Tax, Car, Proton and Malaysia

Global recession did not stop car buyers from purchasing their dream car, surprisingly, the number of sale are still in a competitive mood as most of the car manufacturer developing a new version of vehicle, engines, systems et cetera to caters the demands from the car enthusiast.
Couple of month ago when I was in Pattaya, Thailand, there's a friend of mine, Jill, who wished to reside permanently in Malaysia, and the destination he choose is Labuan, Sabah. He said that the beers are cheap, the cigarette still in a reasonable price compares to Singapore where the price are three times higher than Malaysia. So, when he asked me, how much would an Audi A8 cost? I said it’s around 800k in Ringgit Malaysia and I was not flabbergasted to hear he says WTF. He says the cars at his hometown in Wyoming just cost about 120-130k only, that's around 500k in Ringgit. I asked him why he doesn’t get on some budget car. A car only moves him from point A to point B. But being a petrol head since at a very young age, he knows what he's looking for in terms of reliability and stability. Jill was a liquor runner during 1930's when under President Herbert Hoover, the banning of consumption and selling liquor was once a good opportunity for people to smuggle the product domestically in States, so, for being an ex runner who run against the police and fed by car, Jill knows every inch and detail that he needs on his ride.
He asked me why the fuck does the tax were imposed so high, it is almost 300% from the actual retail selling price?
I told him that the high imposed tax was meant to protect the interest of the national car, Proton. To make sure the price of the Proton stays in a very competitive price and cheap enough according to the affordability of most Malaysian people.
But aren't that against the free-trade doctrines?
There were two perspectives to look at here. First, the national cars has less demand comparing to other well establish car manufacturer in the world. If you pick anybody from the world and ask his or her choice of car, higher possibility that Proton name won't be mention. So, to uphold the buying strength, only Malaysian will buy Malaysian car whether they like it in sense on patriotism (and later regretted) or they have no other option due to financial limitation. Sadly, the microeconomic freedom of choice has failed on this part.
Looking at average Malaysian meridian income, Rm1500 is the magic number. With this kind of basic earning of individual Malaysia, only 20% of the earning are recommended to spent on car and transportation while the other 80% will be spent on shelter, food, saving and entertainment. That's about Rm375 per month to spare for car, this amount if added up with the cost of gasoline per month, that’s more than 20% of the suggestion rate.
Looking back at the banks in Malaysia who offered loan for car purchasers, they provide installment repayment at maximum for 108 months with the interest of 2.8% to 4.7% for a new car. So, if a car buyer in Malaysia wanted to purchase a decent car, they need to scarify another 20% of his of her income in order to purchase a decent Proton car, price range around 15k to 50k.
So, on the first hand, Proton has offered a solution to the most average Malaysian dream on owning a car.
By keeping the tax of import car high, most Malaysian will choose Proton rather than a Toyota. But this action is not fair after all to the economic and to petrol head like me and Jill, we loves car, and love good car, the definition of good cars are utterly not Proton, hell no!
I remember an episode in BBC Top Gear, Jeremy Clarkson were insulting the Proton Savvy with his flamboyant colorful words. And as I browse again the clip on YouTube, I notice abundant of praise and agreement by the visitors for Clarkson quote. Yet, Proton has failed to gain its confidence among car buyers.
What seems to go wrong here? Why can't Proton regain a trust and confidence for car buyers that not from Malaysia? The answer I shall not write on this post. Every petrol head know which angles, which spots, which handling they expecting for a car.
But the main thing that has been gone wrong for a long time is the approach by the Malaysian government to fully let Proton monopolizing the car market in Malaysia that is by keeping the tax on import car high, by this action, the Proton has a big space to breathe in its homeland. If Malaysia size is similar with Singapore, it is not surprising to notice the car price is high, even if the price is skyrocket, the approach are only mean to curb and controls congestion. But Malaysia is big on its size.
If a price of LP640 were only 190k Sterling, in Malaysia it will cost at most 2.5 million, and only millionaire can afford a Lamborghini while back in Brit, you can own it for less than 200k?
I still don’t understand why does this approach was still be practice by the Malaysian government why in this competitive age, everything need to be float. If a product can’t succeed, let it collapse, if the Gov want to play Keynesian, create higher paying job for Malaysia.
Even when I realize the actual price in States compare to Malaysia several years ago, I get shitted off, the long lost dream of getting a Ferrari was almost impossible if the government still protecting Proton but not improving it. Or perhaps one day I will built another car company and imposed a high end quality ever offer on a car to satisfy my ego??? So that the Proton designed dude understand the meaning of quality, sexy and crazy?

How Wise Is It For RBA?

Begining from 12 August 2009, the Aussie has gain a seriously bullish momentum against the greenback, from 0.8220, the Aussie climbbed to 0.8472 before it starts to bear on 14 August 2009. Amids from it bullish scenario, it is a question mark for the currency for not in paralled with the gold price, and we all may assume it the Aussie was under speculation infuence. 

So when it come to the RBA (Reserve Bank Australia), they want to handle the economic global recession rebound in the manner of fully prepared, that is by raising its benchmark interest rate. Currently the rate set at 3%,  compares with other major economic leader such as United States at 0.25% and Japan at 0.1%.

Australian economic grew by 0.4% in the first quarter. So, if RBA wish to increase its benchmark interest rate, how high will the rate be?

Keynes Economic Achivement

Keynes stated that if Investment exceeds Saving, there will be inflation. If Saving exceeds Investment there will be recession. One implication of this is that, in the midst of an economic depression, the correct course of action should be to encourage spending and discourage saving. This runs contrary to the prevailing wisdom, which says that thrift is required in hard times. In Keynes's words, "For the engine which drives Enterprise is not Thrift, but Profit."

Keynes took issue with Say's Law - one of the economic "givens" of his era. Say's Law states that supply creates demand. Keynes believed the opposite to be true - output is determined by demand.

Keynes argued that full employment could not always be reached by making wages sufficiently low. Economies are made up of aggregate quantities of output resulting from aggregate streams of expenditure - unemployment is caused if people don't spend enough money.

In recessions, the aggregate demand of economies falls. In other words, businesses and people tighten their belts and spend less money. Lower spending results in demand falling further and a vicious circle ensues of job losses and further falls in spending. Keynes's solution to the problem was that governments should borrow money and boost demand by pushing the money into the economy. Once the economy recovered, and was expanding again, governments should pay back the loans.

Economically and socially successful economies have significant contributions from both the government and the private sectors. 

Keynes's view that governments should play a major role in economic management marked a break with the laissez-faire economics of Adam Smith, which held that economies function best when markets are left free of state intervention.