FEBRUARY 20 — The Fourth Quarter GDP growth figures for Malaysia which were released on the 16th of February 2024 showed a slower than expected growth rate of 3.0 per cent which resulted in the Malaysian economy growing at 3.7 per cent for 2023, lower than the initially projected 4 per cent.
While economists and policy makers will debate and discuss various reasons for why this is the case — lower external demand resulting in a drop in exports and a fall in manufacturing, for example — for the person on the street, they would not be able to feel or tell the difference between a 3.7 per cent and a 4.0 per cent GDP growth rate.
The government needs to understand that debating and discussing the nuances of statistics, while important to those in the financial sector, has very little impact on the masses and the voting population.
For them, what they have been negatively impacted by since the opening up of the economy post Covid19 in 2022 has been as follows:
(i) The expiry of the loan moratorium for housing and car loans at the end of 2021, no more EPF withdrawals after 2022, and the end of Covid19 related assistance at the end of 2022
(ii) Above normal headline inflation rates of more than 3 per cent in 2022 and between 2.5 per cent to 3 per cent in 2023 due to supply chain disruptions from Covid19, the war in Ukraine and increased imported inflation due to the weak ringgit and less disposable income from rising interest rates
(iii) The increasing strength of the Singapore Dollar to RM3.56 / S$1 today that has been Malaysia less attractive as a place to work, especially for those living in Johor
At the same time, businesses have been feeling pressures because of the following:
(i) A sudden increase in electricity prices in Dec 2022 because of delays by the previous government in implementing the Industry Cost Past Through (ICPT) mechanism
(ii) A shortage of foreign labour which resulted in upward wage pressure for existing and new staff (without seeing increases in productivity)
(iii) Increase in costs to comply with changes in the Employment Act in 2023
(iv) Increase in costs because of the weaker ringgit, the war in Ukraine and supply chain disruptions
(v) Increase in costs in hiring new foreign labour (including expensive “agent” fees)
In addition, despite the high Foreign Direct Investments (FDIs) announced, there is usually a lag of a few years before these FDI are actualised and a few more years before the local supply chain ecosystem is integrated into the activities of foreign investors and the benefits can be felt “on the ground” among those who provide other services to this ecosystem.
Hence, the government should not be surprised if the relatively positive economic numbers announced (at least compared to the Covid19 pandemic times) is not received positively by the person on the street.
What can this unity government do in response to the prevailing public sentiment that the economy does not seem to be well-managed at the moment? The following are my recommendations:
(i) The government should acknowledge the challenges it is facing in managing the economy and stop blaming the past governments on everything including 1MDB causing the slide in the ringgit. This makes the current government seem ineffective to the public and also brings attention away from some of the positive government policies which have been announced such as the National Energy Transition Roadmap (NETR) and the New Industrial Masterplan 2030 which will take some time to actualise.
(ii) Have policy consistency so that families and businesses can plan ahead for issues such as increase diesel and petrol prices when the subsidies are gradually withdrawn this year. Till now, we don’t have any concrete timelines on when these withdrawals are going to take place and more importantly, what is the amount of targeted subsidies that will replace these targeted subsidies and who will be eligible for them.
(iii) Announce rollout plans for the important initiatives that were in Budget 2024 including funding details for the NIMP 2030, NETR related funding schemes, tax incentives for Global Business Centres, just to name a few examples. The longer these are delayed, the less confidence the public will have in the implementation agenda under this Unity Government.
(iv) Announce and roll out initiatives related to important economic catalysts that will have significant multiplier effects. These would include rolling out the new MM2H categories (important for the property, tourism, and education sectors), announcing the MRT3 Line 3 Project (important for the construction industry) and working on specific initiatives that were identified in the joint press statement between Malaysia and Singapore on the Special Economic Zone (SEZ) for Johor, just to name a few.[1] These announcements will not only get the market excited but they will translate into quickly felt economic benefits on the ground.
(v) Finally, this government needs to have better strategised and coordinated communication plans so that it doesn’t end up shooting itself in the foot. One recent example is the announcement by the Chair of the Food and Cost of Living Chairman and Bukit Gantang MP, Syed Abu Hassin on the introduction of a single category of “Beras Madani” or Madani Rice costing RM30 / kg which had not even been decided by the Ministry of Agriculture or the cabinet. This kind of amateurism in public policy announcements only further contributes to the narrative that this Unity Government is not competent in the management of the economy.
It’s not too late to save the economic narrative for this unity government and for it to prove to the person on the street that their livelihood will be better under the Madani government. But time is slowly but surely running out.
* Ong Kian Ming is a former Deputy Minister of International Trade and Industry.
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
