Economy set to reach greater heights

Publication: NST

Date of publication: Aug 31, 2013

Section heading: Supplement

Page number: 002

Byline / Author: By Zaidi Isham Ismail

MALAYSIA'S economy has come a long way since the country's independence in 1957.

From an agriculture-based backwater, the nation's economic base has diversified to an industrial powerhouse and branched further into a knowledge-based economy to become one of Southeast Asia's most successful economies.

From poor farmers and clerks, Malaysia now enjoys "duduk sama rendah, berdiri sama tinggi" (equal standing) among global giants, with the economy poised to grow further.

However, the uncertain global economy threatens to derail the economic train with negative outlook by some international rating houses, such as Fitch Ratings.

Bank Negara Malaysia has also revised downwards and gross domestic product growth this year from between 5 and 6 per cent to 4.5 and 5 per cent, in the face of external demand pressures weighing on exports.

Despite all this, the country's economic performance remains resilient because the special thing about the Malaysian economy is the robustness and sustainability of its domestic consumption, a pro-business government, the resurgence of private sector investment and strict supervisory by financial sector authorities such as Bank Negara, Securities Commission, Finance Ministry and other agencies.

The government has also kick started various Economic Transformation Programmes (ETP) to transform the economy by identifying 12 sectors to steer the country towards achieving developed-nation status by 2020.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah says private and public consumption, private investment and government expenditure are supportive of the country's growth.

The economy has been expanding at an annual rate of 4.2 per cent annually since 2009, with foreign currency reserves at a healthy US$136.1 billion (RM431 billion).

Total approved investments in the first quarter stood at RM49.3 billion and these factors have added optimism to the state of the economy.

Except for some financial issues, a prominent local economist has given his thumbs up to the economy, saying it is in a fairly good shape after considering the adverse external circumstances.

Prof Emeritus Dr Mohamed Ariff Abdul Kareem says the growth outlook for Malaysia this year is still credible, alluding to the latest outlook by United Nations' Economic and Social Commission for Asia and the Pacific's economic and social survey.

Ariff, who is also a senior fellow at the Malaysian Institute of Economic Research (MIER), says the think-tank expects domestic demand and private investments to continue to lead growth.

Inflation outlook of between 2.5 per cent and three per cent is still manageable for Malaysia.

However, there are a number of future challenges facing the country. These include finding ways to address issues related to the introduction of the goods and services tax (GST) as only 10 per cent of the population is paying taxes, the government's shift from a low to a high-end economy and higher gross national income in the face of an uncertain global economy.

For this year, many goodies are in the offing with plans by the Finance Ministry to roll out several initiatives to boost the purchasing power of the people as well as address the growing income inequality among Malaysians.

Moving forward, the role of domestic demand will continue to be Malaysia's key growth feature while strategic and structural reform initiatives and transformation programmes need to be implemented.

To become a high-income country, Malaysia must move towards an innovation-driven economy and continue with the fiscal consolidation plan because currently, there's not much room to manoeuvre as the fiscal and monetary space is limited.

By 2020, its target is to achieve a gross national income of RM1.7 trillion from the current RM900 billion.

That means the income of the nation becomes higher by increasing the number of workers earning between RM2,000 and RM7,000 a month to eight million.

The way to achieve a higher gross national income is to create a higher- income workforce by shifting the focus to a high-end economy.

Blessed with a wealth of natural resources that have long been the cornerstone of the economy, the country has a well-developed industrial base and commendable infrastructure.

Besides the resilient economy that is supported by low and stable inflation, near-negligible unemployment, almost zero poverty and a young and expanding population, Malaysia's exceptional liquidity position also features prominently as a key rating driver.

Except for some minor financial issues, the economy is in fairly good shape and is poised to do better.

(END)