Tag: Economy

Simplifying Supply Chains

Reading time: 9 minutes

Introduction

By now, you may have heard that the world has run short of everything from coffee to coal. You personally may have been caught off guard by the shortage of toilet paper in the supermarket. Perhaps, you’ve also felt the pinch of rising computer prices due to the price increase of semiconductors. Second hand cars have gone up in value, as businesses dismantle the tires of used cars. The immensely intricate and interconnected global supply chain is in disarray, with little end in sight (although, recently the Biden Administration has released 50 million barrels of oil to reduce the price of oil).

This article will first uncover the complexities of global supply chains, and explore the factors that contributed to the “supply chain crisis” of 2021.

Supply Chain: A Look at How iPhone Is Made

The global supply chain crisis has shone the light on the usually unseen processes of manufacturing, shipping, warehousing and distribution. While we have grown accustomed to clicking and waiting for the orders to appear on our doorstep, or simply dropping by the shop to pick up items, the supply chains operating behind the scenes are always taken for granted. Apple, the most valuable company (by market capitalisation) has also felt the brunt of the global semiconductor shortage despite being well-known for its excellent supply chain. Tim Cook, Apple’s CEO, revealed in an interview that the supply chain crisis cost $6 Billion in lost sales (Serrano, 2021).

Every new iPhone is designed at Apple’s headquarters in Cupertino, California, but the resources required to make the design a reality are largely dependent on manufacturers from around the globe. According to Apple’s 2021 Supplier List report, it has 200 suppliers in 30 countries to procure ready-made components, which are sent to factories to be assembled. The iPhone you hold has its chip made in Taiwan, camera and glass screen built in Japan, accelerometer manufactured in Germany, final test of chipset done in Philippines before being assembled into the iPhone in China.

Unfolding Factors behind the Supply Chain Crisis

The supply chain disruptions which have wreaked havoc around the world can be traced back to the early phases of the pandemic. With the outbreak of Covid-19, people and businesses were compelled to limit their activities, driving the world economy into a deep freeze. While January 2020 seems ages ago, disruptions to the global supply processes were inevitable considering the fact that China, the ground zero of the novel coronavirus, is the world’s second largest economy, the largest manufacturing country, and a massive purchaser of goods and services ranging from raw materials to the latest gadgets. Factories were shut down, production was suspended, and a large number of employees were laid off. Shipping companies anticipated a steep decline in demand and trimmed their schedules as fewer goods were manufactured and fewer people had paychecks to spend.

Despite fears that spending in many nations would be devastated, the pandemic merely led to a shift in consumer demand patterns. Purchasing surgical masks, kitchen appliances, furniture, electronics, home gadgets replaced demand expenditures for eating out, travelling to vacation destinations and attending social events. As a result of the pandemic, online shopping, a trend that has been fast rising for years, saw a boom. From April to June 2020, Amazon reported 57 percent more items sold than the previous year.

At the same time, a string of competing shortages exacerbated the situation. In early 2020, China delivered huge volumes of protective gear all around the world, even to regions with minimal trade with China such as West Africa and South Asia. Accordingly, empty cargo vessels piled up in many parts of the world – having delivered their imports, there was nothing for them to bring back to China. A shortage of shipping containers has ensued as Chinese exports rebounded with unexpected strength, leaving many containers stranded in Europe and North America. Factories that depend on Chinese-made components faced difficulty producing more to meet the pandemic-induced spike in demand. Meanwhile, as surging orders outstripped the availability of containers, the freight rates skyrocketed, with the cost of transporting a container of cargo from Shanghai to Rotterdam increasing by 547% compared to the average over the last five years, according to Drewry Shipping.

Even when items were shipped and unloaded at their destinations, another crisis arose: there were insufficient truck drivers to transport goods to warehouses, leaving them unclaimed. Truck drivers have long been in short supply, with wages continuously declining over the years amid arduous working conditions. Due to changing demographics like ageing and retiring workers, border controls and immigration quotas, as well as demands for higher pay and better protection for workers, the manufacturing and supply chain industries experienced a labour shortage, placing additional strain on the system. Major ports faced a staggering backlog of cargo, leading to lengthy queues of ships marooned at sea and delayed shipments. Shortages breed further shortages, and a breakdown anywhere along the supply chain has the potential of bringing output to a halt.

Effects of the Supply Chain Crisis

The interconnection of the global supply chain has long been an asset for increasing productivity, allowing specialisation, innovation, and cost-effectiveness. However, recent events have shown that disruptions in these intricate chains can be equally disastrous, as they are so intertwined, resulting in a domino effect.

On the front end, there have been two significant categorical effects. Firstly, the widespread shortages.

The most notorious example is the shortage of toilet paper, which has become particularly sensational and newsworthy due to the absurdity of the lack of necessity. However, the extent of the issue stretches far beyond just toilet paper. According to Sager (2021), it is becoming increasingly challenging to restock shelves with basic food necessities such as wheat, not because of an actual food shortage but because of disruptions in the supply chain. Hospitals around the globe have also been struggling to provide relief to the public. The lack of qualified medical workers, disturbances in the production and distribution of medicine, and limited access to personal protective gear and ICU beds have hampered the medical system’s ability, putting the lives of millions at risk. The global supply shortages have likewise led to power blackouts in leading economies like China. The severe shortage of electricity has halted the busy lives of millions of homes and businesses. (Hoskins, 2021).

As a result of these supply side shortages, consumers are paying significantly more for the same goods than in 2020. The Consumer Price Index (CPI), which measures the price changes in commonly purchased goods and services, has risen by 5.4% year on year, the most significant increase since 1991 (Adamczyk, 2021). The breakdown revealed gas prices increased by 42.1%, rental cars by 42.9%, meat and dairy by 10.5%, appliances by 7.1%, electricity by 5.2%, and rent by 3%.

The lower-income class is particularly hard struck by these price increases since they do not have consistent sources of income or large savings to tap into. Accordingly, the Raw Material Index has risen by 18% over the last year (Baffes, 2021). This index accounts for the increase in prices of materials such as metals, rubber, cotton, fuel, electricity, and more. Consequently, the cost of production and transportation have suddenly skyrocketed while supply reliability has plummeted.

On the back end, the supply chain crisis has detrimental effects on trade and foreign direct investment. There has been a significant decline in global trade, with imports and exports contracting by 32%, and as a result, foreign direct investment has fallen by 40% in 2021 (ILO, 2021). However, the issue does not end there. Businesses are under a lot of pressure because many are struggling to generate revenue and meet costs, especially small and medium-sized enterprises (SMEs), which usually have low capital reserves to buffer unforeseen expenses and businesses that operate in industries with high fixed costs.

Conclusion

Manufacturing, shipping, warehousing and distributing have long been regarded as seamless and invisible in the eyes of the consumer. But it is not! The supply chain is highly intricate and reliant on all components working well. The Covid-19 pandemic has shed some light on the vulnerabilities of the globalised supply chain system. With the infectious virus prompting authorities to impose domestic and international mobility restrictions, business operations of essential sectors have slowed, factories have shut down, transportation agencies are struggling to mobilise goods, workers can’t go to work, and so on. All of this is happening while consumer demand patterns are changing. Consumers are demanding more household and technology related products, in addition to personal protective equipment. As a result of this supply chain crisis, there is a severe shortage in almost every sector. Food is not being distributed timely, hospitals are understaffed, and an energy crisis has emerged leading to widespread blackouts. In accordance with basic economic principles, the shortage has skyrocketed prices. The CPI and Raw Material Index have had the largest jumps in the last 30 years.

The ILO (2021) has forecasted the crisis will have long lasting structural effects that will reshape the design of the global supply chains. Countries like the United States have repeatedly expressed their over-reliance on China and desire to become more self-sufficient. Therefore, we can expect many economies to start partially reshoring business operations and diversifying their suppliers in order to lessen their vulnerabilities. Some analysts have also indicated that there is a possibility businesses may accelerate the development of automation to conduct business operations even in dire situations.

References:

Adamczyk, A. (2021, October 13). Prices continue to rise—here’s what’s getting the most expensive. CNBC. https://www.cnbc.com/2021/10/13/prices-continue-to-riseheres-whats-getting-the-most-expensive.html

Apple Inc., 2021. 2021 Apple Supplier List. [Online] Available at: https://www.apple.com/my/supplier-responsibility/ [Accessed 8 December 2021].

Baffes, J. (2021, June 17). Raw material commodity prices continue rising amid stronger demand. World Bank Blogs. https://blogs.worldbank.org/opendata/raw-material-commodity-prices-continue-rising-amid-stronger-demand

Beaman, J. (2021, December 26). Here’s how much energy prices rose in 2021. Restoring America. Retrieved December 30, 2021, from https://www.washingtonexaminer.com/restoring-america/faith-freedom-self-reliance/how-much-energy-prices-changed-in-2021

Bloomberg, 2021. Apple Set to Cut iPhone Production Goals Due to Chip Crunch. [Online] Available at: https://www.bloomberg.com/news/articles/2021-10-12/apple-poised-to-slash-iphone-production-goals-due-to-chip-crunch [Accessed 8 December 2021].

Bloomberg, 2021. Surge in Shipping Costs Globally Could Cause Price Hikes From Coffee to Toys. [Online] Available at: https://time.com/6073233/shipping-costs-surge-price-hike-goods/ [Accessed 2 January 2022].

Ellyatt, H., 2021. There are millions of jobs, but a shortage of workers: Economists explain why that’s worrying. [Online] Available at: https://www.cnbc.com/2021/10/20/global-shortage-of-workers-whats-going-on-experts-explain.html [Accessed 14 December 2021].

Hoskins, B. P. (2021, September 30). China power cuts: What is causing the country’s blackouts? BBC News. https://www.bbc.com/news/business-58733193

ILO. (2022, June). Research Brief – The effects of COVID‑19 on trade and global supply chains. International Labour Organization. Retrieved December 30, 2021, from https://www.ilo.org/wcmsp5/groups/public/—dgreports/—inst/documents/publication/wcms_746917.pdf

Petrova, M., 2018. We traced what it takes to make an iPhone, from its initial design to the components and raw materials needed to make it a reality. [Online] Available at: https://www.cnbc.com/2018/12/13/inside-apple-iphone-where-parts-and-materials-come-from.html [Accessed 16 December 2021].

Serrano, J., 2021. Supply Chain Crisis Cost Apple $6 Billion in Lost Sales. [online] Gizmodo. Available at: <https://gizmodo.com/supply-chain-crisis-keeps-apple-from-selling-all-the-pr-1847961450#:~:text=Supply%20Chain%20Crisis%20Cost%20Apple%20%246%20Billion%20in%20Lost%20Sales>

Researcher(s): Muhammad Usama Zahid and Tee Jia Rou

Reviewer(s): Muhammad Bahari

Editor(s): Jessie Gan

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January 14, 2022
Modern Monetary Theory

Reading Time: 7 minutes

Is Printing Money Actually Okay?

To cushion the blows of the coronavirus pandemic, many nations resorted to “printing money”, to stimulate the economy.

Printing Money: A more colloquial term for expansionary monetary policy, where central banks buy up securities (stocks, bonds) from the open market. When central banks do this, they inject more “money” into the economy, hence why it is referred to as printing money. Other terms may include Quantitative Easing.

Now conventional wisdom would tell you printing money is bad, and critics would ask you to look at countries like Zimbabwe or the Weimar Republic in 1923. This is not unwarranted, it is what scarcity (a key tenet of economics) dictates — having more of something deems it less valuable (see the paradox of water).

But what if printing money is looked at through a different lens? Could this potentially be a powerful economic tool to bolster our economy to greater heights? Primarily, by understanding how fiat currency operates in our modern economy, it shifts the debate from how to pay for it to what the people need.

Now, it is worth exploring the ideas of a new school of thought that has emerged: Modern Monetary Theory.

Modern Monetary Theory

The basic idea of MMT is, nations with the ability to produce their fiat currency can issue as much as they want, (theoretically an unlimited supply) to finance deficits (D’Souza, 2021).

Now, when we think about the Ringgit Malaysia, it is not backed by an underlying commodity like Gold, but its value is given as such because the government has deemed it so. Look at the banknotes and you shall see:

“Wang Kertas ini Sah Diperlakukan Dengan Nilai RM100” or “This banknote is legally valued at RM100”

This matters because, unlike individuals or businesses, the government is a Currency Issuer, not a Currency User. This is important because unlike a user, an issuer could spend the money first and find it later. This is best illustrated in the following example from Kelton’s The Deficit Myth on how the US government operates:

“In 2018, an additional 80 billion was authorised for military spending. There was no rise in taxation of 80 billion or borrowing, the U.S congress simply had to pass that legislation.” (Kelton, 2019, pg.29)

Now, once the money is authorised, government bodies can start working with businesses to supply the goods. Once the agreements are in place and money is about to change hands, all that happens is the US treasury (the government body who manages the money) tells the Federal Reserve (Fed) to mark up the bank accounts, and voila, money is in. An analogy that Kelton proposes is to think of the Fed as a scorekeeper. Much like a football match, the scorekeeper does not need to find the points, the keeper just adds them to the scoreboard (Kelton, 2019, pg.30-31).

To assess this on a larger scale, take the controversial bailouts of 2008, post the financial crisis. The government assisted banks by buying “troubled companies’ assets and stocks” (refresher: the crisis was brought out by a collapse on bad mortgages). Now, this came with a lot of backlash, as people saw it as bailing out the banks with taxpayers money, but the Fed Chairman will tell you:

“It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed”

This then begs the question of why taxation occurs. The first reason is perhaps to achieve a more equitable distribution of wealth to create a more just society. Another theory, proposed by Economist Warren Mosler, indicates that taxations are put in place for governments to “provision themselves”.

As we have discussed, the government does not necessarily use or need our money to fund spending. Provisioning itself means society can run. If individuals are being taxed, this in turn creates demand for the currency . Mosler illustrates an example where:

– Mosler wanted his kids to do their chores, such as mowing the lawn, making the beds and washing the cars.
– In return, he would reward them with his business cards, and the tougher the chore, the more cards they would receive.
– Long story short, the chores were not completed and when asked by the kids, they replied “Why would we work for your business cards? They’re not worth anything”
– With that, the whole model was turned upside down. Instead of requiring them to do work instead, he required payment of 30 cards a month.
– If the payment was not made, they would lose their privileges; no TV, no pool, etc
– Long story short, the children got to work, to procure these business cards.

So, if governments as we have discussed do not technically need our taxes and can simply mark up the accounts, what is the consequence on the economy?

Inflation

Essentially, the constraints on any economy are the real resources, or it’s productive capacity. When there is too much money chasing too few goods, the economy “overheats”.

To control inflation there are various policies, including controlling the interest rate. But with the tools of MMT, inflation can be tackled head-on. If the issue is the real resources, why not expand the capacity of the economy? This means, using MMT to create an economy that works to increase the real resources. This can be done by spending on infrastructure, research and development, and investing in training a more skilled workforce to increase productivity (Mazzucato, 2021, pg. 148).

Now, in reality, all this is easier said than done, hence why it is a theory. It is important to consider various drawbacks, namely, that this does not apply to all nations. Countries in the European Union use a shared currency and are thereby currency users, not issuers. This however does not mean that deficits do not matter, a miscalculation in spending could lead to rapid inflation. Furthermore, most nations probably have the best intention to expand their economies capacity, but unforeseen circumstances can occur. Spending on increasing the real resources will also take a while to materialise and to an extent, inflation is inevitable.

But changing our thinking of how the economy operates is about realising that governments have the power to do right by the people and serve society at large. An example is viewing the world through the lens of MMT, which could bring about a Federal Jobs Guarantee, where those who are looking for jobs can come to the government with a set minimum wage and ideally, these jobs would be productive for the economy at large.

It is also worth discussing the feasibility of MMT in Malaysia. The actual concern towards the economy is inflation, and if Malaysia were to embark on an unprecedented expansion of government spending, this may trigger fears of inflation from investors. A big contributing factor to inflation is future expectations. Therefore, if spending is not done with care and the economy fails to grow, it may bring about inflationary pressures instead. Moreover, inflationary pressures may be exacerbated if institutional reforms are not put in place to curb corruption. A study by The Institute for Democracy and Economic Affairs (IDEAS) and Coalition for Business Integrity Bhd. (CBI) found that corruption adds 14.8% to the cost of your property (MalaysiaKini, 2021). Again, any form of government spending will result in inflation so to put it simply, projects must be done as efficiently as possible to reduce inflationary pressures.

Furthermore, whether we have “complete monetary sovereignty” is debatable, as noted by an Edge Columnist (Yahya, 2020), Malaysia has perhaps curtailed it’s monetary sovereignty due to its “exchange rate policies and debt ceilings”.

However, this does not change the prospects of Modern Monetary Theory. Especially during the pandemic, we have heard that there is simply insufficient money to go around, hence the reduction in spending on essential services. By looking at the economy from a new perspective , perhaps we could start moving towards building a more socially beneficial economy by investing in the right kind of spending, be it in infrastructure, healthcare or research and development.

Source : https://twitter.com/StephanieKelton/status/1362427117523382272

Researchers: Muhammad Bahari

Reviewers: Millen Lau

Editors: Nadiah Mohd Sobri

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August 25, 2021
How COVID-19 Affects Consumer Behavior

Introduction

Since the beginning of COVID-19, lockdown has been implemented globally and individuals are forced to stay at home which leads to a change in consumer behavior. One of the most common changes is that consumers have chosen to do their shopping online as it is obvious that stores are not open in response to the current situation. However apart from online shopping and e-commerce, there are industries like healthcare, education and many more that are highly impacted and do illustrate a change of consumer behavior, bringing in the importance of technology in this era. So the question here is, what are the changes of consumer behavior on different perspectives under this new normal situation?

Aspects on the Change of Consumer Behaviour due to COVID-19

Health and Well-being

With the ongoing pandemic, consumers have been really aware of their health and well-being. According to a PWC United States survey, 31% of the survey correspondents have planned to or have made adjustments on their spending towards healthcare visits and 22% have reported on increasing their spending on medication due to the impact of COVID-19.

Chart 1: As a result on the impact of COVID-19, have you already or do you plan to adjust your spending on healthcare visits or medications? (Source: PWC Health Research Institute COVID-19 Consumer Survey, April 2-8, 2020)

Another research published by Deloitte has shown that around 90% of the respondents fear to visit the hospital due to the high risk of getting infected by the virus while more than half of them are really concerned about healthcare after lockdown. Also, more than 70% of them are willing to go to hospitals that do not treat COVID-19 patients and 45% are fine with going to hospitals that separate those patients in a different building.

Chart 3: Consumer concerns around health management respondents (Source: Deloitte)

In addition, the majority of the consumers are willing to proceed with their elective procedures in the hospital once lockdown ends. However, only 28% of them are only willing to do it after the vaccine is created.

Chart 4: Willingness to undergo elective procedure % respondents (Source: Deloitte)

On top of that, almost 75% of the respondents have agreed on lesser hospital visits because of the infection risk, while showing an increase of at-home remedies, telehealth and telemedicine to avoid hospital visits.

Chart 5: Frequency of hospital visits once lockdown ends vs. pre-lockdown % respondents (Source: Deloitte)

Ever since the pandemic, consumers have started to explore new alternative platforms of home health care. E-pharmacy and E-health have been introduced to the society especially for chronic disease, cancer and mental health patients. The term E-pharmacy (or telemedicine) means the existence of online pharmacies that are able to prescribe medications for patients online and also deliver it to them without patients having to leave their homes. As for E-health, or also known as telehealth is a system that helps to monitor the patients with long term conditions to self manage themselves remotely. Part of the service consists of patients entering vital signs data like blood pressure readers, pulse oximeters or blood glucose monitors. After submitting the data, the information will then be passed on to a clinical or non-clinical monitoring service where the patient’s health is being observed. Also, this service does provide automatic coaching and mentoring for patients through questions and answers by the process of the system’s software algorithm.

Chart 6: Shift in preference towards home-based health care has resulted in an increase in usage of and preference for telemedicine across specialties. (Source: Deloitte)

Based on the chart above, the use of telemedicine has been slightly more than doubled during the lockdown from 21% to 44% of users. Among the respondents who designate an increase in telemedicine usage after lockdown, 77% of the respondents state that it is their preference with the reason of time saving. In addition, around 73% of them who had never tried telemedicine before, are inclined to use telemedicine now. However, more than half of the respondents who are unwilling to use telemedicine due to their belief of face-to-face consultations are much more effective.

Chart 7: Willingness to use telemedicine for consultations across different specialties (Source: Deloitte)

By studying the result, the majority of consumers used telemedicine for general medicine while physiotherapy has the least usage of telemedicine due to the fact that it requires more in person sessions with physical examinations and rehabilitation.

Education

While countries are experiencing different points of infection rate of the COVID-19 virus, schools are forced to shut down. As a result, 1.2 billion students globally are not able to receive education due to school closures. With the restriction of school lockdown, physical class has been shifted to remote learning. Upon such great demand on e-learning, many online learning platforms have provided free access to their services like BYJU’S which is a Bangalore-based edtech company founded in 2011. According to Dingtalk (Alibaba’s remote learning app) CEO, Chen Han stated that they had expanded the capacity to support the large scale remote work by deploying more than 100,000 new cloud servers in just two hours last month from Alibaba Cloud. Besides, some school districts are forming unique partnerships, like the one between The Los Angeles Unified School District and PBS SoCal/KCET to offer local educational broadcasts, with separate channels focused on different ages, and a range of digital options. Furthermore, the UK media organizations like the BBC also offer curriculum-based virtual learning such as Bitesize Daily for children across the nation. With the right technology , e-learning is quite effective for students who have access to it as they require less time to learn compared to having classes in a traditional classroom setting. For example, Zoom is quite commonly used for meetings and educational purposes. As it has the function to record the whole lecture, students are able learn at their own pace by re-watching, skipping, or accelerating through concepts and chapters that they choose. However, there are some disadvantages on remote learning like students who live in areas that have bad internet access and are deprived of technology. For instance, 95% of students from countries like Switzerland, Norway and Australia are able to complete their lessons through online learning but only 34% of students are able to do that from countries like Indonesia. To resolve issues such as having poor internet access and technology, the government can provide digital equipment for students in need. For example, the Welsh government has a support programme with the collaboration of schools and local authorities to distribute devices to learners that are struggling without these equipment.

Entertainment

As lockdown restrictions are being implemented, public entertainment areas like cinemas, clubs, Internet cafes and more are forced to shut down leaving individuals to find their own entertainment at home. A lot of consumers choose to spend their time and distract themselves from the issues going on in reality by playing video games, e-sports and watching TV during the COVID-19 pandemic. According to new research by Nielsen, 82% of global consumers were involved in playing and watching video game content during the lockdown period. As consumers are compelled to stay indoors, some leagues have introduced e-sports (sport competition in the form video games) like eNASCAR iRacing Pro Invitational Series and NBA 2K tournament to keep gamers and fans engaged. With the commitment of these events, it is possible that e-sports and video games involvement could still remain high even when more live sports come back online. Besides, video games are well-known to be very engaging. Based on Nielsen Games Video Game Tracking (VGT), the number of gamers that stated they are playing video games more now due to the COVID-19 pandemic has increased since March 23, 2020. The U.S. has the highest rate (46%), followed by France (41%), the U.K. (28%) then Germany (23%). If TV is an indicator for overall media engagement during the pandemic, Twitch is the indicator for video game content engagement. As noticed below, the difference between Twitch engagement in the U.S. on January 1 and March 28 is more than doubled, as hours watched grew from 13 million to 31 million. The viewership was peaked on March 28, with League of Legends, Fortnite, and Counter-Strike: Global Offensive accounting for 33% of total hours watched across the top 50 titles.

Chart 8: Daily Twitch Viewership In The U.S. More Than Doubled In QI 2020 (Source: 2020 The Nielsen Company (US), LLC)

As we can see, the creativity of the video game industry has played a big part in helping consumers pass time which led to some collaborations. A great example is the collaboration of Epic Games with Houston rapper Travis Scott that organized a unique musical journey in Fortnite. This partnership that was worked out by Epic Games set a multi-date tour that consisted of different time slots to make it flexible for players to join from all over the world while Travis became the face of the event, attracting millions of people to tune in to the game from April 23-25, in addition to other video streaming platforms such as YouTube and Twitch. The Nielsen record for the average minute audience (AMA) for the first Travis concert had reached a total of 4.7 million, which almost half of the audience (2.3 million) were live viewers. While millions of people are self isolating at home, many looked to e-sports as a way to curb boredom.

Consumers have always turned to TV to stay updated on information or simply just for entertainment. Hence, it is normal even during the COVID-19 pandemic as consumers are unable to attend social gatherings or any other physical events. In 2020, we see this trend reflected in a deluge of social media activity about TV programs as consumers lean into the power of technology not just to view or listen, but to also fill a need to stay connected to friends, family and the world at large. A recent Nielsen study on consumer behavior related to the TV has been shown in Chart 9. Apart from keeping close to home and their TV sets, they are also using social media to stay connected more which resulted a total volume of TV and COVID-19-related conversations on Twitter alone to reach nearly 9 million since the start of 2020 in the U.S. with a dramatic increase of 40 times between January and March due to the pandemic. As more consumers are forced to stay at home, they have been using social media to fill their time and discuss about the new TV, streaming, and movie choices. Despite there being a number of programs on air over the years, it is still noticeable that there is a big difference in social media activity across most TV genres. As expected, we see the biggest upticks in social buzz about talk and news programs, family movies and all streaming services.

Chart 9: Number Of TV Tweets Mentioning COVID-19 Or Coronavirus (Source: Nielsen Social Concern Ratings)

Travel and Mobility

The travel behaviour of consumers has also been affected after the outburst of the pandemic. As lockdown rules are being enforced, consumers’ mobility habits do have some changes such as avoiding public transport but instead riding a bicycle or walking for local trips. For example, Germany had implied a travel ban on March 23rd 2020 and the distance traveled per person per day had dropped from the usual average of around 40km to almost 15km only in the first week of April. Thus, it leads to a decline in the number of kilometers traveled on public transport, as consumers prefer to walk or ride a bike.

Chart 10: German Mobility : Average Kilometers Travelled By User And Day (Source: MotionTag)

As consumers had preferred to walk and cycle, the time spent has increased 25 minutes per day compared to the usual less than 20 minutes per day.

Chart 11: German Mobility: Modal Split For Time Spent Travelling By User and Day (Source: MotionTag)

As can be observed, the increase of consumers making short journeys for activities like food shopping locally by walking or cycling has not only reduced physical contact with other people but is also a good way to combine it with regular exercise. Though cars are still in use, usually essential workers that do not work from home only use it for work.

Another important travel behavior aspect is airplane travel. As the spread of COVID-19 virus gets worse, many countries have banned international flights and consumers are afraid to take flights due to the high risk of getting infected by the virus. This has caused a dramatic drop in demand for passengers in this industry due to the current situation which threatens the businesses of many firms under the aviation industry. As we are aware that the aviation industry is also a target for government policies, the recent crisis has resulted in new loan guarantees, subsidies in wages and equity injections. To deal with these issues, government policies should prioritise firm specific measures like preserving competition and strike balance between the support of the aviation industry. Due to the pandemic, the failure of a number of companies will lower the competition and the injection of equity might affect the access of foreign companies to the local market. To avoid negative effects on competition and promote efficiency on controlled firms, lowering the costs of entry like reserving airport slots for new entrants can help to foster the competition.

Chart 12: Expected change in airplane travels once the COVID-19 is no longer a threat as compared to the before-pandemic situations. (Source: Science Direct)

As we can observe from Chart 12, around 43% of the consumers choose to travel less frequently with airplanes in the future even if the COVID-19 condition is in control.

Chart 13: Factors underlying the expected change in airplane travels once the COVID-19 is no longer a threat as compared to the before-pandemic situations. (Source: Science Direct)

According to Chart 13, the majority of correspondents of the survey (48% of them) felt unsafe travelling with airplanes due to the closed space even after the pandemic, followed by 27% of them choosing to travel by their personal vehicles.

Conclusion

It is not surprising that the outbreak of COVID-19 has given such high levels of impact and changes on consumer behavior. The majority of it consists of the use of technology and without the help of it, society will be struggling in getting things done and inconveniences in different aspects will occur. Despite the negativity of the pandemic, we have to be grateful and embrace the modern high tech life that we are living in as technology has helped us get through these hard times.

Researcher: Yeoh Yi Ying (Janice)

Reviewer: Millen Lau

Editor: Adam Jantan

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April 15, 2021
The Halal Industry. Does it really affect Malaysia’s economy?

The world has seen the rapid growth of the halal industry in recent years. The halal product market is expected to grow by 28% from 2016 to 2022. The market segmentation of the halal industry has extended to non-muslim as well. It turned the halal industry to be inclusive for both Muslim and non-muslim. As a result, it is now very common to see the development of the halal industry in non-Muslim countries. The obvious example is the HFCE (Halal Food Council of Europe) has certified over 400 European food companies. This is expected to bring halal into the global mainstream (Mordor Intelligence, 2020a).

As for the halal scene in Malaysia, Malaysia’s halal industry contributed about 7.5% of Malaysia’s GDP in 2017. This big amount of percentage that the halal industry has contributed to Malaysia’s GDP shows that Malaysia is successful in utilizing the potentials it has as a Muslim majority country. In addition, these facts will be very interesting to observe as the halal industry is now regarded as the engine of economic growth. Hence this paper will generally examine the development of the halal industry in Malaysia. It will start by defining the halal industry. The next part will discuss briefly regarding the halal industry worldwide and will be continued by the overview of the halal industry in Malaysia and how it affects the economy.

A. Introduction

The existence of the halal industry has become a debate among some groups of people. Some people argue that the halal industry emerged just for economic purpose. Others argue that its existence is demand for halal products has forced the halal industry to expand its scope into a variety of products and services, such as medicines, cosmetics, tourism, finance, and even fashion. This phenomenon is caused by raising awareness among Muslim about what can be consumed and not. Indeed, this expansion is very helpful to the Muslims. The other factor that makes the halal industry a big business is the estimated increase in the Muslim population. According to the Pew Research Centre, the number of Muslims worldwide is expected to increase by 75% from 1.6 billion in 2010 to 2.8 billion in 2050. According to the Oxford dictionary, the word halal can be defined as meat from an animal that has been killed according to Muslim law. It also refers to something acceptable according to Muslim religious law. Based on these two definitions, it is clear that halal refers to a set regulation based on Islamic law that helps Muslim to distinguish what to eat, use or consume and also the substance and the process of making products or delivering services are the determinant factors that determine whether the products or services are halal or not. Based on the explanation above, the halal industry can be defined as an industry that conducts its business in accordance with Islamic regulation.

To produce a halal product, there are two things to be considered, which are the substance and the process. Based on Islamic law, some substances are substance is prohibited in nature, such as dog and pork. While other non-prohibited substance must go through several processes to be halal. For example, a cow must be slaughtered in accordance with Islamic procedures before being consumed by Muslim, otherwise, it will be prohibited to be eaten. This concept applies to all food products in any form, consumer goods including cosmetics, personal care products and pharmaceuticals. It also applies to the process of trade or commerce and to activities in the services sector (SMEinfo, 2018).

The growing. This shows that the demand for the halal industry will likely increase in the future. In addition, the demand for the halal industry will likely increase in the future due to the estimated increase of the Muslim population. According to the Pew Research Centre, the number of Muslims worldwide is expected to increase by 75% from 1.6 billion in 2010 to 2.8 billion in 2050. The growing demand for halal products has forced the halal industry to expand its scope into a variety of products and services, such as medicines, cosmetics, tourism, finance, and even fashion

B. An overview of the Halal industry worldwide

The spending on halal products can be used as one of the indicators to measure the development of the halal industry in the world. According to the State of the Global Islamic Report 2019/2020 by DinarStandard, the world spending on halal products will likely increase with a projected CAGR growth of 6.2% from 2018 to 2024. The table below shows the expected growth of world spending or assets in six different economic sectors from 2018 to 2024.

From the table above, it can be seen that all the economic sectors of the halal industry will have a positive trend in the near future and none of them will grow with a rate below 5.5%. Although the main consumer of the halal products is the Muslim population in Muslim majority countries, some sectors in the table above are dominated by Muslim minority countries. For example, in terms of halal food, Brazil and Australia are the leading countries in meat and live animal exports to Organization of Islamic Cooperation (OIC) countries with $5.5 billion and $2.4 billion respectively. Despite standing above the rest, Brazil has faced a lack of compliance with Halal standards (Ashfaq, 2018b). In March 2017, Brazilian federal police announced that health officials had allegedly been paid off by influential meat companies to ignore various abuses that may have compromised the safety and certification of food products being sent to virtually every corner of the world. In the immediate aftermath of the scandal, Saudi Arabia temporarily suspended Brazilian beef and poultry imports (Newsweek). To tackle this issue, the commonly accepted standards among certification bodies globally must be made in order to avoid duplicate certification costs and reduce complexity (State of the Global Islamic Economy Report 2018/19).

Furthermore, for halal clothing, the “made in china” product topped the list of halal clothing exporter to OIC countries worth $10.6 billion. This amount left a wide gap with the second position, led by India with $3.1 billion and followed by Turkey with $2.3 billion. China also played an important role in halal media and recreation export. This sector is mainly divided into three parts, which are: a). toys, games and sport, b). printed books, newspaper and picture, and c). photographic or cinematic goods. China led the race with $3.6 billion and followed by the USA with $556 million and the UK in third place with $450 million. The same goes with the next two sectors, halal pharmaceutical and halal cosmetics where the domination of exporting countries to OIC still belonged to the western countries. Germany, French, and the USA are the key players in halal pharmaceutical exporter to OIC with $5.1 billion, $4.4 billion and $3.5 billion consecutively. And the top 5 countries in exporting halal cosmetic products to OIC countries are French ($2.6 billion), UAE ($1.2 billion), Germany ($1.1 billion), USA ($1 billion), and China ($0.8 billion).

The domination of some Muslim minority countries in particular economic sectors of the halal industry clearly indicates that the halal industry still has room for development even in a country with a lesser population of Muslim.

C. The halal industry in Malaysia and how it affects the Malaysia economy

The development of the halal industry in Malaysia started in 1974 when the Research Centre for Islamic Affairs Division started issuing halal certificates. Over the years, this country has recognized the urgency and potential of the halal industry. The establishment of the Halal Industry Development Corporation in 2006 demonstrated the strong willingness of Malaysia to be the leading country in the halal industry. This agency is under the Ministry of Economic Affairs and is responsible for coordinating the overall development of the halal industry in Malaysia (HDC Global).

The government support to advance the halal industry in Malaysia is clear. The most recent and obvious proof is the Halal Industry Master Plan (HIMP) 2008-2020, in which its vision is to make Malaysia as the global halal hub. The desired outcome of this policy is to make Halal as the new source of economic growth (MITI). Other than that, Malaysia also hosts two of the most important annual events in the halal industry, namely the Malaysia International Halal Showcase (MIHAS) and the World Halal Forum (WHF). Both play a pivotal role in building the country’s reputation as the global reference and trade centre for the new mainstream halal industry since 2003 (Visit Malaysia 2020). Moreover, the seriousness of Malaysia to be the global halal hub is also demonstrated by the establishment of Halal Park, a community of manufacturing and service businesses located on common property with the aim of preserving the integrity of halal products. From 2010 to 2017, the total investment in Halal Park has reached MYR 13.27 billion and it has received a total of 14 Halmas throughout Malaysia. Halmas is an accreditation given to the Halal Park operator who has successfully complied with the requirement and guidelines stipulated under the HDC Designated Halal Park development. In relation to that, the Malaysian government has set tax incentives to promote the attractiveness of Halal Park for certain products, such as livestock and meat production, probiotics, speciality processed food, pharmaceuticals and nutraceuticals, cosmetics and personal care, and halal ingredients (HDC Global).

The result of the government’s efforts to advance the Halal Industry in Malaysia can be seen from both the contribution to GDP and halal exports value. In terms of the contribution to Malaysian GDP, the halal industry experiences a positive trend in recent years. In 2017, it contributed 7.5% to Malaysian GDP and it is expected to increase by 1.2% this year or the contribution will be 8.7%, according to Economic Affairs Ministry’s Service Industry Section director Dr Khalid Abdul Hamid (The Star, 2019).

For halal exports, the number of Malaysia’s halal exports experienced a gradual increase from 2010 to 2018. However, in 2018, it slightly declined from the previous year due to the challenging time in the palm oil industry, including the lower palm oil derivatives, Hanisofian Alias said (The Malaysian reserve, 2019). The chart below shows Malaysia’s Halal Export value from 2014 to 2018.

Source: Halal Industry Development Corporation (HDC).

Despite the amount of halal export increased in 2017 from the previous year, the percentage of halal export contribution to Malaysia’s total export value decreased in the next two consecutive years. This is due to the rapid increase in the total value of Malaysia’s export. In 2016, the contribution to Malaysia’s total export is 5.3% with the total export MYR 787.0 billion. The next two years account for 4.6% with MYR 935.4 billion and 4.0% with MYR 998.0 billion consecutively.

In addition, the full support from the Malaysian government towards the halal industry development facilitates Malaysia to be the leading country of the Global Islamic Economy Indicator. This indicator gives a comprehensive picture of which countries are currently best positioned to address the multi-trillion-dollar global opportunity. It measures the strength of the Islamic economy for 73 countries, across supply and demand drivers, governance, awareness and social considerations, and is a weighted composite of 49 important metrics (State of the Global Islamic Economy Report 2019/20). Two Middle Eastern countries are tailing Malaysia in the first position, which is UAE in the second and Bahrain in the third place.

Conclusion

The world has recognized the halal industry as the new engine of economic growth. It can be seen from the increase of halal products in many countries which is not limited only to Muslim majority countries. Indeed, halal is not perceived as a mere label by its user. The use of the halal label identifies that certain products have good standards and quality. Many countries that have recognized the urgency of the halal industry and its potential are now racing to be the top of halal product providers. It is also an effort to cope with the market demand that gradually increased in recent years.

Furthermore, within the next four years, there will be an increase in the consumption of halal products throughout the world. Even countries with a small Muslim population are predicted to be the main players in the halal industry. For example, Brazil and China where they will be the main exporters of halal meat and clothing to OIC countries.

Malaysia as the leading Global Islamic Economy Indicator has a longstanding journey of halal industry dating from 1974. Through the Halal Industry Master Plan (2008-2020), Malaysia is aiming to be the global halal hub. To achieve that goal, Halal Industry Development Corporation (HDC) is established and one of the bold movements under HDC is the establishment of Halal Park. In fact, HDC has contributed positively to the growth of Malaysia’s halal export value. It is proven by the significant increase in terms of halal export value by 163% from MYR 15.2 billion in 2010 to MYR 40 billion in 2018. It will help this country to have a greater competitive advantage, bring in higher wages and increase job opportunities. Other than that, the significance of HDC is emphasized by the forecasted increase of the halal industry contribution toward Malaysia’s GDP to 8.7% in 2020 from 7.5% two years earlier. Furthermore, Halal Park with its tax incentives has contributed to a huge number of investments in the halal industry, which is MYR 13.27 billion from 2010 to 2017. It also has a total of 14 Halmas (Halal Park operator) throughout Malaysia. It means that more jobs emerged as a result of Halal Park. In addition, Malaysia must maintain this positive trend and increase its efforts in order to always cope with market demand.

[tw-toggle title=”References “]

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Halal Industry Development Corporation. Retrieved from: http://www.hdcglobal.com/

Norhidayah Pauzi & Saad Man (2018). “Perkembangan Pentadbiran Pensijilan Halal di Malaysia 1974-2016: Satu Tinjauan”. Online Journal Research in Islamic Studies. Vol. 5 No. 1 (2018): 1-17

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State of the Global Islamic Economy Report 2019/20:

https://ceif.iba.edu.pk/pdf/state-of-global-islamic-economy-report-2019-20.pdf

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Researcher: Rif’at Abdillah
Editor: Chee Hor

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February 21, 2020
Trump and Trade: NAFTA
Trump has been particularly vocal about his commitment to revoke NAFTA on the grounds that it has led to jobs losses in the US, as labor is increasingly outsourced to cheaper countries like Mexico. Signed by President Clinton in 1994, NAFTA (North American Free Trade Agreement) was an agreement between Canada, Mexico and the United States, to remove all internal trade barriers and thus boost imports within the North American Region. 25% of all US imports would be supplied by Mexico or Canada, while 30% of US exports were slated for Mexico and Canada. President Clinton believed that the exports would push economic growth—envisioning one million new US jobs within 5 years. It was this promise to bolster the American dream that would later lead President Clinton to win the presidential elections.

NAFTA’s aims were:

1) Fostering a conducive environment for fair competition in the free trade region

2) Amplifying the investment prospects between those countries

3) Enforcement and protection of intellectual property rights

4) Prepare guidelines

5) Form a framework for multilateral cooperation to magnify the benefits of the agreement.

6) Remove all trade barriers to promote the movement of goods and services between countries.

NAFTA fulfilled them all, and investments in all 3 countries increase exponentially, creating the largest free trade zone in terms of GDP. At its height, trade even tripled when tariffs were eliminated or lowered.

NAFTA impact on the economy

Despite the success of NAFTA which brought in a whopping one trillion dollars in trade benefits to the US, Canada and Mexico, there is still widespread debate on the usefulness of the treaty.

Foreign investors are also protected from the government negatively impacting their businesses. The US council on foreign relations stated that the NAFTA agreement has only increase US GDP by a minimal percentage.

Criticisms
- Many critics (including former president Obama) blamed NAFTA for taking away US jobs—outsourced to Mexico with lower labor costs. CNN estimates a staggering 27% decrease in manufacturing jobs (3.4 million from 1994-2017).
- Obama proposed the Trans-Pacific Partnership agreement instead—which never entered into force as Trump would later decide to withdraw the US from TPP shortly after his electoral win. Trump expressed his ‘America-first’ concerns, showing more interest in entering ‘fair, bilateral trade deals’ aimed at bringing new jobs and promoting the U.S. economy.
- Jeffrey Schott, senior fellow at the Peterson Institute said, “I don’t think there’s many ways to amend the original trade agreement to expand US production and jobs, because tighter rules would only lead to higher production costs and have adverse effects on US competitiveness.”
Differences between the new and old: USMCA vs NAFTA
1. Big changes for cars.
  - 2020 onwards, zero US tariffs will be given on automobiles with 75% of a their components manufactured in North America (a leap from the 62.5% under NAFTA).
  - A significant percentage of automobile manufacturing jobs will be alloted to minimum wage workers, with a minimum of $16 per hour— 3 times more than Mexico’s. The planned increase in this percentage is an optimistic 30% by 2020, and 40% by 2023.
  - Though benefitting automobile workers, the cut-throat cost could lead to higher car prices and kill off small manufacturers. Automakers would likely look to manufacture cheaper elsewhere in Asia, and export to other high demand countries like China.
1. Trump’s victory: Canada opens up its milk market to U.S. farmers.
  - Previously, the Canadian government kept prices high by tightly regulating local dairy production and foreign dairy imports.
  - Canada is now surrendering a greater proportion of market share towards the US by cancelling its pricing scheme for class 7 dairy products. Now, US producers can send more milk protein concentrate, skim milk powder and infant formula to Canada.
1. Canada’s victory: Chapter 19, allowing for a special dispute process, stays intact.
  - In this new trade deal, Canada retains the rights to Chapter 19 which the US have tried to abolish.
  - Chapter 19 allows all North American countries to challenge other countries countervailing and anti-dumping duties in front of a selected panel of representative from each country. Canada uses this chapter to challenge the US on its softwood lumber restrictions.
1. Mexico and Canada get assurance that Trump won’t pound them with auto tariffs.
  - Despite Trump’s threats to impose new tariffs on vehicle imports, side letters signed by his administration has allowed Canada and Mexico to evade them. Regardless of ANY future tariffs imposed.
1. Improved labor and environmental rights.
  - The USMCA raised the labor quality standard for Mexican workers entering the US by ensuring that they comply to the higher safety regulations and retain their right to form and organize unions.
1. Increased intellectual property protections.
  - More protection for domain names, financial services and biotech. Many legal experts and business leaders welcomed this change considering the previous agreement was arranged 25 years ago.
1. Big drug companies gain more footing in Canada.
  - US pharmaceutical companies are granted 10 years to sell its products in Canada before facing the treat of generic competition.
1. Deal must be reviewed after 6 years.
  - If all countries are satisfied after 6 years, the deal will extend another 16 years, and then reviewed and extended every 16 years.
In spite of Trump’s bold and at times, seemingless reckless statements, his administration still managed to strike a favorable deal; whilst Mexico and Canada have stood firm in ensuring that their demands be taken into account. In my opinion, Trump’s new trade agreement does not seem to be strikingly different from his previous trade deal. It is practical and has benefited all parties.

[tw-toggle title=”References”]
1. Jen Kirby, Feb 5, 2019, 10:17pm, USMCA, Trump’s new NAFTA deal, explained in 500 words, Retrieved from: https://www.vox.com/2018/10/3/17930092/usmca-nafta-trump-trade-deal-explained
2. KIMBERLY AMADEO, April 29, 2019, Trump’s NAFTA Changes The USMCA Would Create U.S. Jobs and Raise Auto Prices
3. Office of the united states trade representative, United States-Mexico-Canada Agreement, Retrieved from: https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement
KIMBERLY AMADEO Updated January 23, 2019, Six Problems With NAFTA, Retrieved from: https://www.thebalance.com/disadvantages-of-nafta-3306273

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Writers: Bryan, Yash

Editor: Vikky Beh
May 24, 2019
The Impact of Child Marriages on the Economy
What were you doing at the tender age of 11? Hanging out with your peers and wondering when your next meal is going to be? Well, most of us have experienced the intricacies of childhood but Masaryu Mat Rashid faced a different fate. She had to marry a 41-year-old Kelantanese man as his third wife in June 2018 and this had caused an uproar among fellow Malaysians.Till now, parties like Wanita Malaysian Chinese Association and Lawyers for Liberty executive director Latheefa Koya continued to question Dr Wan Azizah Wan Ismail’s handling of the child marriage case.

Diagram 1.0: Statistical Infographic of Child Marriages in Malaysia

Statistics have shown that over 700 million women in the current era are married before reaching the legal age of 18. Child marriage is rooted in gender inequality and the belief that girls and women are somehow inferior to boys and men. In addition, it is also regarded as a violation of human rights and is restricted by an array of international conventions. Child marriage is a complex issue which covers a diversity of factors which can vary based on the culture and personalized behaviour of a specific community or region. On top of that, child marriage in Malaysia is perpetuated by the fear of shame due to sexual impropriety and legal loopholes, according to a national report by Sisters in Islam (SIS) and Asian-Pacific Resource and Research Centre for Women (ARROW).

Table 1.0: Comparison of the Legal Minimum Age of Marriage under Respective Legal Systems in Malaysia

As shown in the table above, the bottom line of the legal loophole is the absence of strict minimum age for Muslim marriages under the respective legal systems in Malaysia. Nevertheless, people are not paying sufficient attention to this problem as we fail to acknowledge its direct impact on our lives as long as those near and dear are not victims. Most of us fail to comprehend the rippling economic impacts of child marriage. The World Bank’s study finds that child marriage could cost developing countries trillions of dollars by 2030.

Population Growth

The largest economic cost related to child marriage is due to its impact on fertility and population growth. Among the nations considered in the Economic Impacts of Child Marriage report, the report estimates that a girl marrying at 13 will have on average 26 percent more children over her lifetime than if she had married at 18 or later.

Diagram 3.0: Demographic Dividend Infographic

Demographic dividend is the economic growth that may result from changes to a country’s age structure, due to the shift from short to long life span, and large to small family size. Therefore, less investments are needed to meet the needs of the youngest age groups and resources are freed up for what is called the “economic gift.” This indicates that the labor force is growing more rapidly than the population that is dependent on it, creating a window for faster economic growth and family welfare. On the contrary, child marriage delays the demographic dividend that can come from reduced fertility and investments in education as it contributes to larger families and, in turn, population growth. Thus, ending child marriage would reduce total fertility rates by 11 percent on average in those countries, leading to substantial reductions in population growth over time. The analysis done by ICRW also suggests that by 2030, gains in annual welfare from lower population growth could reach more than $500 billion annually.

Poverty

Can poverty be correlated to the aggregate health of the economy? Of course, it can! When an economy begins to grow, the opportunities for employment increase along with a hike in income. Therefore, when you combine strong labour markets and spurting income levels, it will produce a positive effect on families that are living in poverty as this enables them to move beyond the poverty threshold.

In terms of child marriage, girls commonly get married as a result of pressure from their parents and relatives, poverty and insufficient alternatives to turn to. In certain situations, families’ in specific regions possess a mentality that it is far more rewarding to educate boys rather than girls, accompanied by limited job opportunities and access to quality education. For instance, a Ugandan parent states that there is no availability of vocational institutions within their regional vicinity that will opt to train girls after they have completed their primary and lower secondary education. The impact of child marriage can be detrimental for child brides as the loss of education leads to lower literacy rates and earnings opportunities.

Diagram 3.1: Child Marriage Infographic

Child marriage tends to dampen the efforts to end poverty and achieve sustainable economic growth and equity. From an economic standpoint, the total economic costs of child marriage is dangerously high. For instance, early childbearing has the potential to increase fertility rates and the aggregate population growth by one tenth in high prevalence countries. Moreover, the most significant downfall of child marriage is that the rate of expected earnings by women in the labour market will slip. As a result of the increasing cases of child marriages, women who get married as children based on a sample of 15 countries on average are expected to have earnings that are 9% lower when compared to women who had been married later on in life.

Education

Education is a crucial component towards a developing economy. A country’s economic health becomes more productive as a result of the increase of educated workers since they can carry out tasks more efficiently that requires literacy (education).

The likelihood for girls to complete their secondary education is reduced when they become child brides. The graph below displays that on average girls who get married before the age of 18 only get to complete a maximum of three years of schooling. For instance, a set of surveys were carried out to parents, asking them the primary reason as to why their daughters had dropped out of school, the main reason being marriage. The impact of not completing their secondary education can lead to lower earnings for them when they reach adulthood due to their lack of provision of education which prevents them from getting good jobs.

Graph 1.0

Source: https://blog.kiva.org/blog/lending-to-eradicate-child-marriage

Well-being of the Mother and Her Children

Child brides are neither physically or emotionally ready to become wives and mothers, and they tend to experience poorer mental health compared to their peers who married later. International Center for Research on Women (ICRW) carried out a study to assess the mental health of women who married before the age of 18. The well-being was assessed using the Psychological General Well-being Index (PGWBI), a widely-used scale that measures the psychological quality of life of general populations as well as people with chronic diseases. The overall measure is scored on a scale of 0 to 100, with 100 being the highest possible state of well-being. The study shows that women in Ethiopia who married at age 12 or earlier scored an average of five points lower on the PGWBI, compared to women that married later, while women in Niger scored an average of more than seven points lower. This suggests a negative association between child marriage and mental health outcomes.

Furthermore, a mother’s ill-being would affect mother-child bonding, and parenting quality, which in turn negatively influences children’s development. Besides, the children born to mothers under 18 has higher infant and child malnutrition, compared to those born to women married as adults. The annual estimated economic benefits of ending under-five mortality and stunting would be close to US$98 billion annually by 2030. Ending child marriage would have a positive impact on reducing early childbirth and improving child’s development.

Conclusion

Although child marriage is a controversial issue, any sane man should do his best to end this practice as it is morally right and economically beneficial. It is disappointing to see religion become a hindrance due to archaic interpretation, instead of freeing people from their burden. Thus, the respective government should enact legal reform to ban this horrible practice completely. The minimum age of marriage must be raised to 18 for both genders, with no exceptions and the criminalisation of child marriage should be looked into as part of legal reform. Our children deserve to explore their lives without being imprisoned by marriage at such a tender age – they are our future.

[tw-toggle title=”References”]
1. http://www.freemalaysiatoday.com/category/nation/2018/08/01/marina-womens-groups-join-criticism-against-wan-azizah-over-child-marriage/
2. https://www.thebodyshop.com.my/wheniwas11
3. https://www.girlsnotbrides.org/resource-centre/economic-impacts-child-marriage/
4. http://arrow.org.my/wp-content/uploads/2018/03/National-Report-Child-Marriage-Single-Page.pdf
5. Raj, A., Saggurti, N., Winter, M., Labonte, A., Decker, M., Balaiah, D. and Silverman, J. (2010). The effect of maternal child marriage on morbidity and mortality of children under 5 in India: cross sectional study of a nationally representative sample. BMJ, 340(jan21 1), pp.b4258-b4258.
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Researcher – Yashvanth Sivaruban, Tan Shan Yi

Editor – Saras Rehathi
April 26, 2019