Wednesday, February 14, 2007

How is that One Trillion Ringgit calculated?

Apparently our trade hit 1 TRILLION ringgit last year, and this is supposed to be a big, big deal.

Country's trade hit historic high last year, driven by exports

KUALA LUMPUR: The country’s total trade volume has surpassed the magical trillion ringgit mark.

Last year, the figure reached RM1.069tril, a 10.5% rise over that in 2005.

The historic figure reflected the increased trade flow. Exports totalled RM588.949bil last year, according to a statement issued by the Prime Minister’s Office. Imports stood at RM480.493bil.

”Although Malaysia faced numerous economic challenges, especially the economic crisis of 1997 and the global economic slowdown in 2001 and 2002, the country was able to cope well.

“This is seen with the average 10.8% increase in total trade between 1997 and 2006,” the statement said.
I've got 2 bones to pick with this "magical achievement".

Firstly, is it even a real achievement at all? Apparently they took EXPORTS of RM589 billion and IMPORTS of RM480 billion... and simply added the two figures up and voila... you have the trillion number of RM1,069 billion.

But wait... isn't that like adding up debits and credits? Summing up revenue and expenses? Adding the absolute values of a positive and a negative number? Doesn't it make more sense to deduct one from the other to arrive at a net result? ie. Trade Surplus? Balance of Payments?

What's the point? It's like summing up the number of births & deaths, and arriving at a conclusion that more being born + more dying equals a thriving population. What's the logic of adding up births and deaths? And is a larger total of births + deaths a good thing? Might it only indicate bad family planning and bad health care?

So, what's the point of this "trade" number? And does it even indicate anything meaningful?

Secondly, there's this big statement of an "average 10.8% increase in total trade between 1997 and 2006."

How come nobody discounted the 2006 figure to account for changes in currency rates and inflation?

How come the figures in this press statement seems to disregard the time value of money, a bedrock principle found in chapter 1 of any economics textbook?

Is this really good news, or is it a calculated spin to generate positive public sentiment? To take our minds off increased petrol prices, higher tolls and lowering standards of living perhaps? To prepare us for an upcoming event? More price hikes? Election?

Btw, I just saw "MORE GOOD NEWS" in today's papers. Highest investment figures EVER! While I haven't gotten around to picking apart the investment numbers (but just intuitively... do you feel that your wealth and quality of living are the highest EVER? Mine certainly ain't so)... I am fairly convinced that this recent slew of "good news" on the front pages of NST (National Spin Tabloid ;) is designed to condition Malaysian public sentiment for an upcoming event of national proportions, whatever that event might be.

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