In my travels, I meet with some of the world’s top economists, investment analysts, influential academicians, and movers and shakers in the business community. For example, last week, I spent a day with back-to-back meetings at the World Bank Headquarters in Washington to share Malaysia’s transformation story.
I shared the stage as a panellist with Professor Christian Ketels of Harvard University, and Professor Charles Sabel of Columbia University, who wrote a case study commissioned by the World Bank on Malaysia’s transformation programme. I stopped for a day to make similar presentations at Harvard University in Boston and also to the Fitch Rating agency in New York.
Some of these guys tell you things as they see them, and have very little patience for niceties. I listen intently to their assessments – both good and bad, and walk away learning from their experiences dealing with emerging markets battling similar trends as ours.
In a nutshell, they give Malaysia the thumbs-up for our rigour in tackling economic fundamentals and working out the structural kinks in implementing policies and initiatives.
But here’s the kicker. No matter how painful the going gets, they tell me in no uncertain terms, the Malaysian government must doggedly and responsibly continue its tough measures to ensure our economy grows faster than the rate of government expenditure. This simply means that over time, your income should grow at least as fast as or faster than your expenditure.
There’s a saying among economists that ‘good times make for bad policies and bad times make for good policies’. After 1997 several countries made the conscious decision to make ‘good policies in good times’. Malaysia was one of them. We started managing our budget carefully so that it was counter-cyclical, meaning we spent less and worked to reduce our deficit during the good years.
We have seen enough countries – at one time brimming with potential – cave in to political pressures, conflicting interests and factional bickering. Inevitably, they fail to enable, empower and then effectively regulate a vibrant market-based economy. Without a competitive edge, these countries sputter to a standstill with spiralling expenditure, contracting reserves and loss of revenue.
When you fail to strengthen your economic foundation, you are susceptible to domestic and global risks and shocks. When this happens, everyone suffers, especially the poor.
We see this repeatedly. A senior economist made the observation that Argentina, prior to the Second World War, was one of the richest countries in the world. He argued that blessed with rich resources, the country nevertheless failed, over time, to respond to changing times to transform its economy.
Another critic mentioned that Venezuela had one of the most successful petroleum companies in the world. Due to a shift in politics, it went down a populist path and squandered the capability and strength of its petroleum industry.
He went on to add that after the Second World War, Burma was seen to be the most promising South East Asian economy due to its teak, agriculture and high literacy rate. After the military took over the country, its economy quickly regressed to least developed status. Myanmar remains underdeveloped to this day.
When I sat in at Parliament to listen to the Budget 2015 speech by our Prime Minister, I was encouraged that we stuck to our mandate. There are four aspects that I like about the 2015 budget.
First, it continues to propel economic growth in line with our economic transformation programme.
Second, it is an inclusive budget, providing a lot of goodies for all different segments of the rakyat.
Third, it is a fiscally responsible budget, promising further cut in our fiscal deficit.
Fourth, it provides the right balance between what the Prime Minister calls the “capital economy” and the “people economy”.
Indeed, the government will continue its efforts to rationalise subsidies and will implement GST by April next year, even as these measures are not popular.
There is potential upside of RM22 billion from gradually reducing fuel subsidies to market price. Imagine just what good works we can do to improve the country’s public transportation, healthcare, education and welfare!
Rural Development NKRA under the GTP received RM3.7 billion development expenditure as we requested. These are not monies that go to Pemandu, but will be channelled to the various Ministries to roll out infrastructure projects in rural regions. I am aware that a few of our critics deliberately spin a false picture that these money are allocated to Pemandu. This is an absolute lie.
As a Sarawakian, I am of course especially cognisant that development in Sabah and Sarawak remains a challenge. The RM3.7 billion for the rural development NKRA under the Federal Ministry of Rural Development is allocated for infrastructure projects – mostly in Sabah and Sarawak – for rural roads, electricity, water and low cost housing.
The people of Borneo can expect to enjoy benefits arising from the construction of 635km of rural roads, implementation of electricity connection for 15,000 houses, rural clean water supply to 15,000 houses and building and rehabilitating 9500 units of dilapidated houses.
Total development for the whole country in terms of rural areas will include economic development for orang asli communities, improving infrastructure and housing facilities and building more roads to increase accessibility to key economic centres.
There has been hue and cry over the issuance of BR1M with opponents denouncing it as mere hand-outs that do not solve the problem of poverty.
BRIM is not a mechanism to solve or resolve the problems of the poor. BR1M is meant to cushion the effects of a transforming economy that will challenge every nerve in its structure. BR1M recognises that a fast growing economy also means a fast changing economy. Fast changing economies can be stressful for some of those who have to adapt. BR1M is a means of easing the adaptation. Nothing more and nothing less.
With a Budget that looks out for the poor, and if we continue on this footing, I am hopeful that in one generation, we may be able to solve problems, encourage growth and enable our young to face the future with confidence.
If I have to pick any one ‘investment’ that is my favourite, it will be for rural development and the government’s gumption to stay the course on being fiscally responsible no matter how tough the going gets.