THE WHITE FLAG FORGOTTEN

The pounding of a wall on the house in front of mine; a loud grinding or what seems like a sharpening of metal plates in another house nearby; another house towards the north-east of the direction I am facing at my workstation; with a hammer-drill, hammer-drilling into a wall or something like that. One could be forgiven to think that this is a major construction site. It is not. It is just that there are quite a few houses in the midst of major renovations. ‘Tis the season?

Then, one can be forgiven (again) if they were to ask, “economic tough times, inflation, possible recession?” Apparently not. With prices of things in general on the rise, construction and renovation are not spared from it. There is a massive labour shortage all around with home renovation contractors finding difficulty in getting workers. Yet home renovations are still in full swing. The unspoken ‘kiasu’ trait is in the air: “If you can do, I (also) can do; but better”. For the uninitiated, “kiasu” is the Chinese version (1) of the western saying, “Keeping up with the Joneses” (2); loosely translated.

Kiasu sounds better. It has a more aggressive “oomph” to its expression!

It looks like people are going on a spending rampage or revenge, being let loose from the confines of being cooped up at home during the Covid-19 pandemic which turned into an endemic on its way out.

One can be forgiven in thinking that this is a spending rampage or a spending epidemic with the many homes in just one area, being re-modelled or renovated.

This spending splurge is not just limited to re-modelling and renovation of homes, but also in cars, especially luxury cars, property investment and travel, too. For instance, until recently, there was an incentive for people to buy new vehicles in Malaysia. The government waived the sales and service tax on the nett selling price for both, completely knocked down (ckd) vehicles which is 10% and completely built up (cbu) vehicles which is 5%, thus reducing the overall price of vehicles by quite a bit.

It can be quite difficult to fathom or even believe that, not too long ago; around the same neighbourhood vicinity, some people were flying the white flag outside their homes. The white flag was a signal that homes were suffering from financial distress, with no money to buy food and basic house essentials.

These were homes in the middle to upper strata residential areas, too. This could have been due to many people having to take big pay cuts or were laid off from work due to the Covid-19 pandemic. They were not poor people. It was just that their monthly expenses outstripped their incomes which were reduced or stopped.

With the wonderful support of the generous public, and biding of time; they pulled through. The general takeaway lesson here was to live within one’s means.

Income seems flexible, non-guaranteed and cannot be taken for granted. Loans on the other hand, are most times not flexible. Once a loan is taken out, repayments have to be met.

When a loan has been taken out or a purchase made with a monthly installment repayment schedule, the onus is solely on the person to meet those obligations. It is a sale for the seller or financial institution. There is no “toui toui tak balek”. (3)

And, he has to meet those obligations, regardless of his financial situation. If he encounters any form of financial stress and may have difficulty in repayments even if it is for a short period of time; he will still have to meet those obligations punctually. As a chairman of one of Malaysia’s leading banks once said (could have said it many times before), “It does not matter to us if the customer had a spotless record in meeting all his financial obligations for the last 25 years, what matters most to us is ‘now'”.

Interest rates have gone up twice this year and is still expected to move up the scale at least a couple more times before end-December. This in turn, has caused the cost of most things, especially essential goods; to go up. Unfortunately, salaries and wages have not increased in tandem with the increased cost of everything else.

The question you may want to ask is, “Do I want to have a bigger financial risk exposure than I am in now?” Why is it a risk? We cannot really guarantee that we have the funds if a loan facility is recalled and full payment is demanded. Unless, if collateral is assigned to a loan making it a “secured loan”.

But collateral is becoming a rarity for personal loans as financial institutions want to charge a higher interest rate on unsecured loans. Overall non-performing loans (NPL) in Malaysia are low, with little risk to the bank.

Are we more prepared now for a “financial pandemic”? Have we forgotten the white flag era or will we re-visit it again?

Food for thought: Funny how the price of things does not come down when the reason for it going up in the first place, does.

NOTES:
1. Taken from the Chinese dialect Hokkien, kiasu translates to a fear of losing out, but encompasses any sort of competitive, stingy or selfish behavior. If you stand in line for hours just because there’s a gift at the end, then you’re kiasu.
2. Striving to achieve or own as much as the people around you: “If you want to keep up with the Joneses in this neighborhood, you will have to own at least three cars.”
3. “Toui toui tak balek” in Malay was used when we were kids to mean “it is not too late to go back on your decision”.

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