OCT 29 — No problem can be solved from the same level of consciousness that created it. — Albert Einstein
Malaysian economy — the diagnosis
No one may object to the statement that the Malaysian economy is in a problematic state.
The government of the day had embarked on its journey of economic
transformation via its alphabet soup of GTP and ETP in tackling the
NKRAs with all sorts of BR1M, KR1M, PR1MA, TR1MA. The government
in-waiting then had its version of economic reform via its Buku Jingga
and all sorts of promises and hopes. Yet, the bottom line still seems
shady.
Fiscal prudence is pivotal when the deficit and debt level are
alarming. All eyes are set to monitor the federal government debt that
does not show any indication of not breaching the ceiling rate of 55 per
cent of GDP (2013E: 54.2 per cent; 2012E: 53.7 per cent), given the
generous vis-à-vis lavish spending by the incumbent, besides vast
natural resources vested in our land. The government’s fiscal discipline
also needs to be tightened, given the precedents where actual spending,
especially operating expenditure, has been exceeding the original
budget due to additional supplementary budgets tabled when the year just
begins.
Inflation seems unavoidable as early as the first quarter of 2013
when the sudden available money and vouchers to be pocketed and disposed
of may result in a situation where “too much money is chasing too few
goods”, thus pushing the prices of goods and services further up despite
the gradual rise of material cost nowadays.
The level and profile of household debt will then be continuously
monitored by Bank Negara. As reported, household debt as a proportion of
the country’s gross domestic product in 2011 is translated into a ratio
of 77 per cent, the bulk of it came from the financing of sky-rocketing
property and excise-duty inflated cars.
Inflation certainly has a bearing on households with a monthly income
of RM3,000 and below and those living in urban cities as this segment
of households is more vulnerable to potential income shocks due to
their substantial debt obligation with limited buffers to counter any
loss of income to sustain consumption and price increases.
As denounced by Jeffrey Sachs in his book “The End of Poverty”, “many
factors can affect a country's ability to enter the world market,
including government corruption, legal and social disparities, diseases,
lack of infrastructure of transportation and communication, unstable
political landscapes, protectionism, and geographic barriers”.
In order to address and remedy the specific economic stumbling blocks
of various countries, Sachs further espoused the term “clinical
economy” and stated that “countries, like patients, are complex systems,
requiring differential diagnosis, an understanding of context,
monitoring and evaluation, and professional standards of ethics.”
Malaysian economy — the remedy
No one may object to the statement that Malaysian economy is in a dire need of fixing.
A healthy economy thus depends on the level of aggregated demand and
supply which stems from the accumulation of transactions involving goods
and services, carried out by businesses and enterprises under the
economic regime adopted by the government.
On the business side, there are two types of enterprises, those who
rely on exploration and those who rely on exploitation. Every economy
has both, but a healthy one favours the explorers. However, over time,
many explorers become exploiters once they are “too big to fail”, run
out of new ideas, extending their production lines instead of developing
new products, lobbying governments for favourable tax and contract
deals, cut costs by putting pressure on their workers, merge with
competitors to form monopoly, and manipulate customers to squeeze their
margin.
Successful enterprises invest their time in inventing better
products, serving customers more effectively, and supporting workers in
ways that enhance their commitment. Government support should be shifted
from protecting large established corporations to encouraging the
growth of social enterprises and budding start-ups.
Incentives and subsidies should be channelled to improve competency
and resilience of the people and enterprises. Regulation and taxation
should be used to nurture sustainable investment and productivity, not
to breed a generation of “know-who” that surpassed the quality of
“know-how”.
In the corridors of power, there are also two kinds of politicians,
those who rely on services and those who rely on manipulation. Every
country thus has both, but a healthy one favours the former, instead of
the manipulators who count on corruption and abuse of power. A fiscal
policy full of integrity is vital for Malaysia. The economic regime thus
must be built on values, instead of greed and fear. Flow of financing
should promote entrepreneurship and risk sharing, instead of risk
avoidance. Capitalism seems to be equated with debtism, and incremental
income must be rooted from a real economic participation and activity.
Above all, the real engine of economic growth is the people. It all
depends on our propensity to produce, to consume, to save, and to
borrow. We have to live and consume within our means, thus to save
wisely and to leverage only on productive and quality debt.
Malaysia is certainly at a crossroads. A fundamental change is
required, not just on economic performance and social quality, but also
in the people’s mindset and delivery of public goods and services that
underpin our ability to develop the country. The journey will be long
and arduous, God willing, we will succeed.
Thus, the answer to the earlier question is, you and me.
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