What Malaysia is not ready for is recession — Rais Hussin

JUNE 9 — When one sweeps away with all the issues surrounding the inadequacies of Pakatan Harapan, which are mainly exaggerated by the cyber troopers of Barisan National (or what remains of it), what remains of Malaysia is a federation of states that is as good as the sum of its parts.

If any one of the states, especially those in Borneo, begin to reject the idea of Malaysia as a federation, the country as we know it would be weakened; not unlike how the United Kingdom is weakened by Brexit. With Scotland, Wales and Ireland preferring to remain, the United Kingdom as an entity is now thrown into question.

Using this as a benchnark, any form of divisive politics can pull Malaysia apart. If not territorially then psychologically in terms of mutual suspicions of each other; which can be further made worse by racial or religious extremism. But there is a third R which can split Malaysia too: Recession.

A recession is defined by the contraction of two economic quarters. The last time Malaysia was in a near fatal position was the Asian financial crisis in 1997, and before that the meltdown in the prices of rubber and tin in 1986.

Regardless of how Malaysia has been able to evade the proverbial bullet, including the global financial crisis of 2007-2008, which led to the end of the Lehman Brothers, there is no telling if another global economic recession may trigger the economic problems besetting Malaysia right now.

As things are, the Sino-US trade war is part of the matrix of a larger war between the US and China. Tom Wright at Brookings Institution has described the conflict between US and China, indeed US and Russia, as part of the larger subset of the conflicts in the cyber security, and geo-political front.

The "Thucydides Trap” where the US and China, according to Professor Graham Allison at Harvard University, is one where both countries are entwined in a conflict which neither country can pull itself out of.

The latter is due largely to the the growing mass of the duo's economic power as two of the world's biggest juggernauts. It is also happening at a time when Asia's combined GDP has far exceeded that of the West for the first time in 400 years in 2019.

Having dominated the world for such a long period of time, the West, led by the US, is not about to roll over and play dead. Consequently, it has chosen to defend its turfs by locking China in a tariff war, that is escalating and not relenting.

Malaysia, as a trade dependent country where 30 per cent of its Gross Domestic Products is exposed to international trade, cannot avoid the economic forces of such trade war.

Indeed, just right next to Malaysia is Singapore. Singapore's GDP is 10 times more reliant on international trade. It's GDP is 300 per cent more vulnerable to the peturbations of global trade.

If Sino-US conflict worsens ever further, Singapore would be hit, and Malaysia too. This is especially true in Johor, the state closest to Singapore, where tens of thousands of workers make a beeline to working in the city state each morning.

Although the trade war has had only a 0.4 per cent impact on the GDP of China and 0.2 per cent on the GDP of the United States, the impact will begin to show by 2020 when President Donald Trump is up for re-election.

Polls amplified in the news cycle of CNN Network already showed that more than 30 per cent of the voters do believe that President Donald Trump can be re-elected. This is a tell tale sign that President Donald Trump would be emboldened by these numbers to ratchet up the trade war against China.

China, meanwhile, cannot buckle precisely because President Xi Jin Ping is not the type of leader to blink first. How Trump and Xi assert their countries' respective economic strength and political will is bound to cause Malaysian economic to be hit hard in the short and medium term.

If Pakatan Harapan wants to go beyond one term, it has to focus on enhancing it's economic performance both within the region and without.

This includes counselling US and China to exercise self restraint, a message which Prime Minister Tun Dr Mahathir can deliver both at the Asean Leaders Summit in Bangkok in late June and also once again in November 2019.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.

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