Government facing an economic dilemma

By Ramon Navaratnam | 25 Nov 2011
The Malaysian Insider

NOV 25 — At least two economic ministers, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah and Tan Sri Nor Mohamed Yakcop, the minister in charge of the Economic Planning Unit, yesterday sounded greater caution on our economic outlook next year.

The European economy is weakening and the finance minister stated that government is “closely monitoring the European situation”. This shows his serious concern as to how low the European economies can go and how much we would be adversely affected.

The economic planning minister at the same time stated that “the global economic recovery is likely to stay weak and bumpy with a higher probability that things could get worse.”

We cannot therefore take it for granted that Malaysia can achieve a 5-5.5 per cent growth in our economy this year and anything near 5 per cent next year. Inflation could exceed 3.5 per cent next year and we could move towards stagflation which means stagnant economic growth and rising prices.

The government is now facing an economic dilemma. It would like to stimulate the economy, but the long-standing budget deficits do not allow even more budget spending, which would worsen the wide deficit. More government spending would also mean more borrowing especially for development expenditure. This, we are starkly reminded, is not prudent financing, particularly in the light of the Greece and Italian experience.

Hence the second finance minister indicated at the 16th ASLI Capital Market Conference yesterday that “Malaysia’s economy would primarily be driven by domestic demand”.

He expects private consumption or consumer spending which constitutes about 55 per cent of the Gross Domestic Product to increase by 7.1 per cent to provide the push for growth. But it may be difficult for consumers to spend more at a time of slower income growth and rising prices.

Minister of International Trade and Industry Datuk Seri Mustapa happily announced that foreign direct investment for the first nine months this year has exceeded the RM9.1 billion for the whole of last year. 

This is good news .However it is also important to state how much of our own domestic capital has flowed out of the country. Even more significantly, it would be appropriate to ask what can be done to discourage not only the large capital outflows but also the serious brain drain of highly qualified human resources? Both are vital for our capacity to fight likely recession and to progress towards Vision 2020

This may therefore be the right and an opportune time to make more transformational policy changes that would encourage more Malaysian private investors to invest at home .

We can be gratified by the World Bank’s recent assessment that “the ease of doing business in Malaysia” has considerably improved. But the business climate could be spoilt by insufficient longer term confidence in good governance, and in the prospects of better racial and religious harmony and national unity in our country. 

Thus increasingly we have to look at our business climate and outlook in more holistic ways since our domestic investors must feel more comfortable in their business sustainability in the longer term future.

Given the weakening US and European economies, and even the possibility of economic decline in China’s and India’s huge economies which are now our major trading partners, we have to take the signals for greater caution more seriously and prepare for more difficult times.

What we need to do to counter the declining economic trends is to liberalise our socio-economic and political policies further, provide a more attractive business environment and a better a more inclusive quality of life for all Malaysians. 

Finally, we can step up public private investment partnerships amongst Bumi and non-Bumi businesses in Malaysia and within Asean and our Asian neighbours, especially for the major productive and income-generating projects like the KL-Singapore high-speed railway.

In effect we have to be more resolute and innovative in facing the great dilemma and grave challenges of our times.
* Tan Sri Ramon Navaratnam is the chairman of the Asli Centre of Public Policy Studies.

  1. #1 by Godfather on Saturday, 26 November 2011 - 12:37 pm

    How ? The amounts stolen from the rakyat can be given back in the probable event of an economic downturn ? Don’t think so. Ask Shahrizat’s family.

  2. #2 by dagen on Saturday, 26 November 2011 - 12:41 pm

    The eurozone problem is bad enough but it seems there is another monster lurking somewhere in the austrian alps – threatening to trigger an avalanche in that country. Austrian banks are deeply immersed in the property market of several east european countries. And signs of bubbles in those markets are now showing.

    read on …

    Nevertheless remember folks:


  3. #3 by Godfather on Saturday, 26 November 2011 - 1:41 pm

    Prepare for more difficult times ? Where has Ramon Navaratnam been all these years ? More difficult times means we better take whatever we can, especially since there is the real risk, after 54 years, that the thieves could be made to account for their plunder after the next GE. Why do you think they are rushing to award the contracts for the patrol boats, the APCs, all under the disguise of official secrets that do no require any transparency ?

  4. #4 by Bigjoe on Saturday, 26 November 2011 - 1:48 pm

    Don’t believe it for one minute that UMNO/BN won’t trash the country’s economic to keep in power. All politician are the same everywhere and UMNO/BN politician is worst than most. All politician will abuse monetary and fiscal policy to the long term detriment of this country and UMNO/BN will if they are pushed to the wall.

    What is happening to US$ and Euro will be done to the MYR if UMNO/BN is forced it. In fact they have been doing it in bits and here already..

  5. #5 by Loh on Saturday, 26 November 2011 - 4:07 pm

    ///1Malaysia Foundation chairman Dr Chandra Muzaffar said politicians must hold fast to the ‘wassatiyyah’ principles, adding that “politicians should not sacrifice fairness and balance just to draw votes from certain races or groups to win elections.”///–

    Is NEP not drawing votes from Malays or the so-called Bumiputras who form the majority of the population? NEP is discriminatory based on race. NEP is against the constitution, and of course it is not a law. NEP is against the teaching of Islam which forbids discrimination based on race. But BN practices it for 41years in Malaysia’s 54 years’ existence.

    Muhyiddin said that the government must first satisfy the demands of Malays who form the bulk of the population, and thus the voters. That is for drawing votes from a particular section of the population.

    Democracy is meant to allow the people a choice. But to group the majority of the population to attain discriminatory capability is equivalent to tyranny of the majority. It is no different from the organization of the secret society which masquerades as a political party to gain power to bully the minority.

    Muhyiddin did not talk about fairness of the people in the society. he did not know about compassion. Indeed,making people rich, like Najib promised to make successful Malays more successful is not compassion. It is not the aspiration of NEP. It is pure racism. Racism cannot coexist with moderation. Najib had the audacity to talk about moderation in United Nations but practices racist-extremism at home. It is Bodoh Sombong.

  6. #6 by Loh on Saturday, 26 November 2011 - 4:36 pm

    ///’Can the Malays depend on PKR, can they expect something from Anwar Ibrahim? Can they defend Malay rights, Malay rulers, Malay language, Malay economy?’///–Muhyiddin, Malaysiakini

    Can a person ask those questions not racist? Malays have the same right as non-Malays in the constitution. They were classified as persons in a special position based on the needs to seek assistance. The late Tun Dr. Ismail said that out of pride, Malays when they ‘come of age’ would let go of the classification. Clearly Muhyiddin wants Malays to continue to be seen as classified in that special position, shamelessly.

    Malay Rulers need no defence. They are respected. Only UMNO uses the rulers for its own political gains. Of course no one forget that Mamakthir embarrassed Malay Rulers for his own political ends.

    Malay language does not need protection, just like any other language in the world. The people would use it and it is living on its own.

    Malay economy is something newly minted by Muhyiddin. That is racism to the hilt. In a globalized world no economy can be an island. To talk about Malay economy is to make use of the term to allow some minority privileged group in the Malay community, including Mamaks, to enjoy unfair advantage. With Mamakthir’s perverted implementation of NEP Malays are made to believe that it was in their interest that some Malays, Mamaks included, become super rich, even at their expense in their share of government resources, so that they can feel proud. Now that more Malays know that NEP is an excuse for selected politicians to enrich themselves, and are ditching UMNO, Muhyiddin coins a new term Malay economy!

    How racist can Muhyiddin be?

  7. #7 by daniel on Saturday, 26 November 2011 - 4:54 pm

    Isn’t that just stating the obvious? What a waste of space.

  8. #8 by monsterball on Saturday, 26 November 2011 - 5:07 pm

    PR politicians have sounded it too.
    But anything sounded by PR…are considered lies …bluffing Malaysians.
    Little by little they are exposing themselves as a government with useless Ministers…and the country affairs are actually managed by employees with stupid bosses…only have big mouth to talk politics…day in out.
    Malaysians are so sick of the charade.

  9. #9 by yhsiew on Saturday, 26 November 2011 - 8:07 pm

    Some people on the street suspected that the 55% ceiling of GDP borrowing is already breached as Bolehland government does not practice transparency. If the Greece government can lie about its borrowing, what do we expect from Bolehland government?

  10. #10 by tak tahan on Saturday, 26 November 2011 - 8:33 pm

    Our half past six economic expert,Idris Jala at one moment said we will be heading bankrutpcy and the next moment said we will be doing fine.Which of which is the truth?So sad and pening kepala la to have so many buffoon ministers running our nation like playing computer games.It’s just like one is death in the game,replay lor.

  11. #11 by limkamput on Saturday, 26 November 2011 - 10:07 pm

    Growth, growth, growth and more growth, this has been the stupid economic mantra for decades now. Growth for what? So that the rich shall have more opulent living, so that we shall have more moronic ipads and iphones to talk aimlessly and uselessly. Can’t we see we are creating sustainable debts in order to have that moronic and meaningless growth year after year? I say for once let the world works for food, shelter and medical care only. The rest we can shaft it. What is so worrisome about the state of the economy everywhere? I still see people go for demonstration luxuriously, I still see people lining up to buy ipads, iphones, and concert tickets. So what is the big deal growth or no growth.

  12. #12 by waterfrontcoolie on Saturday, 26 November 2011 - 11:59 pm

    No one in BN dare to talk about corruption! Why? It is so obvious by the actions we have seen so far. They will geature about the Opposition inability and inexperience which I will exchange any time against corruption! We don’t experience in stealing! We only want sincere and honest leaders. BN is already on a frenzy in reaping what they can get with their mind of uncertainty.

  13. #13 by k1980 on Sunday, 27 November 2011 - 7:13 am

    After spending RM500 million to rear 3,000 cows, bn is trying to recoup that money by making the rakyat pay

  14. #14 by waterfrontcoolie on Sunday, 27 November 2011 - 8:13 am

    There was this argument by the bankrupt MCA’s CSL that PR did not have any experience in government and hence it would be dangerous to vote them in!!!!He should have said of MISGOVERNMENT BASED ON CORRUPTION and ask Malaysians if they did like to continue with it! Given this scenario, the country will not do worse than the last 30 years by any Gomen! CSL has nothing tp offer maybe the more intimate practices related to his profession! And he emplaced his son at the top of the MCA heap thinking the Community will still support his family member! It is good that a vast majority of the Community has learned fast, hence even at the forthcoming UMNO assembly, their members have been told to tone down their racial overtone in their speeches. All these just prove that all those speeches have been purposely delievered for political agenda without much substance except to arose emotion! All Malaysians should base their votes on such perception; vote out even PR members who deliverately play this game; so that the nation will have MPs who talk about facts and figures rather than creating emotional issues which do not contribute to the progress of the nation; in fact derail most of the progressive actions which are necessary to push us forward!

  15. #15 by dagen on Sunday, 27 November 2011 - 10:32 am

    So umno is coming down hard on all these irresponsible idiots who wasted billions of our money year after year. “Pay up or get axed.” The star paper headlined. Hoi mama mamak so wat say you? Stupid question. She would willingly go for the axe of course. No problemo.

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