Prudence and rainy days

2 days ago, I attended to an injury case, a foreign worker from Myanmar.  On unwinding and lifting the piece of cloth wrapped around  his arm, blood spurted out and sprayed my shirt. I have to immediately cover the wound again , put a tourniquet and stitched up the wound.

After that, I have to drive home to change my shirt. Luckily, that was the day when it rained the whole morning, and I was relatively free  but even so, I have to inconvenience a few patients who had to wait for my return.

Why I brought up this point is that I used to keep a few shirts in a  cupboard in my restroom just for this purpose. But because over the years, I have never encountered this thing happening, I have taken  the shirts home for washing and never brought them back again. This is the first time in over 20 years that I got sprayed by blood again; normally I would be very careful and would not get my shirt dirty.

The moral of the story is that we must always be prepared for things like this to happen. During sunny days, we cannot afford to just throw away the umbrella.  We must keep the umbrella even if if there is no rain for a long time.

Similarly with our finances. We must always try to spend less than we earn ad keep certain amount in the bank for the ‘rainy’ days.

The same thing goes for the government. Government must be prudent in its spending, even when revenues are high, even when commodities’ prices are good, even when petroleum is fetching good income for the nation. It is important to build up the country’s coffer, so that this money can be used during a downturn like the present one.

It is now said that Norwegian Krone is the safest currency in the world. (click Time Magazine article here).  I quote from Time:

 Currently at its strongest against the dollar and euro since last fall, the krone is set for a “sustained appreciation” over the next year and a half, according to HSBC. The main reason: Norway’s budget and current-account surpluses are the biggest among nations with the 10 most traded currencies. Factor in the country’s $350 billion sovereign wealth fund pumped full of the country’s oil revenues, and the cost of insuring against government default in Norway — a key measure of a currency’s safety — is the lowest of those countries. With Norway’s output expected to shrink by a modest 1.2% this year, far less than in most of the world’s leading economies, the krone, HSBC said, represents “the ultimate safe haven.”


untitled2Krone, the safest ?

However, please do not rush to change RM into Krone. My purpose of pointing this out is not to ask all of you to rush to money changers to change Krone. My purpose is to remind those  minding our finances to be prudent , especially during the good time. If we have built up our surpluses during the good time,  we would have no problem now facing this recession. But if our coffer is empty during good time, we would be in big trouble during the bad.

We can afford to take some risk with our own money in investment, always leaving some in the bank for the rainy days. But for those manning the public finances, they could not afford to and should not take risk with other people’s money. The key word perhaps is prudence. Ask ourselves, over the past few decades, did we practise financial prudence?


As for the political scene, there is just a phrase to describe it , and that is ” Mou Gan tai”, Cantonese phrase literally  meaning ” no eye see”.


13 Comments (+add yours?)

  1. Peter Yew
    Mar 27, 2009 @ 14:25:27

    Dr Hsu,

    We called it ‘contingency’ in planning for the unforeseen. It means that as humans we cannot see into the future so we have to make provisions in case things fail to turn up as we planned.

    Such a ‘contingency’ culture is very much an older mindset (like yours and mine), a state of caution because we have been there or seen tough times so we know that it can revisit us again, like now. However, many of the younger generations were never exposed to bad times, some (even when exposed) were given preferential treatments through affirmative policies like the NEP that became exploited by those who actually do not qualify. ‘Contingency’ culture is far off their minds so if our government went on a spending spree all these years it was, in my mind, with a glee that our natural resources are limitless and their demand always there. Now that our crude oil reserves are diminishing, and palm oil is facing serious alternative competitions, it is a wake-up call to consider a culture of prudence. But it will be a tremendous effort when majority of those born after Merdeka never understood poverty, real abject poverty, and therefore think that we will never be badly affected.

    Perhaps it is why I fail to see the impact of recession, visibly that is, whenever I go to the shopping malls. People are spending like crazy!


  2. wits0
    Mar 27, 2009 @ 15:35:10

    Bank staffs themselves are now acting as agents canvassing for depositors with a five figure and above deposit to invest in various deposit/investment schemes, pointing out to the low interest rates offered by the bank presently.

    Prudence comes first here too, why not?


  3. Nick
    Mar 27, 2009 @ 15:35:13

    Peter Yew calls it contingency culture or mindset. I agree with him. I have worked for Singaporean bosses almost all my working lifespan and I can tell you they are paranoid. They see ‘trouble’ and ‘crisis’ even during good times. But then, because of their mindset, they have become prudent with their business principles. We are into the 5 month of semicon collapsed, I am proud to say my Company is still very strong on cashflow. We have salted away enough reserves to last for another 3 years, if necessary. Dr. Hsu quoted Norway to compare with our Country. It is indeed apt. We are both oil producing nations but alas we never have a truly qualified Finance Minister except Tun Tan Siew Sin. The rest are just snake charmers. The next one even worse, “playboy”.


  4. Disgusted
    Mar 27, 2009 @ 19:47:03

    Dr Hsu,

    You are a wise man and thought to be wise when you are young.

    The old values are eroding now. Even we are taught not to waste food, besides clothing. We keep wearing the old clothing till it is torn and tattered from repeated washing.

    But is our EPF prudent? Are you satisfied with their investments and interests declared?


  5. pohwatchdog
    Mar 27, 2009 @ 22:24:00

    We need to be prudent, transparency and accountable. If we spend without thinking about tomorrow, we will have problem solving our debt. the best solutionis spend within our mean. If today Malaysians follow the old values whereas the fixed deposit rate is just a mearge 2 % only. What do to with this mearge interest rate? Hopefully the Bank Negara should regulate the expenditure of the bank. We don’t want history repeat in Malaysia with the so called rescue plan in United State. Fat salary or bonus, spa treat, study tour and unnecessary expense inccured by the bank executive.

    Is it time that we encourage saving with purpose?
    Spend more on infrastructure development with proper supervision and monitoring on the implementation that bring benefit to the people.
    Is doen’t matter that we spend more but the qualties of life need to improve? Improve public transport to curb traffic jam during peak hour. Have a well educated work force, capable, colour blind and dedicated one to boost the economy.
    Stop unnecessary politicking and move on with our economy.


  6. klm
    Mar 27, 2009 @ 22:44:12

    Reading the delegates statements make me sick. There is really no hope. The will to change is not there.

    I have given up on this country. It is still a cheap place to live. That is all.

    Will I give anything back to this place. No more.
    At one time, there were many people who would want to do something for this place. But they have been screwed by these people. Now, I am seeing more of this.


  7. clearwater
    Mar 28, 2009 @ 15:52:14

    My good Dr. Hsu,

    You, I am sure, practice financial prudence as do most people my generation ( age 50’s ). How come? Our generation did not have it easy. Our parents had little education (disrupted by WW2 ), no government help (non-bumiputra ), large families ( no family planning ) and small incomes ( unavoidably not rich ). In contrast, the generations born after 1980 enjoyed greater material affluence as the Malaysian economy grew but suffered severe trauma from a ethnically divided society. I do not think they fear bad times unless they have experienced it personally.

    Do our federal government leaders practice financial prudence? Ha ha. They don’t even know what it means. Examples of profligate waste, inefficiency, corruption abound in the last 30 years. Its almost obscene the way public resources are squandered without accountability by politicians and civil servants without a conscience. And it appears this will continue.


  8. klm
    Mar 28, 2009 @ 16:11:45

    After reading what those scumbags said, I think I will now go back to be a practical. Rather than contributing money to the treasury, I will contribute directly to people in need.

    1. I will tip the policeman who offer to settle a traffic violation

    2. I will share profit with the newly electeds to get projects and sell stuff at price that is as high as possible.

    3. I will use all legal means and then bend some to pay as little income tax as possible.

    4. I will look upon Francis Yeoh of YTL, Patrick Lim aka Patrick Badawi and other corporate pirates as heroes.

    5. I will scheme and I will scam to take as much money as possible.

    6. I might even join Gerakan. But alas, Gerakan cannot offer any influence. So, I join MCA instead. Heck, I will join UMNO if they allow me. All, I want is influence and connection.

    Why should I left any money in the treasury for these scumbags. I would rather have it in my bag.


  9. chinseng
    Mar 28, 2009 @ 23:40:15

    Malaysia Boleh ? 2020?‏

    Where is our direction for our next generation..?

    For those who started work around 1973, a 1.3 Litre Japaness car was RM7,000.00

    Today the equivalent is…. let’s say RM 60,000……….. 8.5 times

    In 1973 a double storey house was about
    RM 45,000.00….or less, Today it is about RM 300,000.00 …………6.6 times

    (It was advertised in a newspaper, price at RM37,000.00 at Taman Lumba Kuda) This makes it 8.1 times

    In 1973, an Engineer’s pay was RM 1000
    Today it is about RM 2000 +/-…………2 times….

    From 1973 to 2008……..35 years……what is the Trend.? Bearish !!!!

    In a stock market when the trend is bearish , what do we do?..Exit !!!

    When a country’s trend is bearish what do we do??

    This Bearish trend is more difficult to turn around as compared to the stock market.

    I have used these 3 items House, Car & Salary as a measurement of the country’ s performance for the past 35 years….

    Foreigners also ask about these 3 items to gauge our standard of living.

    There is a book I saw in MPH bookshop entitled :

    Malaysia : The Failed Nation
    some of you may be interested to read it.

    I agreed with the writer…..

    This morning I was having Coffee at McDonald ( now the coffee..100 % Arabica quite good@ RM 2.90….free refill !!. I asked how much per hour is their pay?

    RM 3.00 ! x 8 hours = RM 24 per day… x 25 days = RM 600 per month

    A student in Australia works part-time during her University days..she worked at Gloria Jeans Coffee…. the pay ?
    Australian $ 14.00 ( @ 3.15 = RM 44 per hour……x 8
    = RM 352 per day !!! x 25 days = RM 8800

    13.3 times more !!!!! ……Price of houses in Perth is about the same in KL

    Price of cars are about 23 % cheaper…in Perth.( Australia )

    I think more and more people are becoming aware of this Bearish trend.

    Developed country by 2020?…means High income country

    Let’s look at some as of year 2005 ( Financial Times )

    USA GNP per capita US$ 35400

    UK GNP per capita US$ 25510

    Australia GNP per capita US$ 19530

    Singapore GNP per capita US $ 20690

    These are developed countries by income measurement

    Malaysia ‘s GNP per capita US$ 3540

    Year 2020..developed country? Really…a sad story.

    Worrying Trends, isn’t it??
    Ringgit sliding further and further under BN

    Recently, I interviewed some fresh graduates applying for jobs with my engineering company. I accepted two applicants on a starting salary of RM1600. It struck me as odd that 25 years ago, I myself started work as a fresh graduate engineer for the same pay.

    Indeed, if you compare the salaries of graduates now and 20 or even 25 years ago, you’ll find little difference but that their purchasing power is vastly different. It’s the same story when you compare salaries of shop assistants, office staff, factory workers and others.

    To compound the effect of inflation, the ringgit has depreciated greatly against all major currencies after 1997. The real income of most Malaysians has moved backwards.

    This is why many Malaysians suffer under the petrol hike. The root of the problem is that our real incomes have shrunk in the face of inflation and depreciated currency.. Malaysians have not been spoiled by subsidy but are unable to move out of the time lock of stagnated and depreciated incomes.

    If you compare the per capita incomes of Singapore , Hong Kong , Taiwan and South Korea , they are a few multiples of ours although at independence all these countries were the on the same economic level as Malaysia .

    What has gone wrong? We were the rising star of East Asia , a country rich in natural resources with the most promising potential.

    The reason is massive corruption, plundering of resources, wastage of funds for huge non- economic projects, anti-public interest deals with politically-linked GLC companies and passing-of-the -buck to the man in the street..

    Four decades of NEP where education, economic and employment policies are defined by race ensured that meritocracy took a back seat.

    Our university standard has declined and the today best and brightest of our youths emigrate to escape the racial inequility only to contribute to the economies of foreign lands.

    The reputation of our judiciary which was held in high esteem worldwide has sunk so low that foreign investors now insist on arbitration in Singapore in case of any dispute.

    We also have a slew of oppressive laws such as the ISA, OSA, Uuca and PPPA which stifle free speech and are designed to keep the ruling parties in power.

    We have become less attractive to foreign investors and now lag behind our neighbours in Asean for foreign direct investment. Even some corporations who have established themselves here are moving out.

    All the economic and social malaise cannot help but affect the value of our currency. The strength of a country’s currency is after all, a reflection of its fundamentals.

    Furthermore, Bank Negara has a policy of weak ringgit to help exporters, never mind the burden on the common folk. The government is pro-corporation, not pro-rakyat.

    While the poor and middle-class are squeezed, an elite group gets breathtakingly rich. We have the distinction of having the worse income disparity in Asean. A re-distribution of wealth is under way from the poor and middle-class to a select group of politically-connected elite.

    The end result of this re-distribution will be a small group of super-rich while the majority are pushed into poverty and the middle-class shrinks. This is what happens when the rich gets richer and the poor get poorer.

    There is much that is wrong with Malaysia . The sponsibility for pulling the country backwards can be laid squarely at the door of the ruling regime. It is BN’s mis-governance, racial politics and culture of patronage which has seen the country regress economically and socially..

    We seem to be sliding down a slippery slope, further down with each passing year of BN’s rule. Another five years of BN rule and we’ll be at Indonesia ‘s standard under Suharto. Another 10 years and we’ll be touching the African standard. What a way to greet 2020.

    Is there any hope for Malaysia ?

    Faced with the reality that BN will never change,
    many Malaysians desperate for change turn their lonely eyes to Anwar Ibrahim.

    Pakatan Raykat has promised to treat all races fairly, to plug wastage, fight corruption, reform the judiciary and make Malaysia more competitive.

    But some have questioned whether we can trust AI and the loose PR coalition of disparate parties..

    The question is not whether we can trust AI and PR but whether can we afford not to??

    Can we afford another ten years of BN’s misrule?

    God Bless You – Malayisa.


  10. Disgusted
    Mar 29, 2009 @ 13:21:10


    Remember? Now DBKL wants to build “sky-bridges” and walkalators (air-conditioned) which I mentioned before were scrapped during Dr. M’s time. Well, the business idea from a tycoon is bringing it back to live!

    This is not the US and there is no winter here but looks like billions available is making some fingers ringgit trigger happy.



  11. klm
    Mar 29, 2009 @ 13:48:26


    It is very simple. Income is kept low so that Malaysia can continue to attract FDI. Only FDI can keep Malaysia growing. It does not matter that everything else has gone up.

    The formula had been

    – good and cheap slaves – ahem! worker
    – good infrastructure
    – stable govt
    – legal system

    Unfortunately, many countries offer the same and better.

    So, we will see FDI especially manufacturing slipping away in coming years. This economic crisis will see structural changes. 😦

    Malaysia best bet is still back to agriculture. The plantation sector employs over 1M people. The unfortunate part is that with the demise of the rubber plantation, the indian plantation workers are displaced. The oil palm plantation employed over 1M people. The first generation were Malays. Now it is Indonesians. The local dont want to work in the oil palm plantations anymore. 😦

    As for high tech industry. Malaysia do not have any niche where it is or can be no 1,2 or 3. This was what Mahatir wanted to move Malaysia in Vision2020. Badawi practically dismembered it. Now the window of opportunity had been gone.

    Najib’s new strategy is to increase the service sector. I dont see where Malaysia can excel. Except maybe political blogging ( no1.) or c4 a body (no 1). 😦

    So. I agree with you. I would suggest we become corporate pirates. We focus on short term gain.
    We do whatever it take. I used to despise Patrick Badawi. But now, I think he is one hell of a smart guy. Throw morality into the dustbin.


  12. klm
    Mar 29, 2009 @ 14:02:09

    Monk. See my previous and new comments. (done with the evil spirit still inside me).

    Actually the walkalators idea is not bad. There are many making schemes and scams

    1. Get taxpayers to fund construction

    2. Buildings connected by the walkalators will see immediate gain in property value. can see at least three people who will make a killing

    – Vincent Tan (he owned a major part of lower or is it upper Bukit Bukit Bintang)
    – YTL (Lot 10)
    – Daim (Pavilion)
    – Sungei wang (dont know who owns it)

    3. Space rental for advertisement . Some one will have monopoly

    4. Stalls rental. Again a monopoly

    5. Maybe a toll for using the walkalators. If not a tax on the mall operators by DBKL.

    There must be a large annuity income in this thing. Anybody seen the business plan?

    By the way, I like the phrase and I change it to ringgit finger trigger happy. May the ringgit finger is the one used to do the up you.


  13. A true Malaysian
    Mar 29, 2009 @ 20:26:39

    The Income Tax regime of Malaysia was used to be on tax on ‘preceding year’ basis. That is to say, income taxes collected in current year were on income of immediate preceding year. This means that tax money was collected on income that ‘already’ earned, and in a way tax money that collected by the government can be spent in lower risk of being ‘overspent’.

    The year 1998 was the last year of this tax regime of ‘preceding year’ basis. Year 1999 was declared a so-called ‘Tax Free’ year, and Mahathir was smart in capitalising this to win year 2000 GE, as many people were in a way, deceived to vote for BN because of this ‘Tax Free’ year.

    I put it as ‘deceive’ because, just imagine, in year 2000, income taxes supposed to be collected on 1999 income tax. That is to say, in year 2000, no ‘revenue’ shall be collected as 1999 was a ‘Tax Free’ year.

    But, the government was not silly at all. Tax regime was changed to tax on ‘current year’ basis in year 2000. In a way, tax money collected from tax payer in year 2000 was in respect of that year’s income, which was not being earned yet.

    The point I wish to bring is that, the government is actually collecting income tax revenue that not even being earned yet, but on ‘estimated’ or ‘forecasted’ income / profit since the year 2000. In a way, if such tax revenue are not being spent prudently, financial position of our government will be in deep shit.

    Thus, being prudence is wise in all circumstances, especially since the government is collecting and spending on ‘estimated’ or ‘forecasted’ income / profit of tax payers. In economic downturn as of now, the actual results that will only firm up after year end account closing maybe all losses and not profits. By the time, would you expect the government can pay you back income taxes that you already paid currently? How about next year 2010? Anymore money left to pay taxes by then?


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