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CME: A total economic shutdown would ruin the country

Sunday, 24 January 2020: The Center for Market Education (CME) has understood via the media that Putrajaya is set to announce a total economic shutdown after February 4, should the number of Covid-19 cases in the nation continue to not show any improvement, according to what the EU-Malaysia Chamber of Commerce and Industry (Eurocham Malaysia) seems to have said in a letter issued to its members.

According to CME, however, a strengthening of the so-called containment measures would bring Malaysia to the verge of economic collapse. First and foremost, as mentioned in other occasions, it is now more and more clear – scientifically speaking – that lockdowns are not an effective measure for containing the virus. Better data analysis and communication, to allow people to take informed risk assessments and to orient their behaviour, is a much more effective way to fight Covid-19. But such data analysis strategy is yet to be seen in Malaysia.

“From the economic perspective, instead” – explained Dr Carmelo Ferlito, CEO of CME – “a decision to completely shut down the economy, including manufacturing, can only be driven by a poor understanding of how the economy work. The economy, in fact, cannot be divided into independent sectors; on the contrary, it is an intricate web of connections, in particular human interactions”.

With an example, Dr Ferlito explained that if you allow chicken farms to operate but you shut down manufacturing and transports, then you don’t allow chicken to be slaughtered, packed and carried to the supermarket. In a nutshell, you allow a product to be produced but you do not allow people to consume it. Similarly, if you do not allow the service people to repair the broken machines in chicken farms, you get a similar result. “Only a deep misunderstanding of what the economy is can lead to imagine that the economic sectors can be somehow divided into non-communicating groups”, Dr Ferlito added.

This adds to another factitious division, the one between essential and non-essential sectors. As declared in another statement, CME reminds the government that each work is essential to the worker to bring food to his or her table.

“We need to learn to live and the virus – Dr Ferlito added – and the real problem is not to avoid infections in the first place but to focus on prevention and treatments that can reduce, minimize and eventually nullify mortality (already at a very low level in Malaysia)”.

The hiccup lockdown strategy that seems to become the new norm in Malaysia policy is creating nervousness in the investor community; while countries like Indonesia and Vietnam are gaining from FDIs leaving China and are implementing favourable investment policies, Malaysia seems to be on the way to discourage both domestic and international investment. Recently 16 companies from China, Japan and Korea moved to Indonesia and not to Malaysia. This is something that we should keep into account.  

The situation is aggravated by a confusing political scenario.

“For the Center for Market Education – stressed Ferlito – it is time for a change in pace in the fight against Covid-19”. CME indicates the following steps:

  • Abandon any idea of total lockdown, which is not proved to be useful from a scientific perspective, and can only bring Malaysia to a devastating level of poverty, with the number of people dying of poverty much higher than the one dying of Covid-19.
    • The current MCO 2.0 does not need to be strengthen in order to increase unemployment and poverty and to flatten the GDP curve, it is already working very well.
  • Focus on collecting more disaggregate data for Covid-19 cases and Covid-19 deaths:
    • Age groups.
    • Gender.
    • Comorbidities.
  • Public these data for a better individual risk assessment so that individual choices with respect to movements and exposure can be more soundly grounded.
  • Enforce control over respect of SOPs.
  • Enhance research for better prevention and cure of the virus, for a long term fighting strategy.

For media enquiries, please email carmelo.ferlito@gmail.com or centerformarketeducation@gmail.com.

About CME: The Center for Market Education (CME) is a boutique think-tank based in Kuala Lumpur, Malaysia. As an academic and educational institution, CME aims to promote a more pluralistic and multidisciplinary approach to economics and to spread the knowledge of a sounder economics, grounded in the understanding of market forces. In order to do so, CME is not only involved in academic initiatives, but it organizes seminars, webinars and tailor-made economics classes for students, journalists, businesspeople and professionals who wish to better understand the relevance of economics for their daily lives and activities. Economics matters and needs to be presented in a fashion in which the link with reality is clearly visible. In this sense, we look not only at theoretical economics but also at policy making, with an emphasis on the unintended consequences generated by political actions.

January 24, 2021 Comments Off on CME: A total economic shutdown would ruin the country Media Statement

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CME: No lockdown against COVID-19, but better data analysis, communication strategy and research

Friday, 8 January 2020: While observing the rising number of Covid-19 in Malaysia, the Center for Market Education (CME) invites the government not to react with fear but with a sound data analysis and a better communication strategy.

“We are concerned about the growing rumours about the possibility of another MCO”, said Dr Carmelo Ferlito, CME CEO. “The more recent scientific literature is showing that there is no correlation between draconian restrictive measures and curbing the spread of Covid-19; the explanatory variables are to be found elsewhere, such as in latitude, climate, social habits and population age”, he added (Ref: https://www.frontiersin.org/articles/10.3389/fpubh.2020.604339/full#SM6). 

Dr Ferlito explained that the results obtained in different parts of the world with lockdown are so heterogeneous that it is impossible to identify in the movement restrictions an explanatory power to the spread of the virus. “If the same policy produces different results in different contexts, it means that the main factors behind the results were different” – Dr Ferlito added.

CME observed that in different regions those countries that were mildly affected in March and April are now experiencing a strong wave of Covid-19. It is the case of Malaysia in Southeast Asia and Germany in Europe (the latter is now recording double number of deaths compared to Italy). This means that these countries were spared by the virus by natural factors rather than by restrictive measures. And these measures in Europe are failing to produce the expected results.

According to CME, then, it is necessary to avoid measures which would harm human lives under many perspectives without obtaining important results in the fight against Covid-19.

The Center for Market Education invites the government to focus on the following initiatives:

  • Better data analysis and publicity;
  • Better communication strategy;
  • Strengthen research.

Data analysis is crucial in identifying the root of the problem. With regard to Italy, in example, we have the following information on the Covid-19 related deaths:

  • Average age: 81 years.
  • Deaths by age group:
    COVID-19 deaths by age group in Italy, data as per 29 December 2020

    COVID-19 deaths by age group in Italy, data as per 29 December 2020

  • 67.2% of the patients who passed away with or by Covid-19 had three or more different pathologies.

These data are not only important from the statistics standpoint, but because they help to implement sounder policies and – if accompanied by a proper communication strategy – they help the people in better evaluating their risks. 

In example, data above suggests that school opening is not a real issue, while elderly people or people with different pathologies should minimize their exposure to public places.

We need a constant update about these data for the case of Malaysia, and we need these data to be public and properly communicated, with an emphasis aimed to protect the most vulnerable groups. 

While there is no point in locking down the entire population, with huge and dramatic consequences, those subjects that are more at risk needs to be properly informed and helped in protecting themselves. 

At the same time, in evaluating risk when exposed to the right communication, the rakyat should step-up in terms of self-responsibility and consciousness about their role in fighting the virus.

CME suggests two more working points:

  • Start to move asymptomatic and mild cases to home treatment, to avoid to stress the healthcare system and to create unnecessary healthcare clusters.
  • Push the research system to investigate treatments that may be a better alternative to mass vaccination.

For media enquiries, please email carmelo.ferlito@gmail.com or centerformarketeducation@gmail.com.

About CME: The Center for Market Education (CME) is a boutique think-tank based in Kuala Lumpur, Malaysia. As an academic and educational institution, CME aims to promote a more pluralistic and multidisciplinary approach to economics and to spread the knowledge of a sounder economics, grounded in the understanding of market forces. In order to do so, CME is not only involved in academic initiatives, but it organizes seminars, webinars and tailor-made economics classes for students, journalists, businesspeople and professionals who wish to better understand the relevance of economics for their daily lives and activities. Economics matters and needs to be presented in a fashion in which the link with reality is clearly visible. In this sense, we look not only at theoretical economics but also at policy making, with an emphasis on the unintended consequences generated by political actions.

January 8, 2021 Comments Off on CME: No lockdown against COVID-19, but better data analysis, communication strategy and research Media Statement

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CME calls for a post-budget recovery strategy

Wednesday, 16 December 2020: The Center for Market Education (CME) welcomes the latest Budget 2021 approval but invites the government to think about a wider recovery strategy. 

“Now that the discussion on Budget 2021 and its tail of political fights are over, it is time to move forward with those measures that will move Malaysia from the containment to the recovery path”, said Dr Carmelo Ferlito, CEO of CME. 

The Center for Market Education believes that the growth projections for 2021 are too optimistic and invites to consider the possibility of a reverse square root trajectory: the crisis is followed by a physiological rebound (which follows the reopening of the economy) but then a period of flat growth follows. The length and flatness of such a stage will depend not only on the reliability and distribution chain of the vaccine but also on the economic strategy that is implemented now.

CME indicates the following urgent measures:

  1. A strategy for reopening borders for business travellers, at least within ASEAN.
    The Covid-19 crisis has demonstrated not only the potential of digitalization but also its limits. Business practices require physical interactions in order to produce long-term strategies which will create positive spill-over effects on employment.   
  2. Re-discover the business-friendly approach which made Malaysia an attractive destination for investment.
    This means:
    • More clarity on the labour market: Malaysia needs the contribution of both foreign workers and expatriates, within a clear regulatory framework which create opportunities for the local labour market and avoid the emergence of illegal situations.  
    • Extension of the MIDA “principal hub scheme” to Small and Medium Enterprises (SMEs). 
    • Further reduction of the business-related red tapes, with particular reference to the inefficiencies of the banking system.
  3. A new industrial strategy for relaunching Malaysia as a potential manufacturing hub.
    Covid-19 demonstrated the importance of a domestic industrial backbone, which in the case of Malaysia does not need to be rebuilt on a “cheap-labour” strategy, but rather on quality manufacturing which could leverage on the availability of skilled professionals and workers. This includes not only manufacturing in strict sense but also the development of advanced agriculture hubs.
  4. A tax reform centred on:
    • Lower income and corporate tax.
    • A targeted GST.
    • A strengthened enforcement system.

“These points demonstrate that we can build a recovery strategy without further increasing government spending”, Dr Ferlito added. “A debt-driven recovery strategy is not sustainable in the long-run, as it will create inflation and force future governments to increase taxation, diminishing the strength of the Malaysian economy and creating a vitious circle of brain drain”, Dr Carmelo Ferlito concluded.

For media enquiries, please email carmelo.ferlito@gmail.com.

About CME: The Center for Market Education (CME) is a boutique think-tank based in Kuala Lumpur, Malaysia. As an academic and educational institution, CME aims to promote a more pluralistic and multidisciplinary approach to economics and to spread the knowledge of a sounder economics, grounded in the understanding of market forces. In order to do so, CME is not only involved in academic initiatives, but it organizes seminars, webinars and tailor-made economics classes for students, journalists, businesspeople and professionals who wish to better understand the relevance of economics for their daily lives and activities. Economics matters and needs to be presented in a fashion in which the link with reality is clearly visible. In this sense, we look not only at theoretical economics but also at policy making, with an emphasis on the unintended consequences generated by political actions.

December 16, 2020 Comments Off on CME calls for a post-budget recovery strategy Media Statement

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CME welcomes the signing of the RCEP deal but invite to closely monitor the relationship with China, to improve...

Thursday, 19 November 2020: The Center for Market Education (CME) welcomes the signing of the Regional Comprehensive Economic Partnership (RCEP), which potentially leads to the creation of the world biggest free trade area.

“Free trade agreements are beneficial for all the parties involved and lead to the availability of better and cheaper products for the consumers in the area”, said Dr Carmelo Ferlito, CEO of CME.

Surely, the agreement will also be of help in the post-Covid-19 recovery path by creating growth and job opportunities.

The Center for Market Education, however, invites to monitor two important aspects which are very much crucial to make RCEP effective and to achieve its desired outcomes.

  1. Monitor the relationship with China.
    It is important that the new free trade area does not turn to be an economic colonization area for China. On the contrary, RCEP needs to be the occasion for China to embrace the relationship between free trade and fair trade; in fact, for the development of a true free trade agreement, duty policies are only a part of the picture: it is also necessary an institutional framework which supports that free trade making it fair. It is well known, in fact, that the Chinese legal framework is not always respectful of copyrights and needs to be strengthened. The same goes for the respect of human rights: economic ties can be an occasion to shape a change in the traditional Chinese approach to the rights of minorities and to the freedom of religion, opinion and speech.
  2. A free trade area cannot be accompanied by rising nationalistic tensions on the people freedom of movement. Recent tendencies in countries like Malaysia and Singapore with regards to the hiring of foreign workers do not go in the same direction that RCEP would like to go.

“For an effective action on these two points”, Dr Ferlito added, “CME invites ASEAN to strengthen its regional position by studying the possibility of a common currency, which, in order to be competitive, needs to be free from Central Banks influence and rather be linked with a strong cryptocurrency such as Bitcoin, in the attempt to develop a new version of the gold-standard system”.

For media enquiries, please email carmelo.ferlito@gmail.com.

About CME: The Center for Market Education (CME) is an academic and educational initiative aiming to promote pluralism and multidisciplinarity in economics learning. Furthermore, CME aims to promote a better understanding of the driving forces of the market process, in order to realize the unintended consequences involved in policy making.

November 19, 2020 Comments Off on CME welcomes the signing of the RCEP deal but invite to closely monitor the relationship with China, to improve people freedom of movement and to develop an ASEAN currency Media Statement

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CME perplexed about the new expatriate hiring process: it will make MNCs flee Malaysia and increase unemployment

Wednesday, 28 October 2020: The Center for Market Education (CME) is perplexed about the new procedures for hiring foreign talent (expatriates), issued by the ministry of human resources.

According to a recent statement by the Malaysian human resources ministry, all employers who intend to employ foreign workers through a re-hiring program and recruit expatriates are first required to advertise job vacancies on the national portal, MYFutureJobs, effective 1 November 2020.

Vacancy advertisements on MYFutureJobs must not be less than 14 days for the re-hiring program (foreign workers already in the country) and 30 days for the recruitment of expatriates. This will then be followed by a candidate interview session with the employer’s representative and the government agency of the Ministry of Human Resources, which is the Social Security Organization (SOCSO).

Foreign workers or expatriates will only be considered if there are no Malaysians who are interested in applying for the particular position.
While the measure aims to reduce unemployment among Malaysians, it presents important unintended consequences that may lead to reduce FDIs and MNCs presence in Malaysia, therefore increasing unemployment, rather than reducing it.

Dr Carmelo Ferlito, CEO of CME, explained the most critical points in the measure:

  1. It interferes with employers’ decision process, imposing also the presence of government representatives during the hiring process, which poses serious problems in terms of privacy and independency in the business conduct.
  2. It applies not only to new positions but also to the renewal of expatriate positions, making the future of foreigners in Malaysia increasingly uncertain, with the risk that Malaysia will be unable to attract foreign talents.
  3. It applies to business-owners too, which therefore will find themselves in the risk of being replaced in running their own company.
  4. This further element of confusion adds on to an already confused scenario, where the limits on hiring foreign workers, the new CMCO in Selangor and Kuala Lumpur, and the way in which SOPs are determined and communicated, are discouraging business initiatives, putting at risk existing jobs and the creation of new ones.
  5. Malaysia is playing in a global scenario and the attraction of the best talents plays in its favour, not against it.

CME recognizes that in the past decades Malaysia did a wonderful job in attracting Multinational Companies thanks to a business-friendly institutional framework, certainty of the rule of law and attractive packages such as MIDA Principal Hub scheme. However, the most recent policies are putting at serious risk such great achievements.

In commenting the news, Dr Ferlito explained: “If a MNC is hiring 5 expatriate top managers and 200 Malaysians, and it is forced to replace those expatriates with locals, how will we end up? With 5 more Malaysians getting a job or with a MNC leaving Malaysia leaving 200 people unemployed? Policy making cannot be driven only by good intentions, a serious consideration of the negative unintended consequences is a must”.

Dr Ferlito added that this is very much crucial in a moment in which neighbour countries such as Indonesia are developing very attractive policies for FDIs.

CME therefore proposes the following modification to the new policy:

  • Open a discussion table with the relevant stakeholders, and in particular with foreign chambers of commerce, before implementing such measures, rather than after they are in place.
  • Identify a salary threshold, such as RM 15,000/month, above which the new procedure will not be applicable and businesses would be free to hire without using the portal but only with the traditional channels.
  • Exclude work-permit renewals from the scope of the policy.
  • Exclude business-owners from the scope of the policy.

For media enquiries, please email carmelo.ferlito@gmail.com.

About CME: The Center for Market Education (CME) is an academic and educational initiative aiming to promote pluralism and multidisciplinarity in economics learning. Furthermore, CME aims to promote a better understanding of the driving forces of the market process, in order to realize the unintended consequences involved in policy making.

October 28, 2020 Comments Off on CME perplexed about the new expatriate hiring process: it will make MNCs flee Malaysia and increase unemployment Media Statement

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CME concerned about rising anti-foreigners sentiment

Friday, 4 September 2020: The Center for Market Education (CME) is concerned about a rising anti-foreigners sentiment in Malaysia, which may produce harmful effects on the local economy, in particular on employment.

In the past two days, the following policies were announced:

  • ban from entering Malaysia for citizens of countries with more than 150,000 Covid-19 cases
  • impossibility for foreigners to open certain businesses, including restaurants, in Kuala Lumpur, even with a local partner

These two policies were announced on the same day (Thursday) in which G20 foreign ministers sought international cooperation over easing travel restrictions and reopening borders, as months of coronavirus shutdowns exerted a drag on the global economy.

In commenting the news, Dr Carmelo Ferlito, CEO of CME, observed the following points:

  1. These measures add on other discriminations against foreigners, like the impossibility to access non-muslim worship places.
  2. The ban to enter Malaysia seems to imply that Covid-19 is somehow related with nationality rather than with the physical presence in a certain place. Why should an Italian coming from Japan, in example, be barred from entering Malaysia by virtue of his/her passport?
  3. It seems that the contribution of foreigners, both immigrant workers and expatriates, to the Malaysian economy is not recognized anymore.

Dr Ferlito added that to protect the country from the spreading of the virus is important but such a commitment to general healthcare should not be conducted with discriminatory policies, whose efficacy is also questionable. Currently, foreigners entering Malaysia are already subject to Covid-19 test and quarantine in a government centre; we should enforce these measures rather than discriminating on nationalities.

At the same time – Ferlito added – we should wonder how truly “nationalistic” is the rethoric of “Malaysians first”. In fact, if nationalism means to care about the welfare of the nation, to implement measures that may discourage Foreign Direct Investments and push Multinational companies away from Malaysia surely is not in the interest of the nation. If a MNC with 10 foreign managers and 200 Malaysian employees, pushed by discriminatory policies, decides to relocate its activity, who is harmed the most? The 10 foreign managers who can continue their job elsewhere or the 200 Malaysian employees who find themselves unemployed?

As in other occasions, Dr Carmelo Ferlito stressed the importance of understanding the unintended consequences produced by policy on the economy.

As emerged in a webinar organized by CME on 3rd September, in which Professor Deidre McCloskey from Chicago talked about “Economics, History and the Great Enrichment”, Liberty, not capital accumulation or exploitation, is the key for a miraculous and long lasting economic growth. Liberty is key for good ideas to become innovations and drive a country’s growth.

For media enquiries, please email carmelo.ferlito@gmail.com.

About CME: The Center for Market Education (CME) is an academic and educational initiative aiming to promote pluralism and multidisciplinarity in economics learning. Furthermore, CME aims to promote a better understanding of the driving forces of the market process, in order to realize the unintended consequences involved in policy making.

September 4, 2020 Comments Off on CME concerned about rising anti-foreigners sentiment Media Statement

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CME perplexed about the proposed property vacancy tax

Wednesday, 2 September 2020: The Malaysian Minister of Housing and Local Government, YB Hajjah Zuraida binti Kamaruddin, proposed a property vacancy tax to be paid by developers on unsold units priced above RM 500,000.

The Center for Market Education (CME), led by Dr Carmelo Ferlito, expressed concerns and perplexity over the proposal.

Dr Ferlito, CEO of CME, explained the reasons why such a tax should be avoided:

  1. It cannot even be defined as a tax, as a tax is always an amount of money paid after a certain benefit has been enjoyed. Income taxes, in example, are paid after an income has been produced. But even taxes that can be defined as “punishments” for the production of negative externalities are imposed after a benefit has been enjoyed: in example, a pollution tax is imposed to polluting firms after they have obtained an output with polluting production methods; a tax on tobacco is paid by someone enjoying the pleasure of smoking, and so on… In the case of a property vacancy tax, therefore, the very reason for a tax is lacking: which benefits are the developers enjoying by not selling their units? In fact, unsold units are already a missed profit for developers. A property vacancy tax would sound like taxing a butcher for being unable to sell out all his stock of meat.
  2. The proposed tax can be configurated as a violation of property rights. In fact, built units belong to their legitimate owner, who has to be free to choose to hold the property if the price emerging in the market is not satisfactory for him or her.
  3. Such a tax would constitute a dangerous precedent, suggesting that the government can address the way in which individuals dispose of their legitimate properties if such a usage is not in line with government’s ideas.
  4. The proposed tax could discourage future initiatives. In fact, while the housing market is now suffering, the cycle will eventually turn and the vacancy tax could discourage the emergence of sound entrepreneurial initiatives for fear of taxation on eventual unsold units.

The Center for Market Education, therefore, invites the government to avoid implementing the proposed tax and remains at disposal for discussing together proposals that could be benefit the housing market and the Malaysian economy.

For media enquiries, please email carmelo.ferlito@gmail.com.

About CME: The Center for Market Education (CME) is an academic and educational initiative aiming to promote pluralism and multidisciplinarity in economics learning. Furthermore, CME aims to promote a better understanding of the driving forces of the market process, in order to realize the unintended consequences involved in policy making.

September 2, 2020 Comments Off on CME perplexed about the proposed property vacancy tax Media Statement

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CME welcomes the shift to rent solutions for the housing policy

Thursday, 6 August 2020: Housing and local government minister Zuraida Kamaruddin has announced that the new housing policy will shift toward renting solutions.

The Center for Market Education (CME), led by Dr Carmelo Ferlito, welcomes such a shift, inviting the government to a wider reflection on the potential measures and their consequences, intended and unintended.

Dr Carmelo Ferlito, CEO of CME, invites the minister to reconsider the possibility of some sort of rent control, which may produce negative outcomes such as limiting supply, lowering maintenance conditions and stimulating the black market.

On the other hand, Dr Ferlito welcomes the idea that government is going to develop affordable housing to be rented rather than for sales, but he suggests also to push further in this direction with a system of rent support: rather than having the government building specific houses for rent, it would be interesting to explore the possibility of a dialogue with developers in order to have rent-subsidized units within their projects. This solution, being market-driven, would have the advantage of more easily meeting customers’ expectations and to promote social mobility.

Finally, CME invites the ministry to work together for the development of a new affordability index, able to capture not only financial affordability but also social desirability and social mobility potential.

For media enquiries, please email carmelo.ferlito@gmail.com.

About CME: The Center for Market Education (CME) is an academic and educational initiative aiming to promote pluralism and multidisciplinarity in economics learning. Furthermore, CME aims to promote a better understanding of the driving forces of the market process, in order to realize the unintended consequences involved in policy making.

August 6, 2020 Comments Off on CME welcomes the shift to rent solutions for the housing policy Media Statement

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