KUALA LUMPUR: Former finance minister II Johari Abdul Ghani today laid out three issues that are dragging down investor confidence and adversely affecting the economy.
Johari, the former Titiwangsa MP, said first on the list was the “fundamental” question of succession.
Without it, there was no certainty in the market, he said in an opinion piece on what ails Malaysia in the latest issue of The Edge Weekly.
“Prime Minister Tun Dr Mahathir Mohamad is 94 years old, and people are not sure who the next leader will be. The supposed premier-in-waiting, Datuk Seri Anwar Ibrahim, is not sure as well,” he said.
Noting that Anwar was at loggerheads with Mohamed Azmin Ali, the economic affairs minister and deputy president of PKR, he added: “In a nutshell, everyone is fighting.”
This was producing a lot of uncertainty, with “too many political voices out there”, resulting in the business environment being no longer conducive, especially for foreign investors.
In this kind of an environment, he said, investors would adopt a wait-and-see attitude, which was not good for the economy.
Secondly, Johari said, there seemed to be a lot of flip-flopping.
“For example, the acquisition of certain toll concessions and highways may increase government debt. This is inconsistent with the government’s agenda to reduce direct debt.
“Another example is the stalling of large infrastructure projects, which, after a while, were revived.
“Investors who bought into the companies – thinking they would be undertaking the awarded contracts and, as a result, receive steady profits in the coming years – would have sold their shares after the stop-work orders were issued, thinking the contracts had been cancelled. But then, they are re-awarded. This is one of the impacts, people suffer losses.”
Johari also noted that drastic changes had been made to the tax system, with the goods and services tax (GST) being replaced by the sales and service tax (SST).
After the switch, he said, there had been a need to create smaller taxes such as the digital tax and the sugar tax.
“All the new taxes being introduced were badly timed – when things are tough for the rakyat, sugar tax and what not were implemented. All these factors have led to a diminishing level of confidence on the part of the investor as well.”
The third factor, he said, was the lack of clarity in the decision-making process.
“The feedback that I have received from those in the business community is that they are confused as to who makes the decisions in the government level. Is it the ministry of economic affairs, the ministry of finance, the Prime Minister’s Office or the Council of Eminent Persons (CEP)?
“Even though the CEP has been abolished, many in the business community believe it still exists. Even some of those in the management of government-linked companies that I meet still think the CEP is calling the shots and still has a lot of influence. This whole set up is confusing.
“To add to this, we have inexperienced ministers who are unable to work with senior government servants to execute government policies. There are fights between ministers and chief secretaries. They seem to contradict one another.”
One impact of this situation, Johari said, was that long-term investors in the country would have less confidence to deploy their investment because of the wait-and-see attitude.
“Our competitiveness in the region is becoming a concern. The net outflow of funds for the past 18 months amounts to more than RM20 billion. This is a lot,” he said.
A second impact is a slowdown in potential economic growth.
“There are no leads in the capital markets, there is nothing to shout about. Bursa Malaysia has dropped, from 1,800 points to below 1,600 points,” he said.
Loan growth, Johari said, was slowing down, the property market was declining, certain sectors were dead, and many contractors under the PR1MA housing scheme had not been paid.
Over time, these issues would result in an increase in both unemployment and the cost of living, and inevitably reduce the rakyat’s spending power, he predicted.
“If this goes on, the market will continue to go down and at some point, it will become very cheap, then too cheap – only then will investors start coming in. But, basically, we will have to restart our engine to get back up.
“On a scale of 1 to 10, the Pakatan Harapan government has performed below par in certain areas – the economy, development, policy, focus and so on. But in terms of governance, it is better. Maybe it has learned from past mistakes,” the former minister said.