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We're neighbours but worlds apart. Malaysia and Singapore share many similarities, from our food, culture and even citizens. But when it comes to the economy, the differences are beyond obvious. In 1965, the value of Singaporean dollar (SGD) and Malaysian ringgit (MYR) were the same, but today, 1 SGD is equivalent to ~3.30 MYR. Even the average monthly salary differs. In Singapore, they earn USD $4,100, which is five times more than Malaysia's meagre USD $804. So, what led to these stark differences in economic success when we started out the same just a few decades ago? #1 Education The tie between education and the economic success of a country is indisputable. A population with higher education attainment tend to produce a higher income workforce and individuals who are prepared to face the challenges of the real world. Unfortunately, this isn’t the case for the Malaysian education system. In Malaysia, the government spends only $502 per capita on education, while Singapore spends $1,600 per capita. From very early on, Singapore realised that they had very few natural resources, so they made the choice to invest heavily on human capital as it was their only resource they can depend on. And one of those investments was their education system. Singapore recruits top students to be teachers. Their job was to educate future generations to be competent on a global level. On the other hand, Malaysia has English teachers who don't even speak English well and Science teachers who barely got an A in their science subjects. This situation produces students who are uninterested in learning, and consequently, this affects the future economic success of the country. While the situation remains gloom for Malaysia’s education system (no thanks to dirty politics), it’s not to say that we can’t do anything about it. In fact, now is the time for parents to improve their children's education. As a parent, perhaps you can start your children's education early by reading with them, instilling the importance of it, and talking to them about your experiences, successes, failures, and the challenges you’ve faced. These things will help your children to embrace challenges and failures, which will make them more creative and industrious in the future. #2 Salaries It was only in 2022 when Malaysia raised the minimum wage to RM1,500 from its previous RM1,200 salary. But if you live or have visited Malaysia, especially in the capital city, Kuala Lumpur, you’ll know that RM1,500 goes very quickly. The cost of living has simply become too unaffordable in the country. Meanwhile, on the other side of the causeway, Singapore's civil servants are among the highest paid in the world at SGD4,500 per month. Their president Lee Kuan Yew once said, "you pay peanuts, you get monkeys." He was describing how if people of authority were to be paid lowly, the chances of them succumbing to corruption would be higher. Of course, paying civil servants better salaries does not guarantee that there won't be corruption. After all, corruption is a complex issue that requires a comprehensive solution. However, paying civil servants better salaries can reduce the likelihood of corruption (an issue Malaysians can understand all too well). #3 Housing Policy Singapore's unique housing policy promotes integration and shared prosperity among its citizens. The government provides high-quality HDB flats (government housing) designed to shape society and foster cohesion between varying income levels. In a HDB, each family is placed near another family with a slightly better economic level, encouraging aspiration and success. Additionally, ethnic quotas are in place to ensure that families from different backgrounds interact and live harmoniously. These housing projects come with all sort of amenities nearby, creating little townships all throughout the country. You could simply walk to school, grocery stalls, hospitals, gyms or malls as it's all connected through proper township planning. In contrast, Malaysia's government flats are not as well-built or maintained which lowers it's attractiveness. Because of this, people who can afford it would rather buy a property developed by private companies. Integration among citizens is also challenging since there's no system in place that requires people to intermingle with others from different backgrounds. Nevertheless, Malaysians can still contribute by encouraging their children to interact with neighbours from different ethnic backgrounds, nurturing a new generation that values unity and integration. Conclusion There’s no denying that Malaysia's economy has fallen behind Singapore's due to various factors. However, it's not all gloom and doom; the rakyat can still take proactive steps to improve their own education and encourage unity among their community. With that being said, it's crucial for Malaysia, especially those in power to wake up and address these issues in order to catch up and compete on a global level once again. If you found this read interesting, I'm glad to tell you that we made a video about it as well! You can check it out here. It discusses more about this topic and you'll get to hear what Peter thinks of it, especially as a parent raising his kids in Malaysia.

Back in March, the news of the Silicon Valley Bank (SVB) bank run flooded every news outlet and social media platform, causing chaos to erupt in the US. People were pulling out money from their banks which caused even more bank runs to happen. All of this resulted in one thing: People doubting the stability of the traditional banking system. Now, you might be thinking, “Okay, what does this have anything to do with me in Malaysia?” Well, the thing we need to understand is that bank runs can happen anywhere. Malaysia included. So, in this article I’ll further delve into the SVB's downfall, explore the implications for the traditional banking system, and evaluate the readiness of Malaysian banks to weather similar challenges. SVB Bank Run Silicon Valley Bank (SVB) was the go-to bank for startups in Silicon Valley. In fact, they were so popular among these start-ups that they quickly rose to top, becoming US’s top 20 commercial banks! That was until earlier this year. After some rumours of instability, SVB depositors rushed to withdraw their funds simultaneously. 42$ billion worth of deposit withdrawals were demanded of them. SVB didn’t have the liquidity to meet those demands hence leading to a domino effect that resulted in substantial losses and shattered confidence. But what caused this bank run to take place? After some investigation, it was found that the primary cause of SVB's decline was its over-reliance on bond investments, which turned into liabilities when the Federal Reserve rose interest rates rapidly. It works like this: when the Federal Reserve aggressively increased interest rates to combat inflation, new bonds issued carried more attractive returns than existing ones. As a result, investors moved away from SVB's bonds, rendering them worthless and forcing the bank to sell them at a loss. Deposit holders, fearing for the safety of their funds, began withdrawing their money, exacerbating the bank's financial troubles. And despite efforts to alleviate the situation, SVB ultimately incurred significant losses, leading to its collapse. The Crumbling Traditional Banking System SVB's collapse was just the start. Wind caught on and people starting withdrawing from their banks in fear losing their money. This caused even more bank runs to happen. Signature Bank and First Republic Bank were the victims of this. At this point, people were not only losing confidence in one particular bank but they were starting to lose confidence in the entire traditional banking system. This can be seen when people started moving their money into cryptocurrency where they didn’t need to worry about how irresponsible bankers use their fund since they had full control over their own money. But this begs a bigger problem. The traditional banking remains the bedrock of the economy, and any disruptions in this sector can have far-reaching consequences, even triggering global economic instability and conflicts. So, something had to be done to restore the public’s confidence in the system. Efforts to Restore Confidence In response to the growing concerns about the stability of the banking system, regulators took steps to protect depositors' funds. In a historic move, a group of well-known, bigger banks joined forces to pledge $30 billion to rescue the collapsing First Republic Bank, demonstrating their commitment to supporting smaller banks and rebuilding confidence in the traditional banking system. This powerful move worked and US citizens found a renewed sense of confidence in their banking system. But what about the bank back home in Malaysia? Are you confident in our banking system? The Strength of Malaysian Banks One of the ways to measure confidence in a bank is thorough Capital Adequacy Ratio (CAR). This refers to the reserve funds that banks hold to sustain potential losses in investments like bonds, loans, mortgages, and stocks. A higher CAR indicates greater liquidity and resilience which is always a good thing. Now, comparing the CAR of Malaysian banks to that of US banks reveals a more favorable situation for Malaysia. Malaysian banks maintain a higher CAR in absolute terms (18.9% vs. 14.6% in the US), and this ratio has been on a positive growth trajectory. The higher CAR suggests that Malaysian banks have fortified themselves with sufficient liquidity to withstand external threats. Furthermore, Malaysian banks tend to have limited exposure to high-risk investments, such as the volatile startup economy which we see in Silicon Valley. Local banks often require collateralization before extending credit, adding an extra layer of security. These risk management practices contribute to the resilience of Malaysian banks and their ability to absorb potential shocks. Conclusion While the collapse of SVB and other regional banks may seem distant, it still serves as a reminder for Malaysia to remain vigilant and maintain a robust banking system. Although Malaysian banks are likely to be able to hold its fort should a bank run were to happen, it doesn’t mean that we should be starting one to begin with. If you found this read interesting, you should also check out this video over on our YouTube channel. We delved further into this topic, so I'm sure you'll enjoy it as well!

Netflix has made local headlines recently cracking down on its password sharing policies. This policy entails that all devices have to be connected to a primary WiFi or else pay an additional RM13 fee per user for password-sharing with those living in different households. This is just one of the many factors that have been worrying investors as of late. But before we get into that, let’s first get to know how Netflix became the most popular video streaming service worldwide. How Netflix Started Before the age of the Internet, people were catching up on the latest movies through video cassettes before they were aired on TV. They had to go to their local video rental stores to pick out a movie they wanted to watch, rent it, and then return it once they were done with it. In the US, these were Blockbuster stores. As technology improved, those video cassettes became thinner and DVDs soon became all the rage. This advancement was a welcomed opportunity for two businessmen: Reed Hastings and Marc Randolph. They came up with the brilliant idea to post DVDs to customers instead of having them visit a physical store like how they would for Blockbusters. And that was how Netflix was born. Simply order the movie that you want to watch then, Netflix will post it to your doorstep. After you’ve watched it, put the DVD back in the envelope provided and drop it off at the nearest post office. This service garnered a ton of popularity in the US and their business grew quickly. Internet And Netflix In the early 2000s, everyone was raving about this new thing called The Internet as it was becoming more easily available. Being the visionaries that they were, Hastings and Randolph quickly jumped on the bandwagon and Netflix pivoted to online streaming by 2007. They hit the jackpot once more and things skyrocketed for the company. Netflix paved the way for online streaming and consumers were more than happy to pay for its services. Global Domination In the next 10 years, Netflix kept growing and wasted no time in spreading its wings. By 2010, it was available not only in the US but in Canada and Latin America too. And over the next few years, they quickly took over the rest of the world. By 2020, their subscriber count was at 203.7 million. Investors couldn’t be more happy with this immense growth but they were in for an unwelcome surprise. Netflix’s Downfall In the first quarter of 2022, Netflix lost 200 thousand subscribers for the first time in a decade. Investors panicked thinking that this was the start of the end for the streaming service. Stocks drastically fell by 35% immediately after the announcement. In the said announcement, Netflix’s board of directors attributed the loss of subscribers to macroeconomic factors like: Slowed down adoption of broadband and Smart TV Increased competition from cable and other streaming services Password sharing among households Increased inflation Russia's invasion of Ukraine This caused the market to become even more cautious when forecasting the company’s following quarter's subscribers count, giving it a -2 million growth for the second quarter of 2022. But what happened next caught everyone off guard. The Other Side Of The Coin In Q2, Netflix did not lose as many subscribers as the market predicted but they still lost more than they did in Q1. All in all, in terms of percentage, Netflix lost 0.5% of its subscriber base in the first half of 2022. While this seems like Netflix is losing steam in their business, as investors, we must bear in mind that the subscriber base only tells half of the story. The other half of the story is this: the average revenue per user (ARPU). It is calculated by taking the total subscription divided by the number of subscribers Netflix has. When you plot that in a graph, we can see that the ARPU has been on an uptrend. Even in 2022 when they were losing a ton of subscribers, their ARPU was still growing from $11.67 per user to $11.76. This means, despite the loss of subscribers, Netflix was still seeing a rise in revenue. This was how Netflix was playing the game. They had to balance the number of subscribers and ARPU in order to keep the business growing (and investors happy). Netflix’s Game Plan After seeing losses in the first two quarters of 2022, Netflix continued to see even more losses going into Q3. This sparked its management team to proactively look for ways to stay ahead of its competitors. They did this by pilot testing a new plan in 12 countries called ‘Basic With Ads' where for a cheaper price, subscribers can get everything on Netflix but have to watch an average of 4-5 minutes of advertisement for every hour of viewing. Many were sceptical of this strategy because they claimed that people subscribed to Netflix because it was ad-free. And now with this new plan, they were afraid that it may deter subscribers away. However, Netflix didn’t see it that way. ‘Basic With Ads’ was a way for Netflix to entice new subscribers to come on board. If they didn’t want to watch the ads, they could just subscribe to the normal plans. And it worked! Following the launch of the new plan, Netflix managed to add 3.4% of subscribers to 230.7 million. Then you may be asking, if the new plan is so cheap, wouldn't that lower the ARPU so much that it will affect the revenue? Quite the opposite actually. Between September 2021 to May 2022, Netflix clocked 1.3 trillion minutes of content watched, making it the most popular platform to stream videos today. Add that to Netflix’s ability to highly target advertisements to users, the company may soon be able to supplement any loss of ARPU with ad money by advertisers. But what do you think about Netflix? Do you think they’re a good company to invest in? If you liked this read, I would like to suggest you to watch a video we made about it on our YouTube channel where we discussed it with even more depth. You can watch it here.