press release
MALAYSIAN ECONOMY IN 2010:
CONTINUING A TREND OF UNDER PERFORMANCE RELATIVE TO NEIGHBOURS
The growth rate of 7.2% registered by the Malaysian economy in 2010 requires a closer scrutiny to understand its full ramifications.
The 7.2% growth should not be viewed in vacuum and must be compared with what our neighbours had achieved in 2010. Singapore and Indonesia registered a growth of 14.5% and 6.1% respectively in 2010. Both outperform Malaysia’s growth by miles especially considering that Indonesia’s 6.1% growth was calculated on a higher base as Indonesia did not face economic contraction in 2009 unlike Malaysia or Singapore.
In the case of Singapore, the 14.5% growth was achieved on the back of a strong rebound in manufacturing sector which recorded an annual growth of 29.7%. Our performance pales in comparison on both accounts – the growth is half of what Singapore achieved while the growth in manufacturing sector was only 11.4% for 2010, nearly a third of Singapore’s manufacturing growth.
There was a big contrast in the way each government explains this in spite of the fact that both countries are export oriented and highly dependent on the global economy – while Singapore cites a strong external demand for its manufacturing products, Malaysia claims the opposite. The reality is our manufacturing products are steadily losing its competitiveness in the global market as we are relegated to the lower rung of the value chain while competitors like Singapore upgrade higher and higher on the value chain. This was pointed out a decade ago, yet nothing effective has been put in place to stem this decline apart from continuous rhetoric paid for by taxpayers’ money.
The relatively lower manufacturing growth is compounded by contractions in the fourth quarter of 2010 in two fundamental sectors of the economy. Both mining and agriculture form a significant revenue earner for the Federal Government in the form of income from oil and gas extraction and palm oil. Mining and agriculture sectors registered contractions of 1.3% and 4.3% respectively in the fourth quarter. The annual growth of only 0.2% and 1.7% in mining and agricultural sectors respectively is another symptom of stagnation plaguing the economy.
This is correlated by key indices used to gauge the sentiment of business community and the public on the direction of the economy. The Business Condition Index published by the Malaysian Institute of Economic Research (MIER) loses 5.4 points quarter-to-quarter in the last quarter of 2010, to settle below 100 points for the first time in nearly two years. In fact, the business community’s confidence on the overall outlook of the economy had been on the decline since the beginning of 2010. As for the public sentiment, while the Consumer Sentiments Index did improve to 117.2 points in the fourth quarter, it has not recovered to the level of 2007 prior to the fuel price hike of 2008.
YAB Dato’ Seri Najib should have been more forthcoming with the public to admit that there is a big disconnect between his economic grandstanding via ETPs and the reality felt by the business community and the public. There is a high degree of scepticism that the series of announcements made are only a smokescreen that will benefit the same type of ruling and business elites while the fundamental problems of the economic are left unhealed.
The fiscal management of the economy also reveals a stark difference between Malaysia and our neighbours, especially Indonesia.
Unlike Malaysia, Indonesia has managed to avoid recession in 2009 and continued to register a strong growth of 6.1% in 2010 in spite of the higher growth base, making it one of the best performing economies among the world’s top 20 rich and developing countries. United Nations Global Investment Trend Monitor (published by UNCTAD on 17 January 2011) recorded Indonesia’s foreign direct investment inflows at USD12.8 billion in 2010; only second to Singapore in this region in terms of attracting FDIs. New investments contribute 32.2% to the country’s economy while government expenditure only contributes 9.1% to the economic growth. This sterling performance was achieved on the back of moderate government spending – Indonesia’s fiscal deficit and public sector debt was only 1.1% and 28.3% of its GDP respectively in 2010.
Malaysia’s economic story is the opposite of Indonesia’s. The total Federal Government debt has ballooned to RM407 billion as at the end of 2010, representing 53.1% of the GDP. The stagnation in private investments had caused the government to rely on pump priming to fuel the economic growth, so much so that fiscal deficit remains one of the biggest economic problems the country is facing. Fiscal deficit peaked at 7% in 2009 and only moderated to 5.6% in 2010, above the government’s own target of 5.3% as set out in 10th Malaysian Plan. Malaysia only managed to attract USD7 billion worth of FDIs in 2010 compared to USD37.4 billion achieved by Singapore.
Against this backdrop, the 7.2% growth is yet another proof that our economy is sliding downwards relative to our neighbours. We are losing our competitiveness and our fiscal position is in a lot worse shape compared to the neighbours.
No amount of glossing and public relations campaigns can confuse the public of the urgent need to institute vital economic reforms to reverse the slide. Economic reforms can only be effective if complimented by an equally strong set of political reforms. Unfortunately, this government is incapable of embracing political reforms as proven time and time again, so any reactionary new economic policies will not be able to address the malaise of the Malaysian economy.
DATO’ SERI ANWAR IBRAHIM
LEADER OF OPPOSITION
19 FEBRUARY 2011
No comments:
Post a Comment