KUALA LUMPUR – Datuk Seri Ismail Sabri Yaakob took over the helm as Malaysia’s ninth prime minister (PM) on August 21, when the economy went into recession for the second time in two years.
While there were calls from several quarters, including economists, for short-term aid to put the economy back on track, most of these suggestions fell on deaf ears.
“We had called for an injection of RM60 billion in direct cash support for SMEs (small and medium enterprises) and households. Instead, we had the same old project allocations. This was a missed opportunity,” said Prof Geoffrey Williams, an economist at Malaysia University of Science and Technology.
Second, we called for a much firmer approach to opening up the economy. Instead, we still have restrictions that affect activity across many sectors. At the same time, we saw an election in Melaka, and (another) one coming in Sarawak.
“So, opening up is possible and must be pushed further,” he told The Vibes when asked to comment on the PM’s 100 days in office.
Malaysia’s economy contracted 4.5% during the third quarter of this year due to enhanced lockdown measures imposed to stop a deadly third wave of Covid-19.
Collectively, the eight economic packages launched by then PM Tan Sri Muhyiddin Yassin since March last year were worth RM530 billion.
While this might seem like a big number, many grumbled that they did not “feel it” or benefited much from it. Many have compared the aid with those in the United States, the United Kingdom, or Singapore, which have been far more generous.
Approach in price hikes taken in good stride
Williams said the PM did the right thing for the economy when he decided to focus on food price controls and address supply issues.
Despite the fact that 100 days is too short a time to judge any policy, Williams believes Ismail Sabri’s approach to price hikes was taken in good stride.
Earlier this month, Ismail Sabri said rising prices of essential goods in the country were not caused by traders, but by costs accumulated at various levels of the supply chain.
He called on the Agriculture and Food Industries Ministry to cooperate with the Domestic Trade and Consumer Affairs Ministry to resolve the issue and, at the same time, look into the problem in terms of middlemen involvement.
“There has already been too much damage caused by the policies under Muhyiddin. So, it is better if there is a pause to allow some healing.
“In this regard, he (Ismail Sabri) has not imposed further restrictions or lockdowns – and that must be acknowledged. Budget 2022 was ordinary and contained the same old approach of handouts to targeted groups. It was overall underwhelming – a missed opportunity, but at least not willfully damaging.”
Meanwhile, Prof Paolo Casadio, an economist at HELP University, said the idea of monitoring the evolution of inflation is a very good point.
“It is important to prevent speculative behaviour or inefficiencies along the supply chain. We are going toward a period of increasing risk of disruption in the world supply chain, and the situation can have a negative impact on the economy.
“It is important to go ahead with additional steps, transforming this contingency plan into a strategic risk management plan of national relevance.
“I think it is worth considering a special plan with the involvement of the military force, too, in order to be able to provide basic goods and services to the population in any possible future scenario. This is not just about food, but also energy and other essential items.”
Promote investments
Williams said in order to create a better, vibrant economy, the government must focus on a long-term change.
“It must create a new approach, not one driven by lame ideas of international development agencies like the World Bank.
There has been a significant decline in domestic and foreign investments – due in part to the crowding out for private initiatives, and also an unfriendly look and feel for Malaysia as an investment host.
“Second, there should be reform and privatisation of government-linked companies within a responsible privatisation framework that I have proposed before. This would open up the economy and offer business opportunities to many in a sustainable way.
“Third, there has to be reform of the social protection system and pensions. This must be based on creating an environment for meaningful well-paid jobs, and introducing a tax credit or reverse tax system that reduces welfare and promotes support to workers. Pension reform must be immediately addressed, and the government should fund new research and new ideas in that area.
“Finally, in response to Industry Revolution 4.0, there must be a focus on creating opportunities and investments in areas that resist technology and replacement of jobs by automation to provide higher value in lower tech personal and socially-oriented activities responding to emerging megatrends – such as an ageing society, for example,” Williams added.
Accelerate upskilling, reskilling of workers
On Malaysia’s road to recovery, Casadio said in the current recession, the country risks compromising its long-term growth potential in a consistent way.
“According to our estimates, the long-term potential of the economy is not equal to 4.75% anymore like it was before this crisis, but it is at 4% now. This has strong negative implications on employment and the young.
“Due to the mismatch of worker inflows in the labour market – more workers are entering the market than there are new jobs opening – we expect that unemployment will rise over time and wage dynamics will be low and sluggish.”
He said the youth will continue to access the labour market, but with a low entry salary – conditioning their income and their life.
“There is also a qualitative aspect of the employment problem, in addition to the quantity. We saw in the crisis that only highly skilled workers managed to remain in the workforce, or improve their conditions.
“The government should accelerate the plan to upskill and reskill individuals, involving universities and the industry to face these problems in a more direct way.” – The Vibes, December 11, 2021
