Just arrived at the Washington DC and checked into the Marriott hotel. En route here, there are more corporate bad news. Both Sony and Samsung have lost more than 15% stock value. The second biggest electronics giant, Sony, expects sales growth to slow down by almost half from next year 2009.
In the US, some automotive companies are badly hit too with car sales staggering lower. A number of companies including GM are expected to announce job cuts in the coming month or two. This is sending US unemployment rates up to more than 7.5% to 8.5% for the first time in more than a decade.
Malaysia should take cognisance of these news. The government should reconsider using the RM5 billion from EPF to prop up the stock market. Despite the announcement, the CPI continues to slid to below 860 points. Counters such as IOI Corporation, Maybank, Genting, Commmerce and other substantial blue chips have lost more than 40 percent of their stock value since 13th October 2008.
The government should instead work out measures to protect small-medium businesses and jobs. SMEs provide 56% of total employment in the country. These companies will be facing severe credit crunch and lower sales in the coming 3 months. Close to 25% of these 560,000 registered companies face a possibility of closure. If this scenario materialises, Malaysia's unemployment rates will go up to more than 4.5% since 1997 financial crisis.
Consumer demand is expected to remain cautious and most consumers will focus on essentials, mortgage and loans. Another aspect which requires immediate attention is the dramatic growth of credit care usage. In the last two years, it has registered almost 500% growth and credit card loans stood at RM250 billion in the country. This does not augur well for the country. Bank Negara should impose on banks tighter regulations on consumer credit especially credit cards.
Only two days ago, the ex-US financial supremo Alan Greenspan admitted his oversight on the ability of banks to self regulate. Malaysia and the rest of Asia may be facing similar tendency too. Loans to car buyers have been quite lax too in the last two years with buyers obtaining up to 100% loan.
Next, it is pertinent for the government to use this opportunity to look at ways and means to help strengthen our economy and skills base. The most important thing for the government to do is to review the education system to ensure it helps to create a more competitive workforce.
Unfortunately, our focus on inculcating the 'social contract' as a subject of study at the schools and tertiary institutions may turn out to be totally counter productive if those writing the syllabus are more interested to impose race superiority and special rights on others.
I have helped to review the Race Relations Module to be used at the universities and was shocked at the extend of facts manipulation and misinterpretation of history.
Until and unless our policy makers wake up to the urgency of being more professional, competent and transparent to face the global economic crisis, we are not so sure if this country is going to survive unscathed. History has shown us that no single country is immune from an economic crisis of this magnitude.