KUALA LUMPUR: A prominent economist says Malaysia’s premature deindustrialisation is actually a sign of failure rather than success.
He also questioned the country’s ability to progress if it continued to rely heavily on its services sector.
Speaking at a forum on Chinese investments, Professor Jomo Kwame Sundaram said at present, Malaysia needed a catalyst for the economy, noting that the country had experienced two periods of economic growth in the past.
“The first was in the 1970s, when we achieved accelerated economic growth through efforts to speed up the process of industrialisation.
“Former Prime Minister Dr Mahathir Mohamad himself was the trade minister then, and probably saw what had happened in Japan and South Korea.
“Perhaps this gave him the inspiration to develop Malaysia,” he said, adding that Mahathir probably saw what South Korea had achieved with its industrialisation projects.
“Until 1997, we achieved a high level of economic development of 8% a year, but after the financial crisis of 1998, our economic growth slowed down to 5% a year.”
Jomo said he was worried that the industrial sector, which had been the catalyst for Malaysia’s economic growth, was prematurely shrinking.
“Our industrial sector hasn’t matured, and is already shrinking. Why are we experiencing deindustrialisation?
“Some say it’s success – that it is a sign of a developed nation.
“So a failure is labelled as a success?
“Can our economy develop in the future by relying on the services sector?”
Jomo said that what Malaysia needed to do now was seek investments that could become a catalyst for the economy.
He said this should ideally come through industrialisation but that skilled workers would then be needed and this was only possible if the country had a better education system.
Jomo also warned that China’s capital flight controls could very well spell trouble for Malaysia.
He said that while the country needed foreign direct investments, including good investments from China, the danger was that some of these projects were being used as an excuse to obtain loans.
“This is dangerous because the burden of repaying the loans will be borne by us and the future generations.
“It is true that Malaysia has had debts even in the past, but these debts are increasing rapidly.”
Jomo also criticised the RM55 billion East Coast Rail Link and questioned its necessity, arguing that the KTM rail lines in the country at present were sufficient, even though the ECRL was expected to transfer cargo faster.
“Cargo doesn’t need to be transported through a high-speed railway. So who is it for?
“Are people going to travel to work from Kuantan or Kelantan to Kuala Lumpur every day?
“What is happening in our country will have many implications.”
The ECRL will create a 250km land bridge which could undercut the Strait of Malacca trade route, bypassing Singapore.