MP SPEAKS | In the past nine years as finance minister and eight years as prime minister, Najib Abdul Razak has wasted the chance to transform the Malaysian economy and bring it back on track.
What should Najib have done?
A progressive and caring government would have set a long-term plan for the benefit of all Malaysians, in close consultation with the private sector to move our economy away from labour intensive operations to skills and knowledge-based economy.
This is one of the major aims and implementation when a new Pakatan Harapan government is formed in the coming general election. Good governance will be the crux of the new administration to ensure that the focus is on the economy and the betterment of the people.
Those who talk about the Fourth Industrial Revolution (Industry 4.0) displacing workers with machines should first deal with the fact that unskilled foreign labour is already displacing locals in a massive way under Najib administration.
Although this problem did not start with the current prime minister, it is getting a lot messier and massive during his tenure.
The best way to get out of this vicious cycle is to ensure a cycle of economy that keeps highly skilled workers, generates growth based on a premise of high productivity, and higher wages for the workers.
It is not going to be easy but under Pakatan Harapan, it will be a new era - a thriving economy after the years under Najib, which will be seen as a wasted decade. Malaysia has squandered the opportunity to reinvent our economy.
Najib still doesn’t understand
In my first pre-budget commentary "What Najibnomics? It’s Nothing-nomics!”, I lamented that Najib had no discernable plans in the past nine years as finance minister and more than eight years as prime minister.
In Najib’s 17-page response piece “My Economic Vision for Malaysia” yesterday, he confirmed that he does not understand the needs of ordinary Malaysians, and what it takes to make Malaysia great.
Apart from the outlandish claim that 1MDB is “on track to realise a profit” - which has been ably dealt with by my parliamentary colleague Tony Pua - Najib is trying to explain away that GST was the right thing to enforce, cutting subsidies is a good thing for the people, and the depreciation of the ringgit has nothing to do with his policies.
Perhaps Malaysians should be satisfied and happy with his explanation.
Yet, many of us are unhappy.
Are Malaysians not happy because the opposition committed “economic sabotage” as claimed by the prime minister? The word “sabotage” is disturbing and implies possible retaliation and retribution against legitimate criticism of his economic policies.
Why are Malaysians unhappy?
Perhaps Najib’s advisors have not been telling him that many Malaysians are unhappy with the current economic condition.
However, these are among the major causes of their unhappiness:
- The combined effect of GST implementation, government austerity for welfare, healthcare and education (excluding Najib’s and Rosmah’s luxurious lifestyle and travels), and depreciation of the ringgit is serious, yet no one wants to acknowledge that there is a silent crisis.
- We are facing a two-speed economy which sees the export sector doing reasonably well as a result of global recovery but the domestic sector plunges further because of the silent crisis depleting household disposable incomes, and hence consumption. The export sector is increasingly employing fewer Malaysians but more unskilled foreign workers, whatever benefits bring very little spillovers domestically. Much of Malaysia’s export sector is dependent on a large proportion of imported goods, signifying the low value-added nature of our economy.
- While Najib wishes to boast about his economic credentials, it should be remembered that he had no solutions to the following apart from asking young graduates to sell nasi lemak and the jobless to drive Uber during his Budget 2017 Speech last year.
He does not seem to care that:
- More and more Malaysians are working in low paying jobs in Singapore.
- More and more Malaysians are working illegally in the United Kingdom, Australia, and New Zealand.
- Those who work in Malaysia are also suffering from low pay and very low skill content in their jobs (less than 30 percent employees are skilled).
- Very high youth unemployment.
- A very high proportion of household heads (35 percent) work in the informal sector.
How to reinvent our economy
Najib has lost the opportunity to reinvent the Malaysian economy by not taking a long-range view in 2009 and bringing the nation along to tackle those challenges. Tweaking won't work and we have wasted nearly a decade stagnating.
First, export-led growth has its limitations - or to be more precise, it has run its course. During the early 1970s, export-led growth brought great prosperity to Malaysia.
However, Malaysia lost its competitive advantage when China entered into the World Trade Organisation (WTO) in 2001. Since the Global Financial Crisis in 2008, this strategy will no longer work.
An export-led strategy pre-supposes that a wealthy United States, (and, to a lesser extent, Europe) would be able to continuously consume Asian industrial products. Since 2008, the US and Europe have experienced very slow growth and very high unemployment rates. This means wage growth won’t be high and consumption won’t be strong.
Exporting finished industrial products to China and Japan is not a sound strategy as both have a massive industrial capacity. Integral to the export-led strategy is that growth is predominantly driven by investment into productive capacity, as well as a low-wage policy.
Second, a rebalancing should have taken place as soon as the Global Financial Crisis hit in 2009, which was proposed in Malaysia’s stillborn New Economic Model.
China is a case in which an economy has rebalanced reasonably well over the past decade from being export-led to a growing emphasis on growing ordinary workers’ incomes to expand domestic consumption. At the same time, its services sector grew to fill the void of stagnated industrial production.
Under Najib’s rule, Malaysia is acting as if the external environment has not changed at all. The two main components of Najib’s strategy are still export-led industries and mega projects (now branded as big toy public transport infrastructures such as the MRT).
Domestic consumption has become the main driver of the Malaysian economy since 2009 but it has mostly been debt-fueled, and not income-driven, hence the very high household debt level at around 90 percent to GDP.
Malaysia is now mostly attracting foreign investment that hires foreign workers to assemble imported parts. Minimal value-adding, insufficient local content and low multiplying effects result in the two-speed economy. This means those in the export sector are seeing some growth, while others who are cut off from those sectors are suffering.
Third, the central importance of jobs in the economy.
While Najib and his associates like to talk about millions of jobs being created, no one seems to be able to answer what sort of jobs, at what level of sophistication and the attractiveness of pay has been created.
Najib has not seriously dealt with the massive influx of unskilled foreign workers flooding the job market, especially in the past few years. The foreign labour trade is dominated by Umno-linked personalities and selected former senior civil servants.
All plans to reduce the number of foreign labour are not taken seriously and mainly serve as a way to extort more revenue from the private sector.
In my third instalment of pre-budget commentaries, we will discuss several necessary political reforms for the economy to thrive.
The years under Najib could be considered as the wasted years of the Malaysian economy. For a fresh start, we need a new government and a New Deal.
LIEW CHIN TONG is the MP for Kluang and DAP national political education director.
The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.
