Kam Raslan’s Talking Edge

(Reprinted from The Edge – Options pullout, 3 November 2014 issue)

Dear Kam,
I told my friends to never underestimate our neighbour Indonesia, which is seeing steady growth. Am I correct?
Green with Envy

Whenever I try to understand economics, my brain collapses because I am unable to comprehend anything. It shuts down completely because all the jargon bores me. Economics makes me feel both stupid and sleepy, but so does trying to understand science or why anybody thinks Australia is an interesting holiday destination. It’s like when I accompany my wife when she goes shopping for clothes. She is able to detect subtle fashion differences in hemlines or colours that have no meaning to me. My wife will ask me questions like, “Which one looks better, this one or this one?” I can tell from her tone that there is a correct answer, but I have absolutely no idea what it is. So I’ll say, “That one. No, that one. Both of them?” Eventually, my wife gives me the important tasks of looking after her handbag and taking a nap in the corner.

But then I saw a statistic that forced me to make one last heroic effort at trying to understand economics. Apparently, according to a website called The Globalist (I’d never heard of it before either), Indonesia’s economy in 2013 “surpassed that of the UK to become the world’s ninth largest”. Apparently, Indonesia’s GDP last year was US$2.39 trillion whereas the UK’s was US$2.32 trillion. These are International Monetary Fund figures and this is remarkable news. For decades, Malaysians have treated Indonesia like it’s some kind of political and economic basket case, a country incapable of, well, anything. We’ve grown up thinking that Indonesia can offer us nothing culturally, politically or economically except perhaps a supply of plantation workers and therefore as opportunities for roadblocks. Now, Indonesia has a new and exciting president, a very free and vocal press, and it is the ninth largest economy in the world. According to the same measurements, Malaysia is the world’s 28th largest economy, just below the Netherlands, which in turn is just below Pakistan. Wait a second. Pakistan is a bigger economy than the Netherlands? A country that has its own branch of Al Qaeda is somehow more successful than the country that invented DVDs and WiFi? That doesn’t sound right.

It seems that the IMF figures are based on purchasing power parity (PPP). According to my old economics lecturer (Professor Wikipedia), PPP is a technique used to discover the relative values of currencies and therefore their purchasing power at home. I don’t think I’m completely wrong in saying that PPP calculates currencies to be somehow equal (aaaand my brain has fallen asleep).

I guess it’s true that a naan costs less on the streets of Karachi than in Amsterdam and a bowl of laksa costs less in Kuala Lumpur than in London, but, well, so what? This sounds like the kind of sleight of hand I use to persuade myself that I’m earning as much as my friends in England. It does cost less to feed myself here but it doesn’t stop me from getting really annoyed when they come to visit me and they keep saying, “Everything is so cheap here.” PPP seeks to flatten economic measurements but in real life, everything remains relative.

Indonesia may or may not actually be the ninth largest economy in the world but Indonesia is on the rise and that economic rise will be the dominant story for decades to come. The days when Malaysians thought they could look down their noses at Indonesia must now come to an end.

Indonesians don’t really think about Malaysia very much. They think we’re arrogant but culturally backward and it makes the headlines whenever Malaysians mistreat a maid. Every abused maid or roadblock is a diplomatic disaster. Other than that, Malaysia is barely on their radar screen. But the growing Indonesian economy is a huge opportunity. If you’ve never been before, then you should visit Indonesia. You’ll find that everything is very cheap.

Dear Kam,
Ebola looks really bad. Should I be scared?
Worried Malaysian

Ebola has killed about 70% of its victims but it is harder to contract than most people think. It only becomes contagious when somebody is showing symptoms and even then, it can only be passed through bodily fluids. It is not airborne, unlike SARS. If an Ebola patient is isolated quickly, then it can be contained. The disease has been so devastating in West Africa because medical services were unprepared (previous outbreaks had happened in faraway central Africa), the first people to be killed were the medics themselves and, well, it’s Liberia, which doesn’t exactly have the most modern medical system to begin with. Despite the 5,000 deaths in West Africa, logic would suggest that it’s virtually impossible for Ebola to spread to any country with even a relatively well-developed medical system. And yet American news media has gone crazy, reporting the news of American nationals who have returned from West Africa infected with Ebola. Despite the feverish reporting, it has been calculated that the average American is still more likely to marry Kim Kardashian than to contract Ebola.

Fear of Ebola is so profound because it is so primal. It taps into one of our deepest and most ancient fears of being infected by an illness we don’t understand. Therefore, we are wary of people we don’t know because they might have that sickness. Whenever the plague came to town in Medieval Europe, the first response was to say that the Jews had poisoned the wells. Quite why the Jews might have done that was never asked. Nobody knew or understood the Jews but they were different and they were massacred. It is possible that the Jews did suffer less from the plague because they lived in tiny ghettoes separated from everyone else and because the ghettoes were so tiny, they had to take hygiene very seriously. Our fear of unknown pathogens can make us racist.

In the unlikely event that Ebola comes to Malaysia, I think we can expect to see demands that we close our borders and keep out certain foreigners.

Dear Kam,
What economic bubble will burst next?
Novice Analyst

Here’s a quick list of some of the things that doomsayers are calling potential bubbles: Australian property, Dubai property (again), China, the US stock market and debt bubbles everywhere. That sounds like just about everything and we are obviously doomed.

Before the bubble bursts, nobody sees it coming but when it does burst, then everyone says they knew it was going to happen. Bubbles keep bursting and we never seem to learn. It’s as if our memory can only stretch as far back as breakfast. We also seem to be driven by a desire to only invest in sexy things like property and stocks. We want glamour like luxury hotel chains and Hollywood movies and not boring stuff that people might actually want, like manufacturing toilets or plastic chairs. That’s not what, say, a wolf of Wall Street would do.

I’ve only ever successfully spotted one bubble and that was the dotcom bubble of 1997-2000. That was insane. But I think I’ve spotted another. We really don’t need any more cupcakes. Honestly, the market is completely saturated and diabetic already.

Reprinted with the kind permission of