Ideas has it wrong, Malaysia is not off track
Ali Salman of Ideas should know that gross national income per capita growth does not depend on one factor alone.
By Firdaos Rosli
The front page of The Edge Financial Daily of March 21, 2017, caught my attention. I read a report where Ali Salman of the Institute of Democracy and Economic Affairs (Ideas) concluded that Malaysia is “severely off track”.
Let me start my response to Ali by quoting a statement made by Finance Minister II Johari Abdul Ghani, as reported by the same publication on March, 17, 2017: “If we cannot get a balanced budget by 2020, we will extend it for another one or two years, as we will require more time to adjust to all these external factors”.
We can debate whether or not 2020 is a good deadline but the fact remains that there is an on-going process towards achieving a balanced budget.
Now, back to Ali’s statement. There is no doubt that the biggest factor that led to such a ‘decline’ is the gradual strengthening of the US dollar versus the ringgit. Ali acknowledged this fact clearly when he said there was positive growth in average income but the figures showed a different story only when quoted in US Dollar.
In case if you have not heard, sir, other countries also experienced a similar ‘decline’ according to the latest World Bank 2013-2015 data. In fact, almost all eurozone countries recorded a similar ‘decline’ in GNI per capita. Are they ‘severely off-track’ too? Perhaps it is more apt for him to explain what he meant by ‘severely off-track’ instead of asking the Economic Planning Unit to explain the drop in Malaysia’s average income since 2013.
Any economist worth his salt would understand that gross national income (GNI) per capita growth does not depend on one factor alone. As Ideas’ Head of Research, I am sure he is well aware of that. Population growth, net exports, health, technology, among others, affect the GNI. For him to deliberately single out one factor in his assessment is not only distasteful but also misleading for a member of a think-tank.
Ali also explained the drop in Malaysia’s 2016 competitiveness ranking as the ‘bigger issue’ as to why Malaysia is ‘severely off-track’. As far as rankings are concerned, Malaysia remains as one of the most competitive nations in the world and any changes in rankings are cyclical at best. Has he forgotten that Malaysia’s competitiveness ranking jumped from 18th to 10th in IMD’s World Competitiveness Yearbook 2010 report? Were we ‘severely on-track’ then?
Ali said only 24.7% of Malaysians in 2015 had university degrees and this was something very alarming. According to the official statistics, the percentage of Malaysians aged 20 and above with tertiary education had increased from 16% in 2000 to 21.6% a decade after. It seems to me, at least, that the number is trending upwards, which is not a bad thing after all.
In 2015, EU-28 countries recorded that those aged 25–54 with tertiary education amounted to 32.6% while Singapore had 32.2% the same year. There is a gap between our number and that of other countries and I could go on explaining this issue but it would take much longer than just a rebuttal piece.
There is clearly a direction towards achieving higher educational attainment in Malaysia. And again, we are not ‘severely off-track’ here.
Ali tries to deceive his readers by alleging that the Price Control and Anti-Profiteering Act 2011 “was introduced to stop businesses from increasing prices during the GST introduction phase, (which) is now being kept indefinitely”. First of all, elements of price control on staple food items have been around for decades and the Act does not deter businesses from making profits. Why should the government restrict profit-making anyway?
Generally speaking, we could argue about the effectiveness of price control and I have my own views on that. The crux of the problem now is that compliance, from the business perspective of course, is still lacking. Section 8 of the Act clearly states that, “Where prices of any goods or charges for any services are determined under this Part, such prices or charges shall include all government taxes, duties and any other charges”. In other words, the price you see should be the price you pay.
Up to today, there are still some businesses who fail to display the final price of the goods or service to consumers in order to give the impression that the price is ‘cheaper’ by, at least, six per cent. There is a big difference between making profits and profiteering, sir.
So, Ali, is it okay to profit by putting consumers at a disadvantaged negotiating position to understand the final price of a good or service?
Investors are not as petty as what Ali perceives them to be as there are a whole lot of other reasons for investment consideration. Billions of ringgit are coming into the country and Jack Ma, the captain of the world’s largest retailer, was reported to have said yesterday that “Malaysia is very business-friendly and much more efficient than I thought”.
Statements Ali made in the news article will not deter foreign investors from coming into Malaysia. It is the kind of over-exaggerated assessments he makes that will drive readers to view less of himself as a member of a think-tank.
Firdaos Rosli is Fellow of Economics, ISIS Malaysia.
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