FEB 21 — The Malaysian economy rebounding in 2010 with the growth of 7.2 per cent is not surprising, and the data is in fact outdated. The most important thing now is how to overcome the current financial challenges.
Prime Minister Datuk Seri Najib Razak had said recently that he is not as lucky as his predecessor as he has to face four challenges brought by changes in the international politics and economic situations.
Najib’s challenges are, in fact, the country’s challenges, particularly the issues of global food shortages and the rising prices.
It is obvious the government is committed to alleviate the people’s burden. From the reduction on traffic summon fines to the abolition of toll station in Kuala Lumpur and toll reduction, all of these are policies benefiting the people. However, the soaring prices of food and consumer products are a global trend and since food accounted for a large part of the people’s expenditure, reducing fines and tolls do not actually help much.
Taking into account the worsening inflation and the next general election which is expected to be held soon, I believe that the government will temporarily stop the action to rationalise subsidies and maintain the existing subsidies for fuel and necessities to avoid intensifying public grievances.
It is quite impossible for Malaysia to distribute cash like Singapore to share its surplus of RM15.8 billion as Malaysia is having a financial deficit for 14 consecutive years. However, as Petronas has discovered new oil and gas fields in Sarawak, the government is still able to maintain the subsidies.
In addition to affecting the people, the rising prices will also affect manufacturing costs and the Economic Transformation Programme (ETP).
As Najib said, Malaysia is a dependent economy in which much of its raw materials are imported, causing Malaysian manufactured goods to lose competitive advantage.
Under the ETP, the government has planned many major projects, including the Mass Rapid Transit (MRT) and the financial district projects under the Greater Kuala Lumpur National Key Economic Area. The surge in building materials will drive the construction costs.
In addition, the external economy is unstable. The government must rely on domestic demand and private investment to expand national economy. Inflation will dampen consumption and if interest rates are increased in the next half year, the public will reduce expenditure.
The country is also troubled by hot money, such as soaring real estate prices. If Bank Negara does not put greater efforts in controlling hot money, inflation coupled with the rapid withdrawal of hot money will be a double blow to the country.
With the political unrest in the Middle East, accompanied by the inflow of hot money into commodities, financial market instability and the soaring international crude oil prices, Malaysia needs to be cautious. Reducing the people’s burden must be the prior consideration of the government.
First, the government must ensure that the people have the ability to afford basic needs like food, shelter and clothing to maintain social stability.
Secondly, the government must cut its coat according to its cloth and avoid waste, so that the limited money can be spent effectively on economic plans and relieving the people’s hardship.
Thirdly, the government must immediately implement a food production programme to reduce dependency on imported food through the production of short- and medium-term alternative food.
Fourthly, the real estate prices must be inhibited to avoid worsening inflation.
Finally, a reform must be made to the wholesale, distribution and retail system of goods to reduce multi-level distribution and contain prices.
In such a situation, with international economic and political instability and global warming, the government and the people must be prepared to face the worst, in the immediate future.
mysinchew.com
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