The Malaysian Economy in the Time of Geo-Economic and Geo-Political Cholera

Malaysia is a trading nation that cannot do without the US and China, for that matter, the European Union and G20. When Malaysia is able to show growth...

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Published in AstroAwani & NewStraitsTimes, image by AstroAwani.

A sitting Prime Minister addressing the nation is a normality. Notwithstanding one who believes in a global era of “post-normality.” The issue is not so much why Prime Minister Datuk Seri Anwar Ibrahim has to make the announcements but why not?

To his detractors, Malaysia hasn’t achieved much over the last 16 months since he has been in office. In fact, Malaysians live, apparently, in constant fear of the Ringgit Malaysia depreciating further. 

In fact, if one needs to be completely truthful, Anwar did reassure the people prior to the General Election of November 19 2022, that the first thing he will do is to address the problems of the “economy, economy and the economy.”

This was the last statement to Melissa Goh, the correspondent of Channel News Asia, on the eve of the 15th General Election. As things are, the Ringgit continues to hover at RM 4.75, occasionally RM 4.78, to USD 1.  As the Harvard economist Jeff Frieden affirmed, “a weak currency” suggests many internal problems of that particular country. In this sense, Malaysia certainly has plenty of economic anomalies. One of which is the bad, including but not limited to, heinous practice of “tukar kulit,” literally, to change the cover. 

Take the East Coast Railway, for example. If one were to look carefully into the archives of the Malaysian government, this was a project to connect Port Klang to the Port of Kelantan in the mid-1980s. 

The proponent was none other than the Japan International Cooperation Agency (JICA) in the mid and late 1980s. It was Tun Dr Mahathir and Tun Daim who turned down the project on the ostensible ground that this was too expensive with asymmetrical impact or benefit. 

That being said, come circa 2009, the elements in UMNO that knew of the scale of this project, removed all references to JICA only to claim that this was the vision of UMNO. The latter has latched on to one of the largest projects proposed by a foreign country only to lay claim to it that this was originated by UMNO no less. 

But also the economic inefficiencies in Malaysia cannot be due to one party alone. There are enablers in the government too, whether it is the Unity Government or of a different variety. 

It is noteworthy that Anwar has spoken of the need of open tender, that can potentially be adapted through holistic digitalisation and Artificial Intelligence too. While Anwar did not make an immediate causal connection, this Initiative, not unlike blockchain, can prevent human meddling. Such initiatives would weed out structural corruption. All entrepreneurs would gain. It is the know how, not know who.

This is the form of great leap forward that is needed by the ministry. The more efficient the government is, the higher the perks and benefits they can enjoy from the Unity Government of Anwar. Favouritism and nepotism would be nipped in the bud. Entrepreneurs from Kangar to KK would enjoy massive bounties. Indeed, in removing corruption one must understand the limitations now.

The Malaysian Anti Corruption Agency (MACC) barely has 3000 officers; of which 1700 of them are investigating officers. The rest of them are administrative staff of personnel hired by the MACC to explain what are the dos and don’ts of receiving any exchange of goodwill, whether in monetary form or otherwise; without which many government officials even private sectors do not know the prohibitions in the government. Time and patience are needed from the people when they try to benchmark PMX’s performance.

Come what may, such incidents are plenty and many. It permeates all over the system of Malaysia. Anwar needs to address  these shortcomings. But they take time. 

In speaking up to the nation, on the economic health of Malaysia, Anwar affirmed we are growing at 4.2 percent this year instead of 3.9 percent. Perhaps a difference of 0.3 percent means nothing. But at least Malaysia is not dipping into recession. That’s a contraction of two back-to-back economic quarters.

Why is this important ? To be sure, in and around November and December in 2023, all the economists in the US were expecting it to face a recession, one that can torpedo the world economy too, given that China was projected by the International Monetary Fund (IMF) to grow at 4.5 per cent, a difference of almost 1 percent.

Malaysia is a trading nation that cannot do without the US and China, for that matter, the European Union and G20. When Malaysia is able to show growth of 4.2 percent, which is stronger than the originally anticipated 3.9 percent, that implies Malaysia has the chance to do even better in the next 6 months.

In fact, the German foreign direct investments are pouring in by more than RM 46 Billion alone. This is a powerful signal that Malaysia has the trust of a country that has generally been wary of anyone that is too critical of Israel. 

For decades since 1945, a De-Nazified Germany has made it their obligation to protect the existence of Israel. While this is strictly Germany’s internal policy. Such a policy is totally untenable and disastrous when Israel is on a genocidal rampage against Gaza and the people of the West Bank. At least the lives and safety of 6 million Palestinians are at total risk.

The Malaysian economy is operating in a geo economy and geo-political contexts are swooning, indeed, filled with shocking surprises. The US Treasury’s accusations against Malaysia, that it was helping Iran to avoid the unilateral sanctions of the US was bad enough. 

The current global zeitgeist is not dissimilar to the novel of Gabriel Marquez i.e. “Love In The Time of Cholera” in the 19th century Columbia. Fortunately, Malaysia does not have to respect the unilateral sanctions of any foreign powers —- not unless the United Nations Security Council has all agreed that Iran is clearly in the wrong in all arenas and fields.

Take the case of Iran, again, for example. It has all the reasons in the world to retaliate against Israel on April 14, 2024 for Tel Aviv’s provocative bombing of the Iranian consulate in Damascus, Syria on April 1, 2024. 

Yet, Iran chose to telegraph —- in other words, inform Turkey, Switzerland, Oman and Washington DC —- of Iran impending attack. This was not so much as geo strategic chivalry as it was the exact thing to do: Iran does not want a region wide great war to consume the rest of the world in a phantasm of global bloodletting.

True enough when President Ebrahim Raisi’s met an unceremonious end of his life just a few days ago, when his helicopter crashed in the bad weather of the northern part of Iran, there was no fear of Iran attacking Israel with sudden ferocity. The region has acquired some semblance of stable instability.

It is amidst this global environment, where the war in Ukraine against Russia has caused a spike in the price of food, fuel, fertilizers and animal feed, that Malaysia is operating in. It is fortunate that at least 25 percent of Malaysia’s Gross Domestic Product is dominated by the Malaysian exports. The lower the Ringgit Malaysia, the more powerful this sector will be —- not dissimilar to the economic strategy of China, Japan and South Korea.

Thus, when Anwar came out with a clinical report on the state of the Malaysian economy, without even trying to blame the complex geopolitical variables for the harsher living conditions of the Malaysians in M 40 and B40, Anwar can be said to be on the right track. 

Perhaps Anwar should not unduly worry about the debt to GDP ratio of 64 percent;  which in all earnestness, is tame by any standards.

That include Singapore and Japan, each of which has a debt to GDP ratio of over 100 percent, yet Anwar is adamant that the national debt should not go any further without which the Ringgit Malaysia may be badly mauled by the short traders. Indeed, the Pakatan government came into office in 2018 always determined to slash the national debt of more than RM 1.5 trillion. In and of itself, this is not a bad goal, granted that the key is not to allow any systemic corruption to become a structural element of Malaysia. Given all of the above, economists in Malaysia should welcome this address to the nation by Anwar. Whether it can or cannot satisfy all sectors of the people, at least there is an effort to give a report card to the voters and non-voters of the Unity Government alike.

It must be stressed, that Anwar must adopt and implement the IOOI (Input-Output-Outcome-Impact) model fervently and diligently towards reinventing and rebuilding Malaysia. The IOOI model (Figure 1) is logical and robust reasoning (solely based on science and data) of the entire causal path from inputs (scarce resources/capitals) to outputs (tangible and intangible manifestation of intervention activities) to outcomes (real-world benefits/changed lives) and finally to impacts (higher-level intergenerational goals, in the context of a nation). In other words, when policymakers embark on an initiative, they must convince and provide assurance to the public (taxpayers and the wider rakyat) that there’s a solid basis in the form of empirical evidence and an established body of scientific knowledge to believe that using an n amount of inputs (resources) on specific outputs will result in the desired outcomes and intergenerational impacts. Therefore, the IOOI model must be institutionalised at every level in the public sector, including government-related agencies and GLCs. 

A diagram of a process

Description automatically generated with medium confidence

Work in pretty much in progress and the proverbial Rome is not built in a day is very relevant. Anwar must not let down of his guards in providing transformational leadership.

Dr Rais Hussin is the Founder of EMIR Research, a think tank focused on strategic policy recommendations based on rigorous research.

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