Maybank KE: Direct subsidies will no longer be realistic for Malaysia

Direct subsidies will no longer be realistic for Malaysia as the country’s ability to subsidise the economy going forward is extremely limited. ― Picture by Choo Choy May
Direct subsidies will no longer be realistic for Malaysia as the country’s ability to subsidise the economy going forward is extremely limited. ― Picture by Choo Choy May

SINGAPORE, June 5 — Direct subsidies will no longer be realistic for Malaysia as the country’s ability to subsidise the economy going forward is extremely limited since the Covid-19 pandemic has affected its coffers.

Maybank Kim Eng’s head of Regional Equity Research, Anand Pathmakanthan said the crisis has affected Malaysia’s fiscal position as it impacted a lot of important sectors, including its biggest revenue generators, namely oil and gas as well as tourism.

Speaking at the “Maybank Kim Eng’s INVEST ASEAN 2020: Capitalising on the Recovery from Lockdowns” virtual conference, he added that the globalisation trend which had benefited Malaysia previously ”is now looking to go in reverse.”

“I’m afraid that is the reality, going forward. If you want solutions, be it for growth or development, the private sector has to step forward because the government is not in the position to take the lead anymore,” he said.

He said the government is facing changes at a time when it is short of funds.

“We have forwarded evidence based on the economic stimulus plan, a huge headline number of RM260 billion or about 20 per cent of the country’s gross domestic product.

“Only about 20 per cent of the sum is coming from the government. The rest is basically allowing us to withdraw from the pension fund or loan moratorium or other non-government entities subsidising the population,” he said.

Anand highlighted that the government had begun to move towards providing incentives instead of direct subsidies a couple of years ago, citing the development in the semiconductor as well as the electronic manufacturing services sectors being the result of government incentives to boost investments in robotics and automation.

He said technology-based companies are seen looking to develop the domestic supply chain for their businesses.

“They are actively engaged with the government to secure lands, subsidies and incentives for the supply chain development in Malaysia by the private sector,” he said, adding that in the EMS sector, companies have started to replace foreign labour by automating processes.

“That is only possible because the government provides incentives to invest in robotics and automation. The government can play a part there, right in the centre, but direct subsidies I don’t think would be realistic at this point,” said Anand. — Bernama

Related Articles