Tuesday, 4 March 2008

Malaysian Economy: Slow and Dangerous Descent

The latest Morgan Stanley Global Economic Forum entry has a piece on the Malaysian economy by their in-house analysts, Deyi Tan and Chetan Ahya. Its concluding paragraphs nicely summarise the deep concern of most of us who understand the macroeconomic situations of Malaysia:

Long-term Risks − Economy Outside of Commodity and Construction Pump-priming Losing Shine

Beyond the cyclical short term, we are also less sanguine about Malaysia’s structural prospects. Its natural resource endowment and the leverage of that to finance investment and subsidizing growth have allowed the economy to grow with reasonable momentum. This has likely lessened the urgency to improve the competitiveness of the economy outside of commodity and construction pump-priming. Indeed, we note that Malaysia’s export sector likely suffered, not only from cyclical pressures but also structural pressures. Export growth has been dragged down by weak electronics performance and, at 2.7%Y, export momentum is one of the lowest in the region for 2007. Malaysia has been losing market shares in key export segments. Integrated circuits and telecommunications equipment have seen their global market share decline from 8.0% and 4.5%, respectively, in early 2000 to 6.5% and 2.6%, respectively, in 2006 − at a time when Singapore has improved its global share in higher value-added production such as integrated circuits from 11.2% to 17.3%.

Additionally, the government’s efforts to move further up the value-added chain have been hampered by its lopsided focus on infrastructure hardware – which contributes relatively little to long-run competitiveness – rather than human-capital software. Its standards of the education system have fallen behind the government’s policy aspiration of economy upgrading. Policies such as the National Economic Policy (NEP), which give privileges to the bumiputras, have also led to a brain drain, compounding the problem of talent-pool shortage.

has 13 years before its oil runs dry in 2021. Concerted government efforts to improve overall competitiveness would be essential to grow the economy beyond the medium term, in our view.

Just want to add on to the bit on oil: in a longer perspective, I believe that the oil that we have is a curse. It has muted much of the urgency that the economy needs in reforming itself structurally. Ironically, it is somewhat analogous to the subsidy curse that the Malaysian society is suffering from, perpetuated by misguided policy emphasis motivated by short-sighted political expediency. When these 'protections' are lifted, Malaysia will be very ill-equipped to face the challenges of the world.

If you want to protect your children from the uncertainties of the world, you do not lock them up and make them weak. You should educate and make them stronger, so that they could rise to the challenge the world has to offer and turn adversities into opportunities.


PS: "Concerted government efforts to improve overall competitiveness would be essential...". It is difficult to imagine how, the current government, being the source of much of the problem, can also be the solution to the same problem. Especially given the state of complacency, institutional corruption and lack of political competition that it is currently afflicting the country.


Benkaiser said...

M'sia needs nothing short of a major overhaul. Policies can be changed, government can be changed but what I fear is the civil service being the biggest stumbling block.

Even if the government is changed I doubt the civil service will be a compliant lot to carry out equitable and transparent policies.

They will be at the losing end and not likely to give up their 'undertable' practices without a good snub and fight. As long as corruption, transparency and accountability, the economy will never function at its optimum for the benefit of the people.

Dan-yel said...

Troubling indeed...

I'm at lost as to what saving opportunity Malaysia really have. My guess is that in 3-5 yrs before and after the oil dry-up, tension will rise, crime rates will go up, religious extremism, the stable peaceful idle country will cease to exist.

The BN government has the best opportunity to carry out this benevolent overhaul, but there's just no political will.

I dare not imagine the implications.

The culture of Malaysian politics among the opposition and the government must change. More emphasis should be given to our Malaysian identity, the Malaysian heritage. Let us be less divided and rally all our energy and thoughts for our common good. Politics must base on this understanding and it requires more professional cooperation than mutual antagonism.

myop101 said...

That is the problem with monopoly of power. We need to usher in a new government led by non-BN related parties.

Otherwise, we might as well prepare of kids to become construction workers and maids to work in other countries!

Btw, are you registered as a postal voter (since you are a student)? I hope you will vote or voted for change too...

elegant lily said...

it's the same old issue isn't it?
bad news is unofficial news from the grapevine suggest that msia has oil reserves that can last another 100 yrs

under mahathir,the govt is estimated to have used only about RM2 billion a yr from Petronas money...under the present clueless PM,the govt is estimated to have used up over RM20 billion of Petronas money. without petronas $$$,suffice to say that the BN would be in financial crisis

Oyster Cove said...

”we shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be, we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender” - Winston Churchill.

Days are numbers before 12th election on 13th March 2008.

An uphill battle that need to be fight. Tough battle ahead of dirty tricks , media advantages to the ruling gov. etc.

For the future of MALAYSIAN next generations, our childrens, grandchildrens, great grandchildrens; fight, we must to protect their rights to political freedom , better economic outlook, education, cost of living etc.

The battle cries had been heard.

Vote for a change. It is now or never. Safe our beloved country before it is too late.

myfivesen said...
This comment has been removed by the author.
myfivesen said...

Thanks for the reference Elanor. The link is here link