Tun Mahathir on Oil Price increase

Tun Mahathir has write a good and informative article on the recent oil price increase in his blog... Dr Mahathir Mohamad: Oil Price ....

Well, I remember very well in 1997 how Tun Mahathir has turnaround the economic crisis in Malaysia which hits all the Asean country. In economy there is a lot of theories and method to tackle an economic issues and in 1997, and from my view points, I have found that Tun Mahathir has adopted a more fundamental approach in solving the economic crisis, which is building an entire foundation of economic strength within the country in order to survive the attack from outside of the country. In his latest article, he also mentioned on the flotation of the Malaysian currencies. I do not understand why people would like to float their currencies in an open market and subjected to various speculations and external factors which cannot be control internally. From my understanding, unless we have a very strong economic fundamentals and a very strong knowledge on the market movements, floating our currencies is like putting a target for a target practice session and will expose our own economy to attacks from all over the world, which I do not think that Malaysia has the brain power to really address the issue and to being kept updated on the movement, speculations and planning around the worlds. I think the size of our economy is very small compared to the other countries and this currency flotation will be a great disadvantages to the country.

I think it is important for Malaysia to understand fully its economic strength and weaknesses to ensure that our steps in improving the economic is a well balance and a positive approach for all the people. At the current rate, I see most of the initiatives only benefit the rich people and will hasten the desperation of those at the other end of the equation. With petrol price at RM2.70, it will greatly impacted the lower and middle income group. From the way I see it, the increase in petrol price will surely have a negative impact on the economic growth of the country. I do not think that people can adjust their lifestyle anymore. Most people have adjusted their lifestyle to the limit. Most people have already trade-in their proton for a kancil and have already sold-off their MPVs to lessen the burden of increasing rice prices, flour prices, cooking oil prices and other type of prices. Most people have already cut their holiday vacation from a two night in Batam or Two night in Bali to a mere camping at their local waterfall... What else can we adjust?

In the article, Tun Mahathir also touch on the factor of purchasing power, which I also think that is a major contributors to the economic growth. Only with a strong purchasing power can the economic accelerated and grow at a faster rate. Without the purchasing power, economic activities will slowdown and the people will become passive in the economic activities. Maybe the current economic scenario will create another circles of economy, where there will the active group economy and the passive group economy. The active group economy will be those who have the money and the purchasing powers and will continue to enjoy the economic growth within the active economic cycles and there will be the passive group, those with lesser purchasing power with less money and less income, who will struggle to find ways to support their lifestyles. I believe the scenario is already happening in this country when during the slow economic we heard that some company still can afford to give hefty sum of bonus payment to the employees. But with the increase in the oil prices, this scenario will become more apparent....

Well, from my understanding of economics, the government have so much options to rejuvenate or to re engineer the economy and have so much option to sustain and to promote the strong economic growth. Since economic of a country is controlled by a country and the government of the country, the destiny of the economy lies on the hand of the government. There are a lot of measures that can be initiated by the government to encourage positive economic activities and I am sure that it is not a closed ended situation. I believe there a so much improvements that can be perfected and we still have so much rooms to manoeuvre and to be creative to ensure the sustainable, positive and healthy economic scenario............... But definitely not a drastic increase in the oil prices....