How to strengthen the Ringgit Part 1

Enough of politics! Enough of blame! Enough of LGBT and sodomy! Malaysians want to see tangible benefits of trusting Pakatan Harapan. Set the economic agenda on course by having a plan to strengthen the Ringgit!

Credits: The Star

The Ringgit is now currently trading at RM 4.13 to the US Dollar. This is completely unacceptable as it affects the purchasing power of the rakyat. The Rembau Times had long campaigned for a change of Government on account of the collapse in the Ringgit’s value. However, even though we have had a peaceful transition, it seems that this had no effect. On the contrary, the Ringgit’s value continued to slide instead of strengthening.

Thus, as we are fed up with this state of affairs, here is some of our views on how Government policy can help strengthen the Ringgit.

Our starting point will be the Current Account balance.

Current account balance:

The Current Account balance has progressively weakened from the earlier part of this decade

This is the difference between imports and exports. When exporters manage to sell goods and services produced in Malaysia, they are paid in US Dollar. The greater our export component as well as the share of locally produced goods in the export component, the greater the demand will be for the Ringgit.

Within the current account balance, there are several components, namely

  • The balance on goods
  • The balance on services
  • The net on primary and secondary incomes.

So how has the Current Account balance fared so far?

In one word: Weak!

From reaching a peak of surplus of USD $9b in Q3 2011, the balance has slumped to about USD $1 billion in the 2nd Quarter of 2018. That is a reduction of almost 90%!

The first component is the balance on finished goods.

Goods balance has decreased due to the collapse in the prices of commodities. We must find new ways to offset this.

The Goods Balance reached a peak of about US $12 billion during the heydays of the commodity boom cycle. It has now slumped to under $5 billion for the 2nd quarter of 2018. The question policy makers must decide is how is Malaysia going to compete with other surrounding nations to capture that USD $ 8 billion of lost “value”?

The answer to this is several fold. Number one, is to understand the nature of the Supply Chain and to see where is it that Malaysia captures value for the secondary industries? Where is it that we lose out due to lack of competitiveness to neighboring countries?  What kind of strategic decisions can we take today so that we can emerge competitive in the future industries? What kind of talent do we require, and where is that talent found? What kind of incentives can we give to local industries to ensure that we can develop champions, if not globally at least regionally.

These are the key questions that policy makers must start to address. Malaysians are sick and tired of politics and sick tired of hearing 1MDB and why the country is suffering because of BN Government.

Either the Current Government display some ability to control the narrative, set a 5 year target and return the ‘wow’ factor, or we just resign ourselves to the fact that Malaysians lack the skill and capability to be anything other than a 3rd world nation.

I however, disagree with the last notion. Malaysians are smart people. We can do it, we just need leadership and direction. Hopefully Dato Sri Anwar can begin to focus on the Ringgit as his key message!

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