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Malaysia: Structural reforms vital for economic resilience
PETALING JAYA: Despite all the projections that Malaysia is on track to achieve high-income nation status, renowned economists are of the view that the country is not yet ready unless it carries out structural reforms.
But the onus does not fall entirely on the government as the willingness to change still needs to come from both the society and businesses alike.
While Malaysia’s gross national income per capita has improved from about US$2, 500 (RM10, 287) in the 1990s to US$11, 200 (RM46, 088) last year, Prof Tan Sri Dr Noor Azlan Ghazali (pic) said behaviours are not changing.
“The drive for success is not there. I believe we are governed by certain behaviours and our surroundings are influencing that.
“We want to be a developed nation, we want to be an advanced nation, but we are not ready to live like one.
“We cannot entice people by saying that we’re going to have a high-income (nation status) and life will be a lot easier, ” said the Economics and Management Cluster head of the National Council of Professors.
He was speaking at a webinar entitled “Navigating Malaysia’s Policy Challenges of the Covid-19 Pandemic and the High-Income Hurdles”, jointly organised by the Jeffrey Cheah Institute on South-East Asia (JCI) and the Malaysian Economic Association (MEA).
He added that in high-income countries, one would be left behind if they do not work hard and catch up.
Noor Azlan, who has been seconded to the Economic Action Council (EAC) as an executive director since last year, said he was surprised to find that the larger portion of industries in Malaysia were not employing technologies or moving towards the path of the Fourth Industrial Revolution (IR4.0).
“If we look into some measurements of complexity, to what extent we adopt technology, we are very far behind.
“We are being pampered by being able to get the so-called cheap talent from abroad. That is a serious thing in pushing down the wages, more so at the lower end.
“We will be in fear of making changes. Look at how we tried to bring in the goods and services tax (GST). For more than 30 years we’ve been trying to implement it and we killed it overnight, ” he said.
After studying the Sixth Malaysia Plan to the Eleventh Malaysia Plan, Noor Azlan said he found a conclusion – that Malaysia is a very stubborn nation – from the society, to firms and the government.
“We know almost everything that needs to be done, nicely articulated line by line, essays after essays, consultations after consultations, reports and blueprints.
“If we’re recovering from this crisis in any way without rolling out the reforms at the same time, it is a serious waste for the country.
“If there is anything good out of this pandemic is that it reveals the problems that we’ve been talking about for a long time and if Malaysia is not taking this as a lesson, I’m scared. How far can we go?” he said.
Malaysian Economic Association president Emeritus Prof Datuk Dr Norma Mansor, who moderated the session, concurred that the pandemic was a good opportunity for Malaysia to reform its structural problems.
“We should not let this crisis go to waste. The right mix of monetary, financial and fiscal policies are needed to ensure the overall effectiveness in securing a sustainable economic recovery.
“Especially now, when we’re exposed to the gaps that we have with regards to protecting our people, having a stronger social protection is one of the reforms.
“When more technology will be taking over some of our jobs, as we further accelerate digitalisation to enhance productivity, more people will not necessarily benefit, ” she said.Norma stressed that there will be losers in whatever reforms that would be carried out and many within the system are vulnerable.
JCI economic studies director Prof Yeah Kim Leng believes the problem stems from the fundamental theory of misaligned economic incentives that sustain interest groups in not pursuing the right reforms.
He said the structural reforms go against their economic interest and there is no incentive for them to reform.
Meanwhile, JCI president Prof Woo Wing Thye said companies should also pay attention to the goal of carbon neutrality to maintain economic dynamism in Malaysia.
He pointed out that if the country does not achieve carbon neutrality in a reasonable period of time, it will face a great loss in international competitiveness.
“There is a race to achieve carbon neutrality in the countries of European Union, North America, China, Korea and Japan.
“In the European Green Deal, it is explicitly stated that European countries will soon start imposing border adjustment taxes on goods from countries with weak climate action policies.
“The US and China also agreed to work together to fight climate change, ” he said.
Source: https://www.thestar.com.my/business/business-news/2021/06/15/structural-reforms-vital-for-economic-resilience