THE prime minister has appointed very credible personalities to be on the Special Economic Committee tasked with recommending measures to address the economic problems facing the country — the rising price levels, the outflow of funds and the falling ringgit.
Most of those named were veterans of the major restructuring programmes undertaken in the aftermath of the 1997/1998 East Asian financial crisis to restore confidence in the economy and they did an excellent job of creating a stronger financial and corporate sector, complementing the internationally acclaimed financial sector reforms carried out by Bank Negara Malaysia. They, and our central bank economists, were also instrumental in advising the government on the groundbreaking fiscal decisions of removing the fuel subsidy and introducing the Goods and Services Tax, which no doubt were tough decisions for the PM to make as everyone loves subsidies and no one likes taxes.
The fact that he stood out the fierce politics showed his courage in doing what needs to be done. Without these bitter antibiotics, the country would be in the intensive care unit by now. Thanks to the preemptive measures, we are still in good shape, though limping because of other factors, especially 1Malaysia Development Bhd.
As everyone knows, the current economic stress and pains are not unique to Malaysia. Other countries are also seeing a disruption in their economic activities due to the uncertainty in the world economy, fuelled by the speculation about the timing of the increase in United States interest rate, the surprise move by China on its economic management, and whether these global changes will further depress the oil and commodity markets in the coming months. The volatility that has rattled markets everywhere has affected Malaysia, too.
There is nothing that we can do about these external factors, but there is a lot that we can do internally to address the factors affecting confidence in the business community by tackling the politically sensitive reforms that have been discussed and reported in the New Economic Model (NEM). Everyone is waiting to see whether this time, the new committee will act on the issues regarding education, the New Economic Policy (NEP), and the institutions of law and order.
These are the structural reforms necessary for making the private sector convinced that Malaysia is truly committed to its stated objective of making the business sector the engine driving the country towards achieving a high-income status by 2020, which is only a few years away. An announcement by the prime minister about implementing the structural changes recommended in the NEM can make a difference in lifting sentiments and giving hope for a brighter future.
The expectations on the committee are high because of past disappointments. On education, there was disappointment when the government announced a deferment in making English a compulsory pass subject in school examination. It is a flip-flop that has been widely criticised. Before this, the teaching of Maths and Science in English was also abandoned, causing many parents to lose faith in the national education system.
A policy reversal of this magnitude gives the impression that when it comes to the hard reforms, the government may back down to pressure groups at the last moment. It is, therefore, important for the government to make a clear commitment on using more English in the education system from primary level as employers are concerned about the language proficiency of employees.
Malaysians and the business sector need to be reassured of government resolve for dealing with high-level corruption.
When the prime minister announced a national consultative committee to study the proposal for regulating political funding, there were many sceptics who suspected it would be another disappointment, like the about-turns on English and the Sedition Act. The legislation on political funding is not a new idea; it was raised before and rejected by all political parties five years ago. Yet, we know that political funding is closely linked to bad political ethics and is a favourite channel for money laundering. Any effort to erase Malaysia’s bad image on corruption must start with cleaning up money politics.
Many have commented that while the NEM has made bold recommendations about reviewing the 45-year-old NEP so as to make it socially just for all races and minimise the distortions and wastages that have cost the country so much in terms of lost opportunities, the government itself has not made a clear commitment to the change.
As a result, there is concern about how soon the country can move towards meritocracy and a more competitive environment in both the public and private sector, and whether Malaysia will be left behind as other Asean countries introduce major reforms to improve the functioning of their market economy, and thereby make their country more attractive to foreign investment. The committee cannot afford to gloss through this important reform of the NEP as it is obsolete in the competitive global economy.
The committee must also address the institutional reforms necessary to strengthen the rule of law and order in the country, and restore confidence in the integrity and independence of public institutions in view of the recent events when officers in key government agencies investigating the 1MDB and related issues were subjected to interference in their duties.
Public institutions such as Bank Negara, Malaysian Anti-Corruption Commission and the Attorney-General’s Chambers must be seen to be professionally independent of ministerial control as this is extremely crucial to maintaining Malaysia’s reputation for the high standards of governance and for providing the checks and balance in the system of administration, which have been the key factors in our economic success.
Investors prefer operating in a country where there is openness than in a country that places restrictions on human rights and free flow of information, as they know from the experience that democracy, for all its faults and frustrations, is more lasting than dictatorships and religious autocracies. The committee should advise the government that a good policy package to restore confidence in the economy must include measures that enhance our democracy and the supremacy of the Federal Constitution.
The committee has a difficult task ahead in dealing with the reforms that really matter for sustainable growth. Time is of the essence as 2020 is fast approaching.