August 16, 2016
By Tan Sri Ramon Navaratnam
GOVERNOR of Bank Negara Datuk Mohammad Ibrahim played it cool in his presentation of the second quarter Bank Negara Report 2016! He was understandably upbeat in trying to drum up confidence in Malaysia’s economic performance and outlook.
But he could also have stoutly alerted the Government to be more wary of the external headwinds as well as the internal threats to our economic growth and stability. Hopefully, he will soon set a new tone and leadership as the current governor of Bank Negara.
The US Department of Justice’s allegations relating to 1MDB are very serious indeed. Yet, Bank Negara has treated this serious issue rather sensitively and over cautiously.
The world is watching and foreign investment and capital outflows, and even the brain drain, could be further adversely aggravated if we are seen to take a soft stance.
Playing it cool and dismissing the allegations lightly will not inspire confidence in our public reports that our economic fundamentals and public institutions are strong and that the Malaysian economy is continuing to be resilient.
Actually, our economic growth has been declining to 4.0% this second quarter from 4.2% in the first quarter and 5.7% in the first quarter of 2015. It is more likely that our economy will slide further unless the Government spends or pump primes more to push economic growth.
As we all know, there is a strong likelihood that we are heading towards a triple deficit economy – the current budget deficit, balance of payments current account deficit, and the present debt limitations or debt deficit.
These are three likely threats (triple deficits) to the economy and it is hoped that Bank Negara will highlight how the Government should handle these possible threats in its next report.
It should also advise the Government to adopt important and urgent policy measures to combat these likely triple deficits!
What are the threats that the Government and Bank Negara must address?
1. Inflation is a major problem and has not been adequately dealt with. Food constitutes a sizeable part in calculating the rising cost of living. Have we got an anti-inflationary plan to counter rising prices, particularly of our basic needs especially food, transport and housing? If so, please let the people know the specific targets and then publicise the achievements. The people will then be consoled that these vital issues are not being played down or, worse, swept under the carpet.
2. Unemployment and low productivity and thus low incomes, especially among new school and university graduates, would be worsening now. This could undermine social stability yet not much is mentioned about what plans are in train to beat these problems. If the Government is slow to share its plans to counter unemployment, low productivity and low incomes, then Bank Negara as the advisor to the Government could perform a more active or hotter role rather than playing it cool.
3. The triple deficits in the budget, possibly in the balance of payments current account and the debt deficit as well, can be tackled more effectively if our economy is made more competitive. But our policies continue to be governed by the old NEP of preference for government agencies like the GLCs. There is still public sector predominance in the alienation of land for vital agriculture and food production, expanding business and investment, and in the award of big infrastructure contracts. Thus, the private sector, both local and foreign, feel constrained in its participation and contribution to economic growth, employment and rising incomes.
The natural and national drive to improve the wellbeing of the rakyat can be badly inhibited. The rich are thus getting richer and the poor are becoming relatively poorer. What plans have we got to narrow the gaps soon? Will Budget 2017 introduce measures to narrow the income gaps?
4. The triple deficits can cause the economy to decline. We cannot therefore afford to play it cool when the socio-economic and political problems are seriously heating up. We cannot ignore the fact that the socio-economic, religious, racial and political problems are all inter-related and can hold back our national development and progress. We cannot wait for a so-called tipping point. We have to anticipate problems and move faster to counter the rising ones.
5. Given our short-term constraints to effectively manage our likely triple deficits, we have to show greater priority in doable policies in the short term. These should be to drastically cut down on corruption, cronyism and government expenditure wastage. But are we acting fast and efficiently enough to solve these long-standing and festering issues? Many seriously doubt it. In the meantime, the economy and poor Malaysians continue to suffer the most.
Given the domestic and external headwinds and threats to our national growth, development and progress, we have to recognise the need for a sense of urgency to adopt new policies and techniques to promote greater national resilience. With the general election looming large on the horizon, and likelihood of it being sooner rather than later – even as early as next year since the international and domestic uncertainties are steadily growing larger – we cannot afford to be cool lest we become too complacent!
Tougher policy decisions by the Government and Bank Negara have to be taken soon to counter the national threats facing the economy, some of which are mentioned earlier.
If we play it too cool, we might face a rising pool of deeper problems and experience more decline. Then it may too late to arrest the possible slide into the soup!
Let’s all be more alert and rise to serve our beloved country with greater integrity, truth, righteousness and justice for all!
View original article in The Star.
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