WITH the global economy uncertain and Malaysia’s economy slowing down, yesterday’s announcement of an Economic Action Council is reassuring.
The appointed EAC members must get cracking as time is not in our favour if we consider the average growth forecast of 4.5 per cent this year and next year. Things have become more complicated with new issues emerging in post-2020 Malaysia, such as the ageing population, environmental crisis and the impact of the technological revolution. An economic blueprint, therefore, which can provide vision, direction and clarity moving forward is critical.
There are three issues that need immediate attention — the slowing down of economic activities, the skyrocketing national debt and the rising cost of living. Already we are seeing a rise in the unemployment rate — a worrying 3.3 per cent, with youth unemployment three times higher. No doubt, the drag in our growth momentum is mainly due to external sources, primarily the United States-China trade war and the uncertainties of Brexit.
But, Malaysia can do its part to cushion the threat of de-globalisation by improving and deepening its export markets.
The EAC must project a visible policy stance and direction. This would boost the confidence of investors, both global and local, and, more importantly, for the Malaysian public.
The government must be clear, for instance, on its commitment to free and fair trade and its involvement in world trade. Lucidity with regard to the on-going regional and multilateral trade arrangements, such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is necessary.
Of the two, perhaps CPTPP is more controversial. Whatever the position of the government, explanation and thorough analysis must be provided, especially on the opportunity cost of not ratifying it. Vietnam is already ahead after having ratified it in November. RCEP and CPTPP are seen not just as a move to boost economic activities via trade but also to promote accountability and transparency of our institutions. A consistency in issuing statements is crucial in the business circle to avoid mixed interpretations.
Undoubtedly, the national debt needs attention. There is a need to improve government finance statistics in the near future. Perhaps, it would be wise for the government to employ a new method of statistics, known as “Nowcasting”, as opposed to the traditional “Forecasting”.
Nowcasting can address issues of delay in the availability of data, and assess several macroeconomic indicators, such as public -sector debt which can be done using the high frequency numbers such as daily, weekly, monthly or quarterly.
With Nowcasting, the government would be able to have real-time fiscal surveillance which allows for more timely responses to emerging signs of fiscal stress before it is too late. The report of Nowcasting for national debt and deficit, for instance, can also be included in the yearly budget report so that more thorough and transparent analysis can be conducted about the real state of the country’s deficit and debt levels.
As for the soaring cost of living, measures to improve the people’s purchasing power, especially the B40 and M40 groups, are needed. For the short term, the EAC could come up with more creative ways to expand the social safety net for the B40 and M40, such as devising a coupon system to be used for essential goods and nutritional foods.
Besides that, I also believe that the time has come for cooperatives to play a bigger role. Now is a good time to empower and build them up. There are many models worldwide which we can learn from and adopt, from First World to Third World nations. The bottom line is that we need to design a new economic model that can redistribute and regenerate the limited resources to the targeted segments of the population in a most optimum way.
For the long term, incomes and wages must eventually go up faster than the cost of living. This requires a systematic and holistic plan to overhaul our education system and boost the level of productivity of Malaysians. True reform in the labour market is crucial, such as the need to address our dependence on foreign workers, which is seen as a major cause in suppressing wage levels.
Accelerating labour productivity, embracing digitalisation and innovation are the ways forward. What Malaysia needs right now is the direction of where the economy is headed. More importantly, the new economic vision must cater to and embrace the challenges of the 21st century.
The writer is associate professor of Economics, School of Economics, Finance and Banking, Universiti Utara Malaysia