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Malaysian economy in better shape than you think

By Tuesday May 17th, 2016 No Comments
The Country is moving forward and is on track to becoming a prosperous and developed nation by 2020.

The Country is moving forward and is on track to becoming a prosperous and developed nation by 2020.

All too often, interplay exists between economics and politics, and sometimes, the two are complicatedly mixed up. For instance, there are economic issues which have been politicised, and there are issues which are political in nature, but have been wrapped with economic posturing.

As politics is basically about power and justice, economics, on the other hand, concern wealth and its distribution. The debate is whether politics is the central force which influences economics, or the other way around.

Giving an objective perspective on the state of an economy is not as straightforward as one may think. In Malaysia today, it appears people give their opinion on the economy based on political sentiments.

I have encountered quite a number of these “unscientific” views, especially on social media where their interpretations of the economy are based purely on political consideration, sometimes bordering on hate and hardly logical. And, worse, those who often speak out are not economists or analytical experts on the subject.

It is important first to acknowledge that any economic analysis will be just an exercise in conjecture if it is not based on facts and sound reasoning. We can agree to disagree, but the problem arises when one gives views without data to back up their claims.

For instance, some have argued that the Malaysian economy is going from bad to worse, others have said the people are destitute, and yet another, that the country is going bankrupt.

What is the basis to support such claims? Or data to justify such wild assertions, which are mostly politically-driven?

Usually, anecdotal evidence is used to support notions or beliefs. But, if that is the standard to arrive at such conclusions, then one can easily provide a counter narrative to the anecdotal evidence. Indeed, when Prime Minister Datuk Seri Najib Razak unveiled the 2015 National Transformation Programme Annual Report (NTP 2015) recently, there were a plethora of real-life experiences to prove that the economy is far from the apocalyptic scenario painted by doomsayers.

The problem here is not just semantics, but context. It is important first to be realistic in our expectations of the performance of our economy. The economy is undoubtedly in challenging times. The source of this challenging environment is primarily derived from the present state of the global economy, which is now characterised by the “new normal”, or “new abnormal”.

The slowdown in the global economy, the slump in global oil prices, the possible hard landing in China, the uncertainty in US policy monetary stance, among others, have led to domestic economic issues, such as the depreciation of the ringgit, the rise in the cost of living, and persistent high level of inequalities to manifest themselves.

Furthermore, there are other structural domestic issues underway, primarily in enhancing the competitiveness of the economy. For instance, under the Economic Transformation Programme, besides the 12 National Key Economic Areas, the Six Strategic Reform Initiatives had been laid down as “the enablers to ensure competitiveness”.

Clearly, the key performance indicators of these two have exceeded their targets by 111 per cent and 108 per cent, respectively.

These involved reforms in the economic apparatus. Some needed to be dismantled, such as the Sales and Services Tax, others needed fine-tuning, such as subsidies, and some needed to be initiated, like the Goods and Services Tax, minimum wage, and Competition Act 2010.

But most important of all, is the reorientation of the underlying purpose and “way of thinking” of the Malaysian economic management as a whole, which is now focused on sustainability and inclusiveness, with the goal of achieving a high-income and developed-nation status by 2020.

It is against this backdrop that the performance of the economy must be seen, i.e. from the aggregate data. The NTP 2015 highlighted five key indicators to encapsulate a holistic picture of the state of the economy since it was launched in 2010.

And since 2010, the economy recorded a gross domestic product growth rate of 5.6 per cent on the average until last year. So, how can they say that the economy is going bankrupt?

True, there are many other indicators to measure the nation’s prosperity and quality of life. GDP alone is not sufficient.

Perhaps, that is why the other four key indicators, gross national income per capita, trade data, fiscal deficit figures, and most importantly, overall recognition by international organisations and rating agencies, are in place to capture the other dimensions of progress.

As for the People Economy, the NTP 2015 says a lot. The poverty level has been reduced to 0.6 per cent from 3.8 per cent in 2009 and more than 100,000 affordable houses have been built. There is a 16.9 per cent reduction in reported street crime and 6.3 per cent drop in reported house break-ins. Greenhouse gas emissions have been reduced by 33 per cent, preschool enrolment has risen to more than 84 per cent nationwide, and many more.

Sure, this is far from perfect and we should do more, especially in increasing productivity, addressing the spike in the cost of living, reforming the labour market, enhancing the education system, wiping out corruption and abuse of power, and changing our overall attitude and mindset.

Surely, such facts and figures in the NTP report do not imply that our society is “destitute”? Far from it. We are moving forward and on track to becoming a prosperous and developed nation by 2020. Dr Irwan Shah Zainal Abidin is senior lecturer at the School of Economics, Finance and Banking, Universiti Utara Malaysia

Source: NST

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