Thursday, August 20, 2015

Dropping Ringgit - Migrant workers worst affected now, but soon all in Malaysia may experience the same?

Dropping Malaysia ringgit impact is already being felt by migrant workers in Malaysia. When migrants transfer wages back to their family and dependents in their countries of origin, the value they get in their local currency is so much less now - this means so much lesser money to cover the cost of living and other financial obligations back home.

If I had 1900 Indian Rupees, and now just 1600 Rupees - a drop of 300 rupees to spend.....that is a drop in about 16%.

{For Malaysia, you had RM1,000 before but now you only have RM840 - a drop of 16%, surely this will have a big impact on your life and that of your family}

Well, your obligations for monthly rental, loan repayments, expenses remain constant,and so such a drop in the value of the currency is most significant to migrant workers in Malaysia, most of whom are just earning basic minimum wage of RM900....[Remember, that a low normal wage can be a 'tool to facilitate exploitation, as workers can then be 'forced' to work overtime for long hours just to be able to make ends meet. Malaysia, sadly, by law permits a very high legal overtime limit - OT - workers in Malaysia have a choice to refuse? Reduce draconian OT limit of 104 hours/month to 50 hr/mth]

Taking just the Indian Rupees, in September 2014, RM1 was equivalent to about INR19, but today it is about INR15.9 - 

Until about September 2014, our RM was equivalent to about 24 Bangladesh Taka - now it is 18.8.

Until about September 2014, our RM was equivalent to about 0.39 Singapore Dollar, not it is about 0.34 Singapore Dollar

Until September 2014, our RM was equivalent to about 10 Thai Baht, and today it is only about 8.6 Thai Baht..
While migrant workers in Malaysia, and their families/dependents in the country of origin, may be the first to really experience the consequence and suffering arising from the drop of the Ringgit, people in Malaysia will soon also suffer the impact - most likely in the form of an increase of the cost of living.

Remember that we in Malaysia, depend a lot on the global economy. Even essentials like vegetables, rice and food are obtained from other countries. Hence, naturally more Ringgit will be needed to procure these items - hence princes will increase. [It may be delayed, if these sales and purchase agreements have been 'pegged' or prices frozen for a certain defined period. Hence, if the sale and purchase agreement is fixed at a rate of say RM10 per kilo rice(just an example') for a 5 year agreement, then the rise and fall of the Ringgit does not matter, but if the price was fixed say in Thai Baht or some other currency - then we will suffer the impact for now it takes more Ringgit to buy the foreign currency. The same effect if in the agreement the sale price was Euro or US Dollar.
Pegging - means fixing the of ringgit value to some other currency, like the US Dollar, Euro Dollar, Chinese Renminbi, etc. If there was pegging, the we will not be impacted by the falling ringgit, as its exchange value with the pegged currency remains the same. After the last economic crisis, we pegged our Malaysian currency to the US Dollar - but alas, I believe, some time in July 2005, this peg was removed by the then PM Badawi. ** In my opinion, pegging now is not an option or a solution when the value of the Ringgit is low. For the benefit of Malaysia, pegging should be done when the Ringgit is strong.. 
Anyway, currency now is treated and traded just like shares - the strength depends on the demand for the Malaysian Ringgit in the currency market. As such changes, do not just depend on facts - but more and more on speculations. Speculations can and will be affected by confidence in Malaysia - especially on the Prime Minister and the government.

While there are external factors that is generally affecting the drop of the ringgit, I believe that the most important factor that is causing the Ringgit to drop even faster is our Prime Minister Najib's RM2.6 Billion Scandal, The manner in which the Malaysian government is dealing with it (removal of the AG, the interference with MACC, the interference of PAC's investigations, ...interference in the proper enforcement of the law,and the allegations against 1MDB, being a government-owned/linked company, are also factors leading to the drop of the Ringgit in my opinion. Free and fair trade in Malaysia? Equality before the law? Rule of Law?

Workers especially the low-incomed Malaysian workers and others in Malaysia may very soon suffer the impact of the dropping Ringgit - i.e. an increase in the cost of living.

As the ringgit drops, the 'Real Wages' of workers drop, and suffering of the people in Malaysia will soon follow.

As it is, with the introduction of the GST, it has already increased cost of living - can we tolerate further increases?

PM's Najib's strategy seems to be one of denial and delay - but alas, his focus seems to be more the preservation of himself as PM, and keeping UMNO/Barisan Nasional in power - NOT so much the wellbeing and welfare of all of us in Malaysia. This is my merely my perspective, which may be wrong...

For the Malaysian migrant worker, working in Singapore and in other countries, the impact they feel may be positive. Malaysians working in Singapore and earning in Singapore currency - now when converted will be having more much more Ringgit!

But, then Malaysians going overseas as tourists, business, etc will have to spend so much more ringgit...




Itchy Bottom said...

please check your spelling and please at least read it back once, before you post.

"Migrant" workers sending back money to their home country is in fact one of the problem why RM is weakening. Basically by sending money back to their homeland, they actually dumping RM into the the global market by buying their HOMELAND currency. Any exchange in buying or selling paper money will affect its value on global market.

Yes, the weakening of RM sure do affect migrant workers, but ask your self, if all they did is keep sending money back home (buying their currency and dumping RM) this will only increase the value of their currency while at the same time lowering ours. So to combat this issue, you decided to "complain" how migrant workers have to struggle? how about giving an option of NOT sending back most of your income back home, and shop more inside this country?

Not only it will increase the economic growth (by spending inside the nation) it will also strengthening the value of the currency. REMEMBER, for every ringgit that your keep under your pillow (not spending OR sending it outside the country) is another ringgit that some one else cant earn.

of course you will say, but the main reason they come here is to send money back home. of course. but then dont complain. if you want to be part of the problem, dont cry about where are the solution. get out of the problem and be part of the solution.

Charles Hector said...

Apologies - the blog posting has been make the necessary corrections. It was a rushed blog post..Thanks for highlighting