Date of publication: Mar 8, 2014
Section heading: Business Times
Page number: 002
Byline / Author: By Ahmad Kamarul Yunus; Rupa Damodaran; Muhammed Ahmad Hamdan
KUALA LUMPUR: Do strong economic numbers really matter to people on the ground when the prices of essentials point towards the north?
Yes, they do matter, according to the dialogue partners at the National Economic Summit, here, yesterday.
Bank Muamalat chairman Tan Sri Dr Munir Majid said the Malaysian economy may not be "rip-roaring", but it is enjoying solid growth and the country is on the brink of an upgrade in its sovereign rating.
"If the (growth) numbers slipped into the negative, we could be out of jobs, not to mention a weak ringgit, asset balance falling, banks in trouble and also loans dropping," he told participants of the summit.
Malaysia's economic activities, as reflected by the gross domestic product (GDP), expanded by 5.1 per cent in the last quarter of 2013, bringing the full year to a 4.7 per cent growth. The country also attracted RM38.77 billion in foreign direct investment, a rise of 24 per cent compared to a year ago.
Munir said it is critical that the government shows fiscal discipline and not waver under pressure.
He praised Prime Minister Datuk Seri Najib Razak's administration for reducing the fiscal deficit to 3.9 per cent of the GDP last year, and embarking on the rollback of subsidies and proceeding with the goods and services tax (GST).
However, these plans need a credible communications plan, said Munir, who was one of the panelists on the session entitled, "What is the real truth of the Malaysian economy?"
He said the plan must reach the public at large and provide rational explanation on the price mechanism or they would be inclined to believe whatever is said in the social media.
Another panelist, former human resources minister Tan Sri Fong Chan Onn, spoke about the gap between the government policies and the implementation.
"Although there is a strong correlation between GDP and SME (small and medium enterprise) growth, there are policy gaps and this was demonstrated in a recent survey to assess their understanding of the overall electricity supply policy direction, overall energy policy planning and the tariff hikes," said Fong.
Understanding of the SMEs also needed to be enhanced, just like GST, minimum wage, subsidy rationalisation and the economic transformation plan, he added.
Fong called for a reorientation of the country's governance, from focusing on planning to outreach.
"We need a new mission of service delivery with key performance indicators based on grassroot understanding and acceptance," he said.
Meanwhile, Malaysian Institute of Economic Research (Mier) chairman Tan Sri Sulaiman Mahbob said subsidy is definitely not the way forward if a country wants to achieve a developed nation status.
He said the removal of subsidy, which could be done gradually, is crucial to support Malaysia's rapid development, which requires bigger investments than ever.
"The fund should be reallocated to productive sources of growth in order to make the economy more efficient and steer it on a sustainable path," he said.
Sulaiman said the subsidy review will allow the local industries to "stand on their own feet", forcing them to be more competent and preparing them to strive for success in the global arena.
"The much-needed investments must be made to modernise the industries," he added.