking sides in the ongoing trade tensions and instead focus on advocating clear, consumer-benefiting free trade policies that foster innovation. "This situation presents an opportunity for Malaysia to push for new FTAS, not just to lower tariffs, but also to tackle non-tariff barriers - such as regulations and quotas - that can hinder trade. He further emphasised that the 90-day pause represents a highly positive signal. "Trump shook the table and now the players are about to sit down for a new round of cards, trying to define new rules. "Trump was not aiming at tariffs per se but at pushing other countries to negotiate with him to reshape global trade,' he said. Lee Hwok Aun, a senior fellow at the ISEAS-Yusof Ishak Institute's Malaysia Studies Programme in Singapore, said the 30 per cent tariff on China remains substantial. "It is unclear whether this reprieve will avert a US recession and wider global contagion,' he said, adding that the truce reflects domestic pressures faced by the US and China. "Countries negotiating trade deals, especially Malaysia and its Southeast Asian neighbours caught in the US-China rivalry, should proceed tactfully and bide their time while awaiting greater clarity on the direction and substance of US-China negotiations,' he said. - Bernama
Daily Express
26-04-2025
- Business
- Daily Express
Illicit cigarettes can harm Sabah's economy
Published on: Saturday, April 26, 2025 Published on: Sat, Apr 26, 2025 By: Carolyn Foo, Daily Express Text Size: Carmelo Ferlito and Rodney Van Dooren. Kota Kinabalu: Walking along the city's streets one can find shops offering the freshest produce to the best local crafts, from tiger prawns to Pinakol. But there is another item found in abundance in Kota Kinabalu and throughout much of the state; illicit cigarettes. While Sabah's famous seafood and handicrafts add value to the state's economy, providing jobs and business opportunities, the same cannot be said about illicit cigarettes. These cigarettes - the production of which is unregulated in neighbouring countries - take a toll on Sabah's economy in more ways than one. 'We have businesses on the ground which somehow adapted to the presence of illicit cigarettes, selling them as if they were regular products,' said Carmelo Ferlito, CEO of the Center for Market Education. According to a recent Illicit Cigarettes Study in Malaysia by NielsenIQ, the prevalence of illicit cigarettes at a national level is 54.8% as of May 2024. The situation is more dire in Sabah, where the prevalence of illicit cigarettes stood at 79.4%. This means that nearly 8 out of 10 cigarettes in Sabah are illegal. Ferlito said this situation leads to the loss of legitimate business and investment opportunities. This in turn means fewer job opportunities for Sabahans. Pankaj Kumar, Managing Director of Datametrics Research and Information Centre (DARE), shares a similar view. 'Without needing to follow strict regulations and taxes, illicit cigarettes create an uneven playing field for retailers and distributors of legal tobacco products,' said Pankaj. Not only does this affect the state's reputation as a business-friendly location, but it also threatens legitimate businesses and robs the state's much-needed revenue which could support public services and infrastructure development. Legitimate investors might be discouraged from entering the market as the prevalence of illicit cigarettes suggests weak regulatory enforcement, he said. In more recent times, the Federal Government has taken stringent measures to curb the illicit cigarette trade which costs Putrajaya an estimated loss of RM5 billion in tax revenue. These measures include a ban on transhipment, a freeze on the issuance of new import licenses for cigarettes and the strengthening of the Multi-Agency Task Force on the illicit cigarette trade. While the measures have helped put a dent in cross-border smuggling, resulting in a slight reduction in illicit cigarette incidents, the problem is far from being stamped out. Additionally, the measures put in place by the Federal Government largely involve federal agencies, and Pankaj said local authorities in Sabah also play a key role in curbing the illicit cigarette trade. He said this includes ensuring businesses comply with licensing regulations, conducting inspections, and assisting with public awareness campaigns. 'They can also work closely with law enforcement agencies to identify hotspots for illicit trade and support the dismantling of illegal distribution networks. 'Additionally, local councils can facilitate community engagement initiatives that raise awareness about the dangers of illicit products.' Pankaj said collaboration between state and federal agencies is vital in addressing the illicit trade as it is a complex cross-border issue. 'While federal agencies such as the police and customs have the resources, specialised knowledge, and jurisdiction, local support is critical in ensuring enforcement is impactful on the ground.' He said the state government also has an important role to play in coordinating enforcement efforts and driving community engagement. 'Local communities can act as the eyes and ears on the ground, helping to identify and report suspicious activities related to the sale of illicit cigarettes. 'Educating the public about the social, economic, and health risks associated with illicit trade is also crucial. 'When communities understand how these illegal activities harm them directly, they are more likely to support enforcement efforts and make informed choices that discourage the use of illicit products.' There are also the indirect costs of illicit cigarettes which presents itself in the form of health issues and a loss of productivity. Ferlito, a faculty member of Universitas Prasetiya Mulya, Indonesia, said recent data from the World Health Organization and the Khazanah Research Institute indicate that smoking-related healthcare costs amounted to RM1.9 billion in 2020. He said although efforts and measures to combat illicit cigarettes were largely driven by federal agencies, states could and should play a more active role, as local councils came under their purview. 'It is not just a moral obligation. State governments will lose out if they are not proactive in doing their part to stop the illicit cigarette trade. 'This is no different than from local councils taking action against illicit businesses be it gambling or prostitution dens.' Ferlito said unlike other illicit businesses, the costs to a state associated with illicit cigarettes were much higher. 'For one it sends a strong signal that institutions are weak or that there is no political will to uphold the law, and this can affect investor confidence, especially for businesses harmed by the illicit cigarette trade.' He said this included not only retailers but also supply chains that are involved in the legal cigarette trade. 'The bigger concern is of course costs linked to healthcare and a loss of productivity. This can hurt the state in the long run. 'We must remember that the damage from any kind of smoking activity is not limited to the smoker but those exposed to secondhand smoke.' However, the risk from illicit cigarettes was higher because the production of these cigarettes was unregulated, he said, adding there were many studies on this. Addressing this longstanding challenge is a priority for companies like Philip Morris International (PMI), who advocate for a smoke-free future but recognize the need to eliminate black markets for illicit cigarettes and tobacco products. Rodney Van Dooren, Regional Expert on Illicit Trade at Philip Morris International (PMI), highlighted the transnational dimension of this issue and stressed the critical role of ASEAN nations collaborating closely to combat it effectively. 'Local law enforcement in the Philippines is making great strides in shutting down illicit tobacco operations, but this needs constant attention as new threats are always emerging. What I want to emphasize today is that according to trade data and news articles in the Philippines, most non-compliant cigarettes in the Philippines originate from ASEAN countries and India, and from China for non-compliant e-cigarettes,' Van Dooren remarked. Van Dooren had urged ASEAN nations to strengthen cooperation in tackling illicit tobacco trade, emphasizing compliance with market regulations, harmonization of transit policies, and leveraging global trade agreements. 'An export without a corresponding import should trigger international action,' he stressed and however cautioned that illicit trade persists due to strong demand and price disparities. The illicit tobacco trade, therefore, hinders public health initiatives by restricting opportunities for smokers to move toward safer alternatives. With Malaysia facing one of the highest rates of illicit tobacco trade in the region, this is an issue that Malaysia must address, especially in light of Act 852, to mitigate the rise of illicit cigarettes and ensure a healthier future for its citizens.
