First of all, I would favour a stronger Ringgit. I love travelling overseas and even around the region. I do not believe that investors would buy properties in Malaysia simply because of the falling Ringgit. There must be a more comprehensive reason including the liveability factors. Recently Ringgit has recovered a little compared to a dismal 2015 where together with its team-mate the Rupiah were the two worst currencies of Asia. Today (11 March 2016), Ringgit ended at RM4.086 to US$1. During the 1998 financial crisis, it dropped to as low as RM4.88 while in 2015, the worst point was US$1 to RM4.458 In 1998, Malaysia was really in an economic crisis. In 2015, the GDP grew 5 percent the worst crisis was that of confidence. Okay, what happens if the currency becomes too strong too fast?
Reported in many medias on 11 March 2016, in the United States, one famous company, Colgate-Palmolive Co announced that it would be cutting more jobs under an extended restructuring programme because of tough macro-economic conditions including a strong dollar. It will cut between 3,300 to 3,800 positions globally. I hope they cut at the right countries to really save enough costs. It has been raising prices to counter the impact of the stronger dollar. This has caused it loss of sales in regions such as Latin America which gives it the highest sales number. Besides that, the company said that it would cut costs on its supply chain and focus on expanding its commercial hubs.
Malaysia has many manufacturing hubs throughout the country. One chief reason why the multi-nationals from all over the world sets up their plants here was due to many investor-friendly policies and even availability of sufficient talent. Where costs are concerned, currency plays an important part because no one would want to produce in a country with an extremely strong currency and export to the rest of the world. It would not be competitive versus producers in lower cost countries or even the local export country itself. So, is this a dilemma? Well not really, as long as the currency goes on an orderly rise, the manufacturers should have more flexibility in adjusting. Let’s just say that as at now, Malaysia definitely have advantage over other regional countries. Of course, it’s best that Singapore can really work closely with Malaysia to face the world. Happy following.
written on 11 Apr 2016
Next suggested article: Ringgit: Happy, yes. Lasting, maybe. Undervalued, still is