I was in Malaysia this week for a family wedding. Five short observations:
The story of Balassa and Samuelson, or at least the Penn effect that it aims to explain, is a reliable guide to relative prices. Non-traded services are relatively cheaper in Kuala Lumpur. Eat until you are stuffed.
Automobiles compete in a global market, but the makes and models in KL differ from what I usually see on the road. Many vehicles were manufactured by Proton, Malaysia’s national car brand, which one doesn’t see in the United States or Europe, because it only exports about a thousand vehicles per year. I also saw models that aren’t sold in the United States, such as the Alphard. This is Toyota’s flagship minivan. It’s a bit of a luxury: in Malaysia, a brand-new Alphard starts at more than 100,000 USD (“From RM538,000”).
Downtown Kuala Lumpur is not particularly walkable. The downtown infrastructure is friendlier to drivers than pedestrian in many respects. For example, KL Sentral (the central transit hub) and Muzium Negara (the national museum) are only about a kilometer apart as the crow flies. Yet Google Maps says that this would be a 3-minute 1.3-km drive, 15-minute train journey, or 52-minute 3.5-km walk. Google Maps overstates pedestrians’ disadvantage, however. If you leverage a multimillion-dollar walkway from KL Sentral towards the Muzium Negara MRT station and then cut out a service door, you can make this a 10-minute walk.
Some local services are too cheap for the Balassa-Samuelson story alone to explain. Grab rides were often as little as one ringgit per minute. How does one get a 30-minute ride for under seven US dollars? It seems likely that government fuel subsidies are part of the story.
Residents of a small open economy are more attuned to international transactions. Upon learning that I was American, the wedding MC complimented me by saying that I am 4.7 times the man he is. I doubt US weddings often feature jokes that require knowing the exchange rate.
