The Difference in Demand for Japanese Cuisine

Finally back after a week worth of break. I thought it would be great to start with something light and at the same time could stimulate your appetite: food. Well, if you live in Singapore, you will realize that almost all the shopping centres have at least 1 Japanese restaurant/café/etc. I like Japanese cuisine so it’s really great to be able to consume such food wherever you are in Singapore. Jakarta, on the other hand, is a stark contrast to Singapore. It’s not easy to stumble upon Japanese restaurants and even if you manage to find a couple from the yellow pages, you will find that most aren’t located in shopping centres (this consequently removes the convenience for consuming them). The scarcity of Japanese restaurants in Jakarta is perhaps due to the low demand for Japanese cuisine there as compared to Singapore.

There are probably 3 main reasons for the difference in demand. Firstly, it is the degree of exposure of the population to external culture. Being well traveled and all, Singaporeans has definitely tried Japanese cuisine at some point of their lives and consider Japanese diet as just one of the many varieties of food they can have for their daily consumption. Indonesians, however, are not as well traveled and thus have a high probability of not trying Japanese cuisine before. When they come across Japanese restaurants, they have a high tendency of walking past these restaurants and selecting others that are deemed as safe choices.

Secondly, it is the difference in preference among the population. Majority of Singaporeans are Chinese and hence find Japanese cuisine which is light palatable. Indonesians on the other hand prefer spicy food and find Japanese cuisine too bland for their tongues.

Thirdly, it is the income level of the population. In Singapore, the income of the working population would not in any way hinder their abilities to consume Japanese cuisine i.e. they are considered affordable by most of the working population. But for a considerable percentage of the working population in Indonesia, consuming Japanese foods is a luxury. For these people, if they forgo Japanese cuisine, they may be able to support their family for another week.

These 3 reasons effectively make the Japanese cuisine market in Indonesia a very niche market, in a sense that it is only sustained by a small number of people. And if the economy of scale remains at current level, I am afraid Japanese cuisine will only become more expensive and that essentially will result in even more people being unable to afford them. As for me, it seems that my dream of consuming authentic Japanese cuisine in Jakarta at affordable price will not turn into reality anytime soon.

Subsidy: a tool to blunt the short-term impact of FTAs

Prior to the current downturn which has prompted many countries to pursue a policy of protectionism, we used to see the word “FTA” all over the media. Each FTA (Free Trade Agreement) is usually signed by two or more countries that have agreed to eliminate tariffs, quotas and preferences on most, if not all goods and services traded between them. A successful FTA is expected to result in an increase in income and subsequently wealth and well-being for everyone in the participating countries due to specialization and division of labour. As an example, A and B each initially produce both milk and beef despite the fact that A is better than B in producing milk while B is better than A in producing beef. With FTA in place, A is expected to eventually produce only milk while B only beef.

Although simple and logical, some FTAs have not been moving in the right direction because of intense lobbying by people who are at risk of losing their jobs once FTAs are in full force. Despite knowing that job loss is nothing but just one of several short-term side effects of FTA implementation that will in time rectify itself, government has to show that it considers the sentiments of the common people and so, has resorted to providing subsidies to the affected industries with the intention of sustaining them. Too much subsidies however create the false impression that a particular industry is more competitive than its counterpart in another country when it should have been otherwise. It also allows the industry receiving subsidy to have the unfair advantage of quoting below the price of its counterparts receiving no subsidy, ultimately causing people who should not have lost their jobs to end up losing theirs.

This very implication of government subsidy has been the main contention point between countries that are engaged in talks to liberalize their market. Countries that are very confident of the ability of their industries to compete globally/regionally without any subsidy have boldly requested that subsidy elimination among participating countries be set as a pre-condition for further talks.

I personally think that fulfilling such a request is dangerous and lacking in foresight. If a country removes government subsidy for a particular industry and yet does not have proper plans in place to absorb the laid-off workers into the non-subsidized industries, it will end up increasing the unemployment rate and its related consequences such as social unrest.

One way a country in such a position could negotiate is to propose that it be allowed to continue subsidizing the industry in the spotlight but at a rate that is just right to sustain the industry and would not in any way affect the competitiveness of its counterpart in other countries. For example, if the cost of producing a liter of milk is $2 in country A and $3 in country B, country B should be allowed to give a subsidy of $1/liter to its milk industry until the industry is able to sustain itself by becoming as competitive as its counterparts if not more or until sound plans are in place to absorb the laid-off workers if the industry begins to cut jobs. Of particular concern is the potential exploitation of the subsidy system by the milk producers, i.e they will not put in any effort to boost its competitiveness and instead live off government subsidy for as long as possible. This can be easily overcome by setting a deadline where subsidy rate will drop to 0% regardless of whether the industry can fend for itself or not.

Biologics or Not?

A white paper on Pharmaceuticals industry by PricewaterhouseCoopers (PWC) mentioned that 55 of the 106 (~52%) blockbusters on the market in 2007 were for specialist treatments. The report further stated that the sales of all specialist therapies could reach US$295-300 billion by end of 2008, accounting for 44% of worldwide spending on prescription pharmaceuticals. With these data, it is clear the demand for specialist medicines is climbing up. And so the most important question in the mind of most pharma industry CEOs is definitely: Should we venture into the business of specialist treatments?

From the economic perspective, the answer is clearly yes as shown by the data above. However, in our complex world, decisions are not made solely from a single perspective. The work of an economist, for example, always involves a balancing act, requiring one to defend his beliefs but at the same time, being mindful of the views of the opposition. This often results in economist supporting a bipartisan policy between his intended policy and that of his rivals, achieving success for those he represented but dampening the impact on those he didn’t represent.

This brings me to the main objective for writing this article: To challenge decision-makers to think twice before giving his nod to venture into this business. Note that I have made the assumption that venturing into the business of specialist treatment means venturing into biologics since it is the preferred type of drugs. First, the cost of developing a biologic (as this protein-based compound is called) is approximately US$1.2 billion, close to US$400m more than the average for a small molecule. Each biologic, on the other hand, is only capable of providing treatment to a mere 3% of the population. This will certainly increase the price of each unit of drug as the development cost of the biologic now has to be distributed over a smaller number of units, in accordance with the much smaller population that it treats. Without subsidy, only a select few can afford it. Can the revenue obtained from the smaller population cover the cost of development, marketing and etc?

A subsidy, on the other hand, does not equate to no troubles. The higher price is sure to increase the level of scrutiny of approving authorities before the subsidy is disbursed to the patients or the company. Can the company sustain itself when this arises? Will it encounter cash-flow problems?

I have also simplified the decision-making process by not taking into consideration the hot issue of “pay for performance”, which essentially shift the price determination activity from the company to payers (government and patients). Without “pay for performance”, all it takes is a patient in need of treatment and a health professional prescribing a drug for the company to obtain the revenue which it has fixed. With “pay for performance”, another factor has to be taken into consideration: outcome of the treatment. If it is below expectations, the revenue obtained may be drastically reduced.

Second, unlike small molecules, each biologic appears to have a broader range of activity and has higher probability of generating immune response. Anyone marketing it must have considerable scientific knowledge, in particular those relating to the risk, so as to communicate it clearly to the relevant people.

In addition, as the price determination activity has effectively shifted from company to payers, marketing and sales people have to engage these people beyond the conventional task of promoting their drugs. They must be able to feed the views of the payers to the various functions within the company, particularly the R&D function so that they can be taken as one of the many considerations of the development process.

Last but not least, many biologics have to be ordered when needed instead of being stock-up, as they are expensive (you don’t want to lock your money in inventories) and have short lifespan. They also must be transported under special conditions because they are prone to degradation. The development of the necessary infrastructures as well as the training of manpower to support all these are sure to further bump up the cost of specialized treatment.

In conclusion, the decision to venture into specialist treatments is not driven by economic perspective alone. It is imperative that many factors such as those shared above be taken into considerations.

Do Treasure Second Chances

We commit many mistakes in life. Though painful, they make us learn the hard way and emerge stronger. Once the predicaments are over and we get second chances to rectify those mistakes, we should treasure the opportunities because when you commit the same mistake twice, people’s perception of you will not be pleasant. Here’s one you should never done.

A couple of years ago, while I was still pursuing my undergraduate degree, I got to know a scholar (let’s call him Bill.) Bill was an exceptional student, having been offered the scholarship after many rounds of competitive selection process. For the first few months, Bill was perfectly fine, attending classes regularly just like the rest of the students. Soon after, he began to skip lessons and failed several subjects. By year two, Bill had lost his scholarship and needed to take up study loan to pay for his tuition fees as well as his daily expenditure.

Sometime in early year four, Bill realized his mistake and began to work hard. It was an amazing feat he managed to graduate in time but his results was so bad there was no way the school could give him a good Honours classification. Consequently, his job search was more difficult than most of his peers. However, Bill’s sheer persistence (including providing free labour for about three months) moved the supervisor and he was offered a job. Seeing his keenness to learn, his supervisor was even willing to argue with the school to allow him to pursue an MSc programme. Bill began paying off his study loan and within two years or so, he had cleared about 70% of his loan which was impressive.

But just a month ago, I heard that Bill had reverted to his old ways. He had been absence from work for sometime and could not be contacted. His work contract had been temporarily suspended and according to a close friend who had visited him, he had been playing online game for almost 24 hours a day since he began staying at home. When asked what his future plan was, Bill said he needed time to think through it.

I really can’t understand the logic behind his actions. Doesn’t he learn from his past mistakes? Doesn’t he know second chances are not easy to come by? There are many who have been waiting patiently for second chances, but for some reasons or another, they never come. For those that have second chances, grab and treasure them.

Pragmatic Friendship

In the past, I used to have very good impressions of my buddies, believing that I could always rely on them whenever I needed help. My experiences however have convinced me that those were just wishful thinking on my part.

Here's the first one: While working as a research officer about 2 years ago, I thought of switching to another job to widen my exposure. I told a good friend of my intention during a weekly dinner and he mentioned that his company was looking for people. He asked me to pass my CV to him and promised to forward it to the HR department. A month pass and when I enquired about it, he said that due to a policy change, the company was no longer interested in hiring people with my background. I trusted and thanked him for trying to help anyway.

Approximately 2 months ago, I discovered something unpleasant during another weekly dinner with him. Then, our conversation was about his ex-housemates. According to him, they had asked him if his company needed people. He said that although not keen to help, he tried to show his kindness and suggested that they passed him their CVs. He however did not pass their CVs to the HR department as he was afraid that if they managed to get employment offer, they would be a threat to him. Naturally, that kind of tell me what he did with my CV 2 years ago.

The second one happened more recently than the first one. Another good friend had asked me if I was interested to join his company and promised to get back to me only to conveniently and selectively forget that such an episode had occurred.

Having shared these 2 experiences with all of you, let me just say that it is not my intention to stop you from making friends because we are after all gregarious creatures and life will be more colourful if we have wide social circles. The objective of this post is to tell you that in this pragmatic world, true friends are extremely rare and therefore, let's not hope for too much from our friends (even those we classify as best of friends), especially if they deem those requests as threats. Usually, money (wealth) is one of the main reasons. In my case, it is employment.

Myanmar’s Military Junta: Preserving National Unity?

President SBY of Indonesia gave a public lecture in LSE on the sideline of G-20 meeting last March. When asked about his view on the policies of Myanmar’s ruling military junta, particularly those towards the oppositions, he mentioned that the military junta had no other options but to enforce its repressive policies because if it didn’t do so, Myanmar’s diverse ethnic groups would fight one another and cause the country to break apart. For a while, I thought it was a reasonable explanation but as I read more articles on Myanmar, I start to question its validity and strongly believe that SBY was just paying a lip service to a fellow member of ASEAN.

My basis for having such thinking is that most if not all of the junta’s actions appear to have no correlation to preserving national unity. When cyclone Nargis struck for example, one wonder how not mobilizing soldiers to rescue those in need as well as intentionally slowing down the entry visa applications by foreign aid workers would preserve national unity?

On the political front, the last few reasons given to extend opposition leader Aung San Suu Kyi’s house arrest were downright baseless. Its latest action of preventing her doctor to treat her illness was obviously extreme if carried out in the name of national unity.

To me, its actions look more like a desperate cling to power and preserving national unity is nothing more than a party line to legitimize the regime. If that’s true, then why is international pressure on the regime not as strong as that compared to other countries with human-rights violations? (Pretty sure the international community is not blind.) Well, the sad reality is the military junta poses no real threat to any major powers or its immediate neighbors at the moment. In addition, it has also reiterated its commitment to restore democracy in several international gatherings, albeit at a very slow pace. Unless it starts acquiring nuclear weapons or showing hostility like North Korea and Iran, it seems that Myanmarese have to live with this regime for a foreseeable future.

On Nurturing Your Subordinates

Last Friday, I had dinner with a good friend who shared that he just met his ex-colleagues the day before. From the gathering, he realized that many of them had left his ex-department. And as he expected, there were rumors of more impending talent outflows. Quite naturally, our conversation developed along the line of talent turnover.

In my view, talent turnover is a common occurrence in every organization as people move on for various reasons: greener pastures, change of environment, etc. Just like unemployment rate, it is never possible to keep the rates at 0%. What can be done is to minimize them. While talent turnover is normal and acceptable at certain value, talent turnover of 1 person/month in a department of 15 is abnormal and warrants more investigation.

From what my friend told me, I believe the high talent turnover in his ex-department is mainly due to the inability of the management, particularly the direct supervisor, in nurturing his/her subordinates. The department may be able to continuously hire talents with great potential but without the proper training, these people will not be able to realize his/her full potential. Worse still, they may end up psychologically weaker than they were when hired and my friend happened to be one of them.

He joined the company brimming with confidence, having just cleared 3 rounds of interview. It was one of the happiest moments in his life, very sure he had finally found a career with bright prospects. Then the nightmare begins. Management indecisiveness caused him to change each presentation 5-6 times only to end up with the original slides and flow. Large portions of his written work which he spent days working on (at times, sacrificing the precious time that he could have spent with his loved ones) were deleted or replaced without explanation. His position as a driver in the teleconferences or meetings were cast aside as his direct supervisor cut him off and started speaking as if she was the only representative.

As time passes, his confidence continued to erode. He began keeping quiet, choosing not to mention his ideas, lest they were put down. He started to stammer when he spoke to the management. In fact, close to 1 year after leaving, he still has the phobia of expressing his personal opinions. He repeatedly proof-read his writing and practice what he wants to say, looking for the non-existent mistakes that may result in misunderstanding on the receiver’s side.

I empathize him for having such a bad experience and to prevent the same from happening to others, I would like to urge managers to evaluate their current policy on nurturing as the impact of poor ones on their subordinates may be long-lasting.

Balancing Ambitions and Self-Contentedness

I have always been a very competitive person since young and I gave the credit to my late grandfather for instilling that nature in me. Thus far, it has served me well, particularly in my life as a student. It spurred me to work harder, to be the top, to be the crème de la crème. Competitiveness and ambitions go hand in hand and naturally, as my competitiveness grows, so does my ambitions. Thus, is it a good thing to be ambitious?

From the perspective of career-minded people, the answer is a definite ‘yes’. Ambitions allow one to set high goals and think of various ways or permutations to achieve them. Ambitions make one more efficient and more productive, 2 of the main criteria that employers look for in job applicants. Without ambitions, one tends to be contented with his current situation and thus unlikely to put in that extra effort. Is being contented then necessarily a bad thing?

If I had been asked this question just a year ago, I would probably have given you an ‘isn’t-it-obvious’ look before replying firmly: yes! However, experience has taught me to think twice or even more before giving a firm ‘yes’. Unlike words such as diligent and lazy, which when used, directly imply the inherent character of the person as good and bad respectively, the words ‘highly ambitious’ and ‘easily contented’ are not so easily categorized.

‘Highly ambitious’ could mean one is working hard to achieve his goals but at the same time, has sacrificed many things around him in pursuit of his goals: his family, his relationship or even his current job (if his goals have no links to the existing one). Can this ‘highly ambitious’ person be categorized as a good and hardworking person?

‘Easily contented’ could mean one is not putting any additional effort beyond that required but at the very least, he does not sacrifice other things which are dear to him. Can this ‘easily contented’ person be categorized as a bad and lazy person?

I am a very good real-life example of this ‘highly ambitious’ person and am not proud of it. In pursuit of my goals, I have sacrificed many things around me, things which are dear to me. I regret my actions and wish that I can turn back the clock.

If you don’t want to learn it the hard way like me, here’s an advice: A good balance between ambitions and contention is necessary. While pursuing your ambitions, do make sure that you do not sacrifice the existing things. If you begin to do so, then perhaps you should try to slow down such that you do not compromise the existing things. All in all, cherish what you have even as you are in pursuit of those greater goals.

Economics Lesson from Mahmoud Ahmadinejad

Besides Mr Kim Jong Il of North Korea, another leader that has always amazed me is Iran’s Mahmoud Ahmadinejad. His habit of taking potshots at the Western countries, particularly US has never failed to get media attention, at times taking the entire cover page of established newspapers. His latest one during UN conference on racism sparked massive walkouts and shouts of shame by the participants to the extent that Mr Ban Ki Moon had to publicly comment that Mr Ahmadinejad had misused the UN conference to further his own agenda.

Just when the world has started to put the ugly episode behind, Mr Ahmadinejad made an interesting comment on economics. In brief, the content is he has no knowledge of economics and is quite proud of it. As if to provide compelling evidence, the media reminded the readers of his insistence for interest rates to be kept low to help the poor despite warnings that it may result in high inflation.

In view of the upcoming Iranian Presidential election, we know it is politically not a good comment. By giving this single comment, he had effectively portrayed himself as the cause of Iran’s deteriorating economy and that will inadvertently reduce rather than boost his chances of being re-elected.

From the viewpoint of an economics student however, the evidence given is a very good example of the consequence of not exercising balance when crafting economic policies. For a while, I have been trying to find a real but simple example to stress the importance of balance in policy-making. That search ended this morning when I read an Economist article on Mr Ahmadinejad.

Here, the two opposing forces are interest rate and inflation rate. A low interest rate means lower cost of borrowing but the increased spending is likely to increase inflation rate which is not a good thing because it will increase the price of goods. A high interest rate means higher cost of borrowing but the reduced spending is likely to decrease inflation rate which will keep price of goods in check. The trick is to find a particular interest rate that allows for healthy borrowing but at the same time, does not increase the price of goods drastically.

In Iran’s case, the insistence of Mr Ahmadinejad to keep interest rate low so that his supporters remain happy has resulted in high inflation and will ironically make it harder for his supporters to purchase their daily necessities and continue smiling.

I am sure Mr Ahmadinejad regrets making the comment and is probably trying to find out why none of his aides reminded him to watch his mouth. Regardless I thought the comment is timely, at least for the Iranian people whom I believe deserve more than another term of firebrand rhetoric.

Indonesia Votes: Military Men ≠ Able Administrators

I know all of you must be wondering why my blog posts have been on Indonesia everytime I touch on political issues lately. Well, there is really no particular reason. Somehow when I think of Indonesia, I just realize that there are so many political issues I can ramble about. By the way, if any of you think that I am campaigning for certain political parties due to the ongoing election, let me set things straight: I am not.

Many of you who have been following Indonesia’s political development would have probably noticed that despite the enactment of laws to limit the involvement of the military in the politics, men with military background remain popular with the masses. One look at the list of politicians and you will realize that many have served in the military at some point of their careers. In fact, for the upcoming presidential election, candidates are either ex-military officers themselves or have ex-military officers as their running mates.

For some plausible reasons or pure coincidence, Indonesia under ex-military officers has been rather stable and prosperous while Indonesia under civilians tends to move dangerously towards anarchy and political turbulence. The current administration of SBY, an ex-military officer, is the only administration expected to fully complete its 5-year mandate since the downfall of Suharto. The previous civilian administrations do not complete their mandate for one reason or another. This by itself is sufficient to give many Indonesians the strong belief that only people with military background are capable of leading them. But are people with military background necessarily able administrators?

The answer is no. Although it is true that military training can turn one into a firm and decisive person, and that these traits must be possessed by whoever that is leading the country, these alone are not enough to qualify one to lead a country. Besides being firm and decisive, an able administrator must also possess other traits such as charismatic and able to accept differences in views (which I don’t think military education emphasizes for obvious reasons).

There are many examples in Indonesia of people who are elected to public offices due to their military background but up till now, have not shown their ability to administer competently. Provinces and cities have continued to move down the charts with regards to hygiene, transportation infrastructures, etc since they elected ex-military officers as their governors and majors respectively. State-owned enterprises have lost its ability to compete with the private players since they are chaired by ex-military officers. The list of their misdeeds continues.

The message is clear: No doubt some ex-military officers like SBY are also able administrators, but this does not mean that military background and ability to administer properly always come together as a package. There are many ex-military officers who have excelled in the military but know zilch about administering. Electing them may not only slow down the pace of development in the country, it may end up causing stagnation or worse, a move in opposite direction.

The Up & Down of Life

I have always wanted to post on this issue, but many ongoing things in my mind makes me chuck it aside and before long, I have forgotten about it altogether until my conversation with another good friend of mine (Mr. C) about Mr. S.

Basically, we were talking about Mr. S’s impending departure for London as well as his marriage this coming December. Mr. C asked me whether Mr. S’s wife-to-be will be working once she joins Mr. S in London. I told him Mr. S hopes that she can work and contribute to the household income as well but mentioned that it is unlikely she will be able to find one since her degree is from Calcutta University which according to him, is not a “good” school. By making the statement, Mr. S has committed 2 crimes: 1) assuming that a person coming from not a “good” school (based on his definition of “good” school) will not be able to find a job in competitive environment such as London and 2) looking down on his wife-to-be.

Upon hearing this, Mr. C made this statement: It’s too early for Mr. S to say such words. For all you know, his wife-to-be will end up earning more money than him in the future. I couldn’t agree more with Mr. C. The life journey of a person is very long and unpredictable. Today you may be very successful but that does not mean that you will remain successful twenty years, ten years down the road, or even tomorrow. The reverse is also true. In fact, Mr. S himself experienced it. When he obtained a poorly written reference letter, he thought he could never find a good job. One month later, he landed a job with an international investment bank.

Don’t make negative comments on others just because you are up there at the moment. Life is full of ups and downs. While you may be up there now, it does not mean that you will always be up there. (Of course, if you are, then let me congratulate you.) Others that you look down on may end up being more successful than you.

Please focus, Mr Obama

Mr Obama, the US President, has been drawing flaks, both from his critics as well as his supporters lately. Among the more popular ones are comments such as he is not firm enough, he is taking a lot of time since his inauguration to unveil concrete plans to deliver his campaign promises and he seems to be everywhere (he is the first sitting President to appear in Jay Leno Show, he participates in town hall meetings over the internet and he tweets). Although all these comments seem unrelated at first sight, they are not if you spend some time poring through the articles. The root cause of these comments is none other than the lack of focus.

Lack of focus tends to divert one from the core problem and start pondering about issues that have little weights on the core problem. The result: solutions that do not pack a punch because of the inclusion of many compromises to make sure they do not hurt these groups, those groups and etc. When more information are received, more changes are made to ensure these information are taken into account. This, I guess, is the reason behind the comment on his firmness.

While it is good to come up with bipartisan (lack of focus) solutions, Mr Obama has to understand the greater amount of time needed to come up with such solutions as compared to that of the non-partisan ones as his officials have to engage more people. On the other hand, speed is the key element to solve the ongoing economic crisis. Under such circumstances, Mr Obama should cast aside, at least for a while, his bipartisan stand. However, it appears that he has not done so, evidence from the time he takes to unveil his administration’s concrete plans on ending the crisis. (Of course, that is in addition to the lack of manpower in the Treasury.)

Mr Obama’s eagerness to maintain his image as the People’s President also contributes greatly to his lack of focus. His intention, I believe, is to show the public he remains in touch with the common people. But he participated in so many events (some I don’t are suitable to be graced by a Standing President) his intention seems to have backfired: People start asking what exactly the focus of his administration is: Economy? Health? Or even music?

As an example, the middle-class tax cut he mentioned during his election campaign appears to be in limbo. He also talked about boosting the number of troops in Afghanistan; only to mention about the need of an exit strategy even before troops are sent in a couple of days ago.

I understand Mr Obama is not a veteran politician and thus has a steep learning curve after moving into the Oval Office, but surely staying focus is not an attribute that is exclusive to the White House. Even a child knows that too many cooks spoil the broth. The message to Mr Obama is clear: Stay focus or risk further drop in his popularity.

Loan or Full Payment

I believe many of you would agree with me if I say that we are currently living in “loan” economy. You can buy almost everything using loan nowadays: house, car, computers and even insurance. I am perfectly fine with taking a house loan or car loan because of the large amount of capital needed to buy them. But, a loan to buy computer or insurance, I find that too much.

I have never been a fan of loans because of 2 main reasons. Firstly, taking a loan to purchase a good or service means that you will not be using the money in your pockets or in your savings. And usually give the false impression that you still have a lot of cash to spare and hence more buying spree. For some people, it results in spending beyond their earnings. Secondly, I don’t like the feeling of owing others money. I don’t like the feeling of seeing a certain sum of money in my savings, knowing full well that a certain percentage of it does not really belong to me. When I buy something, I prefer paying in full although that will probably result in a certain proportion of my savings disappearing. I find comfort in knowing that even though I am poorer by a certain amount, the remaining is mine and not others.

Having shared my preference with others, I have to admit that some of them do have a point for taking a loan to purchase something instead of paying in full. Loan allows you to invest your cash and savings somewhere else to yield a return that is much higher than the interest rate of the loan itself. That way, you have earned yourselves a certain amount of money which you would not be able to if you have paid for the good in full. The advent of 0% interest rate loan has enticed more people to take loan because now they don’t even need to worry whether their investment somewhere will yield return above the interest rate of the loan or not (Any return above 0% is good enough.)

My advice: take a loan only if you are 1) highly disciplined (will not act on false impression that you still have lots of cash) and 2) okay with the feeling that a certain proportion of your cash actually doesn’t belong to you. If you don’t have both, in particular the first one, then join me.