A new book, "Economic Reform In Malaysia: The Contribution of Najibnomics," by a Singapore-based researcher argues that the Najib administration's economic policies have some plus points.

Independent researcher Bruce Gale, in an opinion piece today in Singapore's Straits Times to promote his book, said several controversies clouded public opinion on Prime Minister Najib Abdul Razak's policies.

These controversies include 1MDB, Felda Global Ventures Holdings Bhd (FGV), and the US$681 million "gift" from Saudi Arabia.

"But are all these things really true? And, if so, can the blame be laid squarely at the feet of the current prime minister?

"Sadly, emotions are running so high on both sides of the political divide that genuine attempts at formulating an objective assessment are in danger of being ignored," wrote Gale.

Debt levels explained

On the Najib-administration's handling of the national debt, Gale argued that the RM655.7 billion debt as of end-June, 53.2 percent of GDP, was a response to the 2007-2008 financial crisis.

"It sounds worrying, particularly since the comparative figure when Najib became finance minister in late-2008 was a more comfortable 41 percent.

"A closer look, however, shows that almost all of the increase took place in a single year. In 2009, governments everywhere were pumping huge sums into their respective economies in response to the global financial crisis. Malaysia did the same thing," argued Gale.

He said that Malaysia's current debt levels are not unprecedented, as Malaysia's debt-to-GDP ratio in 1990 was almost 80 percent.

While debt troubles faced by GLCs such as FGV and 1MDB are hard to ignore, it does not appear to affect sovereign debt ratings.

"The macroeconomic impact of any future sovereign downgrade should also be seen in context. Since domestic institutional funds have ample liquidity, any sell-off in the country's bond or equity markets would likely be limited," he said.

Weak ringgit due to externalities

On the weak ringgit, Gale attributed this to externalities: the fall in international oil prices and a drop in demand for Malaysia's commodities.

"By comparison, the impact of the political uncertainties brought about by various political controversies is likely to have been minor.

"Those who contend that the weak ringgit reflects foreigners' low confidence in Mr Najib's Malaysia have to explain why the stock market has not collapsed and why international institutions such as the International Monetary Fund and World Bank have consistently published positive assessments of the Malaysian economy," he wrote.

He argued that a weak ringgit is, in a way, good for Malaysia because this will help improve exports and lower the cost of entry for foreign investors.

On the removal of subsidies, Gale's assessment was that this was necessary as subsidies were unsustainable and was stunting growth.

"The government has tried to alleviate the impact of these economic reforms on the poor by introducing programmes such as the 1Malaysia People's Aid (BR1M).

"Of course, such handouts are not a permanent solution. For that, strong and balanced economic growth is needed.

"But growth can come only if leaders are willing to take the unpopular measures necessary to reform the economy," he said.

'GST was necessary'

Gale also supported GST because it "forced the middle class to share the tax burden."

"While the GST is generally regarded as a retrogressive tax as it taxes the rich and the poor alike, its impact on the poor has been minimised by ensuring that many common food items such as rice, fresh fruit, bread, meat and vegetables are GST-exempt.

"Annual price rises, as measured by the consumer price index (CPI), have breached the three percent level only twice since Najib took power. The political problem arises from the fact that the food and beverage component of the CPI has often risen much faster," he said.

Gale said that Malaysia's economy still suffers from low labour productivity, a lack of affordable housing, and high household debt.

The silver lining, said Gale, was that the productivity of Malaysian workers are improving at a faster pace compared to developed countries, and that household debts are offset by the higher value of household assets.

Give Najib due credit

Gale concluded that regardless of what the critics say, key areas of Malaysia's economy have continued to grow and at a rate above the international average, while inflation remains under control.

"The wider point to be made, however, is that Mr Najib has simply not been given due credit.

"The reality is that under his leadership, Malaysia's macroeconomic policies have been broadly appropriate.

"Abolishing the subsidies and implementing the GST were both necessary and urgent," he wrote.

Gale received his bachelor's and master's degrees in Australia. His PhD on political economy was obtained from University Kebangsaan Malaysia in 1987.

He has written several books on Malaysian politics since the 1980s, including a biography on former deputy prime minister Musa Hitam.

He is a senior contributor to Straits Times.