In looking East, avoid Japan’s mistakes, says economist

Mohd Nazari Ismail.

PETALING JAYA: An economist has warned the authorities to avoid Japan’s mistake of focusing too much on economic growth in reviving the “Look East Policy” introduced in the 1980s.

Universiti Malaya’s Mohd Nazari Ismail said many considered Japan a successful and prosperous country because it has a high trade surplus, a massive amount of reserves and a large skilled workforce.

“Even now, our leaders say we need to emulate Japan,” he said at the launch of his book “Till Debt Do Us Part: The Growth of the Global Banking Industry and its Insidious Effects”.

“But walk around Tokyo and you can see the same problems you see here. Many are suffering and a lot of people live in tents, under bridges, and queue for free food.”

During a recent trip to Japan, Prime Minister Dr Mahathir Mohamad said he was happy that the country once again welcomed Malaysia’s “Look East Policy”.

The Look East Policy was introduced after Mahathir became the fourth prime minister in 1981 to encourage Malaysians to adopt Japanese work ethics and emulate successful development models in Asia instead of looking to Western countries.

However, Nazari said Japan also had serious cases of poverty, adding that many young Japanese couldn’t afford to live in proper homes and ended up living in cyber cafes.

“Is that what we want? If we think Japan is our model, I suggest we buy tents for our children and train them to live in cyber cafes.”

In the 1980s, he said, the Japanese government had focused on GDP growth, so much so that the economy “grew like crazy”. At the same time, he said, the government also lowered interest rates which led to people borrowing money to buy property.

This set the stage for a subprime crisis like the one experienced in the US in 2008, he said.

“When the property market crashed in Japan, the country went through a recession in 1989. Because the crash was so huge and the debt levels were so high, three decades on, the Japanese economy is still recovering.

“After that, the Japanese government wanted to stimulate the economy. So it borrowed a lot of money to get the economy going. That is why Japan now has the highest debt to GDP ratio in the world.”

Nazari said if Japan wanted to pay off its debts, it would need to set its version of the goods and services tax at 15%. However, if it did so, the people wouldn’t have the money to spend.

“So they are in a bind,” he said, calling this the end result of “worshipping” economic growth without understanding the dangers of the economic system.

He urged the government in Malaysia to focus on indexes other than economic growth, like wealth distribution and social happiness.