Misleading State of Economy

Malaysia's economy performance is heavily criticizes by the public recently. There is ineptness and plodding effort to stimulates the growth and provides prosperity reaching to all Malaysians.

Malaysians is afraid of their social security network where there is inadequate. I see preponderant of employees who demanding minimum wage to be put in place. Laughing stock from specious Putrajaya Ministers who strongly believe by raising the wages or salary of private and public sectors, then Malaysia will meet high income nation status even quicker. Human Resources Minister, Datuk Subramaniam for the instance, announced in April 2010 that local security guards minimum salary would increase by between RM300 and RM400 per month by 1 July 2010. This would raise their salaries to between RM1,100 and RM 1,450 per month. Minimum wage does not work and it create very little impact to our productivity. It is seen mechanism to address poverty and social fabrics rather advancing form of economic

I see Malaysians entangling to improve their lifestyles as quality of life is threaten by profligacy of the government. Unnecessary spending for new palace worth RM800 million and military defense hardware which costing another billions of taxpayers money. Reported in UBS investment findings earlier this year, money leaves the country on an unprecedented scale. Says UBS "Question: Which Asian country had the biggest FX losses in 2009? The answer is Malaysia.

Massive amount of money to rewards the failure of Port Klang Free Trade Zone (PKFZ). Very little adherence of the rule of law. High profiles personality escapes from being penalized while certain figures nabbed to drawn the conclusion that there is strident action against the corruption and cronyism.

Where is the confidence to our economy when blistering report from Hong Kong based Political Economic Risk Consultancy (PERC) on Malaysia who criticizes Najib's strategy of 'trying to be all things to all people, but in the end he might satisfy no one’? PERC raised Malaysia risk index from 5.24 in December to 5.4 in January out of possible maximum score 10 for highest level of risk. Most damaging, PERC said it is 'probable' that no other Asian country is suffering from as much bad international press as Malaysia'

The systematic and expediency approach to trim the subsidies; the welfare of unfortunates and low income families under threats. One must heeds of Chief Executive Officer of Performance Delivery and Management Unit (PEMANDU), Idris Jala bold remarks in Subsidy Cut Day "If the government continues at the rate of 12% (debt growth) per annum, Malaysia could go bankrupt in 2019 with total debts amounting to RM1,158 billion"

Malaysians suffers from the worst outcomes of government. According to NEAC, a hefty 40% Malaysian household still earn less than RM1,500 a month while 77.2% are Bumiputera and many are located in Sabah and Sarawak. The burden of Malaysians is unbearable!

At the peak of financial crises emerged at the year of 2008/2009, governments around the world have promoted to Keynesian to save their economy from great failures. The great lesson of Keynesian is the pumping of taxpayers fund into the market; which amounts billions of dollar after loses of billions of dollar from the thin air. It is say, the more money pumps in the system, the more secure as the governments primarily taking over the precedence the private role within empty spaces. It is the fervent believe government has the consciences to lead the economy after the market crash. Another scenes from Keynes is where too big to fails were grabbed the headlines until to date. Reward the failure while punish the success. It is argues the practice of activist government rescuing too big to fail will secures million of jobs and bankruptcy. His intention is apparently to maintain full employment. No saving, but national deficits grow as money is removes to be injected in under perform economy.

Malaysia is not the exception from Keynesian phenomenon. We had injected RM 67 billion taxpayers money into our economy, translating and creating more jobs, infrastructures projects, incentives for corporations and subsidies to low income groups, petroleum and necessary items with the objective is to expand and stimulate our growth. Keynes has results our more bigger role of government and administration. In his book The General Theory of Unemployment, Interest and Money (1935), John Maynard Keynes wrote "There is room...to promote investment and , at the same time, to promote consumption, not merely to the level which with the existing propensity to consume would correspond to the increased investment, but to a higher level still"

Economists assures like minded of Keynes can affects long and short term of economic growth. University of Chicago economist, John Cochrane (2009) adds that;

"First, if money is not going to be printed, it has to come from somewhere. If the governments borrows a dollar from you, that is dollar that you do not spend, or that you do not lend to a company to spend on new investment. Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs loss from the decline in private spending. We can build roads instead of factories but fiscal stimulus can’t help us to build more of both. This forms crowding out is just accounting and doesn’t rest on any perceptions or behavioral assumptions.

"Second, investment is 'spending' every bit as much as is consumption. Keynesian fiscal stimulus advocates want money spent on consumption, not saved. They evaluate past stimulus programs by whether people who got stimulus money spent it on consumption goods rather than save it. But the economy overall does not care if you buy a car, or if you lend money to a company that buys a forklift"

Prime Minister Najib has announced two major strategic economic reform for the first 6 month of this year. There are documents of New Economic Model (NEM) and 10th Malaysian Plan. NEM profound the flaw of Malaysia’s economy is very deplorable. It also clarifies what the government could do to ameliorate the pain of the economy. On top of the report, National Economic Advisory Council is suggesting political will which is very crucial to acknowledge the imminent risk and initiates quick rapid effort to regain the confidence and its losing competitiveness at world stage. Below is several critical highlights of the report;

"Malaysia's economy engine is slowing. Since the Asian financial crisis of 1997-1998, Malaysia's position as an economic leader in the region has steadily eroded. Growth has been lower than other crisis affected countries, while investment has not recovered. Private investors have taken a back seat. Since the Asian crisis, aggregate investment as a share of GDP in Malaysia has continued to decline, with private investment remaining stagnant due to several factors. In some industries, heavy government and government linked company (GLC) presence has discouraged private investment"

"Malaysia's place within the Global Competitiveness Index dropped to 24th in the 2010 report from 21st previously, indicating that the country is osing its attractiveness as an investment destination"

"Productivity is growing but far too slowly...lose the pole position"

"We are not developing talent and what we have is leaving...reaching critical stage"

"The gap between rich and poor is widening"

"Malaysia is stuck in a middle income trap"

"Ethnic based economic policies worked but implementation issues also created problems"

"Controlled pricing system and subsidies result in resource misallocations"

Therefore, NEAC pointed out we must act now before our position deteriorates any further ! The key of the recommendations is to ensuring Malaysia can become more competitive ahead of the other nations. The 10 golden rules of competitiveness listed by World Competitiveness Yearbook are

1. Create a stable and predictable legislative environment.

2. Work on flexible and resilient economic structure

3. Invest in traditional and technological infrastructure

4. Promote private savings and domestic investment

5. Develop aggressiveness on the international market as well as attractiveness for foreign direct investment

6. Focus on quality, speed and transparency in government and administration.

7. Maintain a relationship between wage levels, productivity and taxation

8. Preserve the social fabric by reducing wage disparity and strengthening middle class

9. Invest heavily in education and life long training of the labor force

10. Balance the economies of proximity and globalization to ensure substantial wealth creation, while preserving the value systems that citizen’s desire.

Nevertheless, full potential of these recommendations are not taking account into the framework of 10th Malaysian Plan particularly the continuity essences of New Economic Policy. It was merely what James Chin of Monash University wrote, New Economic Policy is Never Ending Policy. Pressure from Malays Perkasa to ensures NEM and 10th Malaysian Plan does not omits their interest. They still want 30% Bumiputera equity within the both strategic national plans. Najib caught in dilemma where his political and economic reform as reflected in his 1Malaysia's concept been distorted by Perkasa, UMNO patronages and Godfather Mahathir. Race based model rather affirmative action based on market seems to oblige by Najib to garners losing ground support for Barisan Nasional.

Indeed, Ooi Kee Beng book on The Reluctant Politician: Tun Dr Ismail and His Time (Chapter Six), that Tun Dr Ismail, the main architect of NEP saw the implementation and its special privileges for the Malay as handicap and it should be temporary. Moreover, I quote "...this handicap will enable them to be good players, as in golf and in time the handicap will be removed. The Malays must not think of these privileges as permanent: for then, they will not put their efforts to the tasks. In fact, it is an insult for Malays to be getting these privileges"

During the launching of NEM, Prime Minister Najib said "There will be a renewed affirmative action policy in the NEM, with a focus on raising income levels of all disadvantages groups...The New Economic Policy (NEP) has been a milestone of our society for decades...Its original objectives are still relevant but it is time to review its implementation"

That was the launching, however, his position shifted when he deliberated NEM in Malay Consultative Council recently. A council lead by Perkasa, constitutes of 76 Malay non governmental organization has urged Najib to protect Malay interest in NEM. Najib quoted “It is impossible that I, the son of NEP's founder will betrayed his father's fight. It is impossible. In my heart, I want to see the Malays to rise and prosper"

Prominent political economist of University Malaya, Professor Terence Gomez meanwhile cited NEM as paltry amount of investment in research and development and serious deterioration in the quality of education from primary right up to tertiary level. He claims there also needs to be an improvement to the public delivery system as a whole in a public sector seen to be inefficient and highly bloated.

In other words, will the government has prepares for the worst or the better. We are discussing for a better nationhood. We want prosperity and benefiting wealth of the nation. Does the government have the courage to communicate the truth and the only truth to all Malaysians? I believe it is the revival of Hayek’s to be the top reference of all. Our economy is highly planning and centralizes and I wonder whether it’s taking the reflection of totalitarian. Renowned American philosopher Ayn Rand once wrote 'political freedom cannot exist without economic freedom"