Tom Pepinsky

Category: Malaysia

  • Pay Attention To This

    One of the most important lessons that living in Indonesia and Malaysia has taught us is the following: all Muslims are not Arabs.  Of course, we certainly knew this in an academic sense before coming here, but we never really appreciated it fully and internally before living here.  Few people in the West talk about non-Arab Muslims at all, and the vision that you get when you here the word "Muslim" in the Western press is not one of Bangladeshi, Somali, Turkish, or Javanese Muslims, but of Arab or maybe a Pakistani or Afghani Muslims.

    It turns out, most Muslims here do not like being lumped in with Arabs.  It’s considered by many to be a bit offensive.  In fact, even though there are small but distinct Arab Malay and Arab Indonesian communities that you can find, they are a bit marginalized by the majority Muslim groups here.

    We have had cause to think about this a lot in the past month.  Ever since our friend Lindsey got here, we have noticed a marked increase in the number of Arab tourists around town.  We used to see maybe one Arab couple a day here, these days we often see dozens.  It must be vacation time in the Middle East, and Arab tourists love to flock to Malaysia because the food is good but definitely halal, the infrastructure is pretty modern, the weather is comfortable, and their petrodollars go far.  We know that the tourists are from the Middle East because the women are completely covered in black, with only a tiny bit of their eyes showing.  While many women here do cover their hair, complete covering like this is almost entirely non-existent among Malays.

    We have three anecdotes that speak volumes about many Malay views of Arabs.

    1.   About two weeks ago I (TP) caught a cab from our local mall.  In front of me was an Arab couple, and the man was very mad, yelling at the cab driver and then at his wife.  They seemed to be negotiating where the couple wanted the taxi to go.  After about a minute, the cabbie just hit the gas and drove a dozen yards forward, then motioned for me to get in.  The couple was busy looking angry, but didn’t pay attention to me, so I got in and we drove off.  The driver was a Malay guy named Othman bin Something.  He was livid, just seething with anger, and proceeded to tell me that he could not stand Arabs because they never wanted him to use the meter in his taxi and tried to screw him out of money.  He kept saying, "they are so rich with their tourist money but they never want to spend it for the regular people".

    2.    About a week ago I was getting a bottle of water at the 7-11…yes they have them here too.  In front of me in line again was an Arab couple, and there were two cashiers, 20-something Malay women wearing headscarves.  The Arab man could not speak English and he wanted to buy some Fisherman’s Friend cough drops, but he didn’t know how to say it so he just pointed and said "buy! buy!"  The cashier helping him was a little frustrated and had a bit of an attitude.  She commented to her colleague "Si Arab ini tak tahu cakap Inggris"–Mr. Arab here doesn’t know how to speak English, with the implication that she of course, like any good Malaysian, could.  Her friend snapped back "Tanya isterilah!"–Ask his wife!  UPDATE: I almost forgot, after this they both howled with laughter.  This was quite a dig, implying as far as I could tell her disapproval of a situation where a husband does not let his wife talk to the cashier and seems to pretend that she does not exist.  The wife, of course, was completely covered, and silent throughout the exchange.  This is some bitter social commentary.  You could read volumes from these two sentences from these two Malay women.

    3.    Today we caught a cab together amidst several Arab families.  Like always we were waiting in line.  Apparently, one of the families had insisted in trying to hop in a cab a bit further back in the line, with no avail, for the driver knew that there were others waiting in line and he was a nice guy.  The same cab that he tried was the one who took us.  When we got in, we drove past the family, and our Malay cab driver smirked at them and said "these Arabs hate standing in line" to us.  His tone was utterly dismissive.  We got to talking in Malay and he gave us some classic commentary on terrorism and George Bush.

  • Managed Floats

    The big news in the financial markets, of course, is that Chinese has moved from a pegged exchange rate to a managed floating exchange rate.  OK, first, EVERYBODY PANIC.  Now that that’s out of our system, let’s be clear that a managed float is a peg that the government allows to fluctuate a little bit.  When push comes to shove, it is a peg.  In the event of speculative pressure against the yuan, the People’s Bank of China (their central bank, their Fed) will defend it just like they defend a hard peg.  In fact, the tools for managing a managed float vs. a peg (or a currency board or whatever) is precisely the same.  And while the PBC has announced that it has moved to a managed float against an "undisclosed basket of currencies", this reminds me of SE Asia before the Asian Financial Crisis, where this "basket of currencies" was composed of the 99% dollars.  I again think that people just like the term "managed float" instead of "peg" because they think that "float" sounds good.  This is a strategy on the part of the Chinese to buy a little time.

    From the prospects of the US, there has been a little bit of an appreciation of the yuan, but not much.  There will not be much of an effect on either countries in the short term.  In the long term, this could signal changes to come, which would be more important.  I think that the conservative and liberal consensus on this one is that this is not enough of a revalution to solve any of the problems that the US has been, perhaps correctly, complaining about with regards to China.  There is also the nagging problem of what would happen if China actually let the yuan float, something which some rogue economists–mostly liberals, but some conservatives who are not in policy positions too–seem to believe could be tough for the US.

    What has been lost in the brouhaha is that Malaysia also un-pegged its currency and moved to a managed float at the same time.  Again, EVERYBODY PANIC. This is a fascinating development.  People have been wondering when Malaysia was going to un-peg its currency (until yesterday, RM3.8 = US$1), which was pegged on September 1, 1998 along with the imposition of capital controls as a way to get out of the Asian Financial Crisis.  The plan looks to have been on the drawing board for some time, but still, the co-incidence of Malaysia’s decision to un-peg with China’s decision–like, three hours later–suggests something that students of international economics rarely discuss.  Why would China’s decision affect Malaysia’s decision?  Do we often find such regional contagion in exchange rate policy decisions?  One idea is that Malaysia and China might be export competitors in certain sectors.  If the Chinese allow dollar-denominated price of their goods move up, then Malaysia can do the same thing, with the effect that their competing dollar-denominated exports get just a little bit more expensive as well.  There might be a decision that they can offset the implicit increased revenue from a Chinese appreciation (because more people would by Malaysian exports) by greater revenue from higher prices that do not drive all of their customers away.  But really, I have no idea.

    The ringgit has appreciated in the past day from 3.8 to the dollar to 3.775 or so.  It’s only a bit of an appreciation, but our purchasing power here just declined a little bit.  And lest you Americans reading this think that this makes no difference to you, you might be interested to know that Malaysia is the US’s 10th largest trading partner.  Semi-conductors and microchips just got that much more expensive for you.

    While I have not been following developments in China, the Malaysian financial markets demonstrate how close a managed peg is to a real peg.  Currency traders and investors moved into Malaysia en masse, pushing pressure on the ringgit up to what should have been about 3.6 to the dollar, by most estimates.  Bank Negara Malaysia (the central bank here) intervened to keep the ringgit lower, just like it would have done with a secular increase in capital flowing to Malaysia under a hard peg.  So you see, not much of a difference at all.