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Saturday, May 7, 2011

The Ringgit recently is appreciating against US dollar. It is already hovers around RM3 per 1 US dollar and may be already reach lower then RM3 by now. What actually does it mean when Ringgit appreciates. Economists have made various analysis on the impact of Ringgit appreciation, both good and bad. Whatever the analysis, we should view it on long term basis and on the practicality and what authorities should do to mitigate the adverse effects of currency appreciation to the economy and the cost of living.

For those who know some basic economy, maybe can understand the what actually the effects of the Ringgit appreciation. For international business and trading, Ringgit appreciation can mean import cost become lower but exports become more expensive. In this regard, businesses that rely on imported raw materials, intermediate and capital goods can now sigh with relieve since the costs of importing now become cheaper and this could help them to achieve lower production cost and result with better profit margins. Some analysts say that cheaper imports should encourage SMEs to be more innovative by importing capital goods that can help to enhance productivity and quality. But still SMEs will only consider innovating their production and processes if they have enough financial backup to import capital goods or enough businesses to cater.

For exporters, they may feel the heat from the currency appreciation, especially those who rely mainly on local resources or raw materials. Since exports are quoted in US dollar and assume that the export price remain the same, the revenue that they earn when converting back to Ringgit will be lesser now. Hence, these exporters need to consider options which can include rising the export prices which may not be accepted by their customers and which can make them less competitive internationally, or by being more innovative and productive to reduce overhead costs and maintain the same price to retain the customers and remain competitive.

For those exporters who rely on imported raw materials and intermediate goods, they are less impacted and may adjust the production cost and remain competitive.

Some say that imports of food and agricultural products especially that of raw materials like onions, garlic, vegetables, fruits and dairy products may benefit the exporters, wholesalers and traders. It maybe true to exporters of processed food who rely on imported food raw materials where cheaper imports can directly mean lower production cost and they either can retain the same profit margin or better. But it may not applicable to local wholesalers or traders of these imported agricultural and dairy products. Cheaper imports do not mean the price of agricultural products like vegetables and fruits will become cheaper in the local market. In fact, the wholesalers and traders can enjoy better margin even if they retain the same price, but the likelihood of prices of these basic neccesities to increase more in future is imminent unless local authorities take serious measures to curb price increase. In this regard, the cheaper imports will not make much different to the local consumers who are facing with increasing cost of living with prices of basic neccessities especially food continue to increase.

Sunday, May 1, 2011

There are many happenings around the world that will certainly deliver adverse effects to the world's economy and its sustainable development. Japan is facing the aftermath of earthquake, tsunami and nuclear radiation. These incidents will certainly affect the country's economic and social stability in the long run. The government is still find ways to minimise the impact but it is still not clear how they want to do it. At the same, time the world has shown its support to Japan in any possible methods. The nuclear radiation is not only affecting the wellbeing of its people but also impacting the most important neccessity in life; food. There is now concerns over the safety of food produced in Japan, not only for domestic consumption but also exports. Many foreign countries have taken precautionary measures on imported foodstuff from Japan; some countries have banned imports and some of them have stepped up inspection on incoming foodstuff from Japan for the fear of nuclear radiation effects on the farming as well as livestocks. Japan is taking every possible measures to mitigate the risk of having foodstuff contaminated with radiation.

Middle East and North African's crisis have also shaken the world by storms with the uprising of the people demanding for change. This has probably never happened in the past where the protests happened in many countries simultaneously. The instability in the countries and regions will certainly affect the ongoing development in the country and will take long time to recover.

Mother nature is making its calls to all parts of the world. Earthquakes, tsunamis, flood, hurricanes, storms and others are taking places in many countries and these will interrupt the present development. But probably this is the price that the world has to pay for all the development that probably go against the mother nature.

One thing for sure all these incidences will bring about social instability in the region, it is just a matter of the degree of seriousness. Food insecurity is a main issue to handle, as the prices of agricultural products have gone up drastically in tandem with the price increase of energy resources. Countries have started to invest in agricultural sector, not only back home but also in other countries to safeguard the long term supply of food. All of us need to ponder and act fast to rectify this problem, otherwise the future generation need to bear all the problems that the current generation has created.