Malaysia Has No Fear If There Is A Deep Gearing

Don't expect the debate to produce a major breakthrough for Malaysia, which is wrenching from the aftermath of the Covid-19 pandemic and ongoing corruption endemic

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Published in Malay Mail, Business Today, Malaysiakini, The Malaysian Insight, MYsinchew, Astro Awani, and The Malaysian Reserve, image by Business Today.

Policy debates cannot necessarily lead to governance. Just as live telecast debates in the parliament over time did not improve the management and governance of the legislature, one should not expect the debate between Datuk Seri Anwar Ibrahim against Datuk Seri Najib Razak to produce a major breakthrough for Malaysia, which is wrenching from the aftermath of the pandemic  of Covid19 and corruption  that has become endemic. 

To make matters worse for Malaysia, Ukraine and the US signed the Charter of Cooperation in November 2021. Therein began the nightmarish scenario of a  double whammy, not only for the world but Malaysia too. The component and or ingredient of Gross Domestic Product (GDP) of Malàysia is similar to that of Singapore. Not unlike Singapore, Malaysia is a top trading nation too. 

By this token, our GDP is deeply vulnerable to external perturbations, especially when Malaysia imports close to 70 per cent of our food. With a GDP that is exposed to global supply chain disruption, to the tune of 320 per cent of Malaysia’s GDP, Malaysia is facing the twin impact of a Sars Cov II virus that has evolved from the highly transmissible Omicron to subvariants that have developed the ability to evade all vaccines. Factor the variable of Ukraine, which is known as the “breadbasket of Europe,” what the country is facing is the proverbial perfect storm that is hitting the owners of more than 300,000 Small and Medium Enterprises (SMEs), millions of fixed aged earners from B40 and B60. And, yes of course the political instability plus monumental corruption that has become a way of life. 

With only 3 per cent of the Employee Provident Fund (EPF) holders having more than RM 250 K, where 15 per cent of the total population of 32 million Malaysians being  over the age of 60, Malaysia is trapped. 

The country is not merely trapped as a Middle Income country. But Malaysia is backsliding economically and politically, with a change of 3 Prime Ministers between March 2020 to August 2021.

In the debate between Datuk Seri Anwar Ibrahim, the Opposition Leader of Malaysia, against Datuk Seri Najib Razak, the former Prime Minister of Malaysia, it was clear that both understood that one of the critical issue facing Malaysia was the rising cost of living apart from the good governance or lack thereof, lack of integrity and corruption as a way of life.

What is good about the debate is that the entire focus was on “governance” with Datuk Seri Najib Razak using the analogy of a cake to describe how the national economy should be grown bigger to allow the people to participate and partake in the process.

While this is an argument originally used by the late Prime Minister of Singapore, Lee Kuan Yew, who passed away in February 2015, Datuk Seri Anwar Ibrahim was quick to emphasize a critical and simple point. Sensible as this approach may be, the structural and systemic issue at work is one of 3 C: Corruption, Collusion and Connivance between the powers that be and special vested interest that may even be criminal in nature. 

Hence, while the well connected individuals certainly get a bigger piece of the cake, the people are given the crumbs with which they can’t even survive on at all let alone to invest in their own education or evolution to be a digitally savvy entrepreneur, to participate in the cyber commerce that is indeed thriving the world over.

In this vein, this makes Datuk Seri Najib Razak’s preliminary opening statement almost moot if not impossible to implement. The former insists that entities such as Samsung, Lucky Goldstar and Hyundai should be attracted into Malaysia. They should. But would they if 3 Cs remain the root problem of Malaysia. In South Korea, the former Attorney General known for holding big wigs and small fries to full account of any illicit activities in South Korea is soon to be the President. 

Why would the CEOs of the “Chaebols” take the risk of investing abroad, when 3 Cs could have a whiplash effect of how they are seen to be managing their parent holdings. Now, let’s turn to an issue that did not emerge with any specificity in the debate: Ukraine.

Ukraine, in peacetime, is responsible for 12% of the world’s wheat. The ingredients that are needed to create fertilizers are nitrate, potassium, and ironically, CO2 (Carbon Dioxides), of which the latter is needed for the packaging/packing of the fertilizers.

The rise in the price of fertilizers is a global phenomenon since the summer of 2021 due to pandemic and supply shocks. It has hit the US just as badly as it affects the UK and the whole of Europe, even Africa. Naturally, Malaysia is not spared.

As of May 6, the price of fertilizers per tonne in UK has rose from €650 Pounds to £ 1000. The US, the whole of Europe, Africa, Asia and Latin America are all witnessing the same rise in the cost of production. 

Everything rose in two months. Although the consumer price index is registering 8.3 per cent, this is the highest inflation to hit the US since 1941. But the worse Is yet to come 

In Europe, farmers said they were likely to offset the price rises by buying less fertiliser than usual this season for cereal crops, potentially leading to lower production at a time when there is a threat to supplies from Ukraine.  The agricultural inflation in Europe is real. Although Asians don’t consume so much wheat, oatmeal, barleys, cereals and corn, these are the things which Malaysia does import in the form of animal feed.

Therefore Malaysian producers and consumers will also face imported agricultural and fertilizer  inflation.

Some farmers in Europe may try to use more organic fertilisers by partnering with livestock producers (that produce animal feed) or those running anaerobic digesters, which make energy from organic matter, to try to offset the cost of high fertilizers, but what ever Europe does, even Africa, they are producing everything on the back of higher fertilizer and organic fertilizer costs, which World Bank explained.

In Malaysia, with a weak national economy, that is also marked by an increasingly wild and turbulent weather, as marked by more than 2500 MM of rain between December 15-18 2021 alone —- equalling the entire annual rainfall of 2020 ! —- Malaysian famers may not have the risk appetite to plant more at all. This is because the risk of being hit by severe and bad weather are now higher than ever. One wild weather can wipe out the entire production.

The Malaysian farmers will also plant less, and make less fertilizers, even if the prices of fertilizers appear to be on an uptick. 

In a globalized world that is only in the midst of being de-globalized between the West on one side and China and Russia on the other, the geopolitics and by implication the geo-economics of Malaysia could not be more dire. This is why the decision makers of Putrajaya must not be impervious to the structural and systemic problems of 3 Cs now. Datuk Seri Najib Razak may argue that his track record stands for itself over nine years. But if the trajectory of growth was strong to begin with, Malaysians, especially the farmers in Felda in 26 out of 54 constituencies would not have bolted to Pakatan Harapan to begin with. 

That is food for thought for all sides now battling for the Malay hearts and minds in order to engineer their coalition’s respective victory in the impending General Election that could be held in the September 2022 or July 2023.

Dr RAIS HUSSIN is president and CEO of Emir Research, an independent think tank focused on strategic policy recommendations based on rigorous research.

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