By Ramon Navaratnam
The World Bank`s Malaysia Economic Monitor released last month – entitled “Leveraging Trade Agreements” has been most welcome. It was prepared by Dr Rafael Munoz, the team leader and reflects well on the high standards and comprehensive economic reporting of the Malaysian economy.
The report is published by the new World Bank Office in Kuala Lumpur and does give us a good second opinion and another non-Government perspective on the state of the health of the Malaysian economy.
It is thus a good benchmark to assess the Finance Ministry and Bank Negara’s reports on the economy, that is available, right through the Treasury`s Budget Speeches and its Economic Report, as well as Bank Negara`s own Annual Report.
Unfortunately, this clever World Bank Monitor is more polite but less pointed. Thus the full value and real worth of the World Bank Monitor can get diminished.
When the World Bank officialese language is used, it is difficult to see their basic and gut views on what they really think is wrong with the economy. If the World Bank is too polite and subtle, then their intended message and advice is not clearly understood, ignored or even used for positive publicity, or even propaganda.
What are the World Bank Messages – are they polite and not pointed?
1. The World Bank states at the outset that the “Malaysia’s economy has remained resilient to external headwinds”. But it does not point out clearly or emphasise, that we have to be more cautious and vigilant.
The World Bank indicates in its data that our economic growth has been steadily declining from 6 per cent in 2014, 5 per cent last year and 4.2 per cent in the first quarter of this year. For the whole of this year the growth is projected at an even low figure of 4.4 per cent.
These declining data then begs the important question, as to how resilient the economy has actually been and how reliable are the estimates as to the length and depth of future growth trends?
The World Bank therefore need not be so positive and polite but more pointed in advising us, as to what can be done to counter the economic decline or to lessen the impact of further slow down.
Indeed, the World Bank could appear cavalier and complacent, when in fact the declining economy may worsen with so many uncertainties in the United States, United Kingdom, Europe and China and at home too.
The Moral of the story is – please don`t be too cool. It may get too hot for our comfort. Hence the World Bank should advise caution and the urgent need for good governance, and less race and religious bigotry.
We desperately need these qualities to to keep an even keel on our economic and social ship.
2. The World Bank states that “robust private consumption anchored economic growth” and that this was supported by “special cash transfers”. This of course refers to the BR1M grants handed out liberally and periodically to the deserving low-income earners.
But the World Bank does not indicate whether this policy is sustainable and for how long?
Yes, private consumption mitigated the decline in private investment. But again how long can we give BR1M grants to mitigate falling private investment? The World Bank should not just be descriptive but prescriptive in analysing our economic developments and threats and suggest real solutions to our problems.
3. The World Bank rightly highlights the serious development that our exports have declined by 17 per cent in the first quarter of this year. This is due to lower oil and commodity prices.
But the World Bank does not propose measures to reduce imports and raise exports. This can be achieved to some extent by providing incentives, training and the liberalisation of restrictive rules and regulations, especially those that seek to protect the preferred businesses and businessmen. Will the World Bank experts speak up more pointedly here?
If it knows what we should do and yet keeps quiet, due to politeness and political propriety or expediency, then the World Bank is regrettably failing in its role and functions?
4. The World Bank says clearly that “private investment growth is also expected to moderate”.
Then how can the World Bank confidently claim that Malaysia’s GDP is expected to be at 4.5 per cent in 2017 and 4.7 per cent in 2018. With all our economic vital signs slowing down and the considerable uncertainties worldwide, can the World Bank point how and why they appear so confident. We need to be convinced with stronger arguments from the World Bank?
Would the World Bank inadvertently perhaps, be lulling Malaysia into complacency and slumber or unwittingly encouraging us to take it easy, over our mounting problems? For instance the 1MDB problems are still looming large on the international horizon, although they are being somewhat managed here at home.
But the World Bank makes scarce mention of this phenomenon that can reduce international investment confidence in our delicate economy? Can the World Bank help us fix these outstanding problems or explain it satisfactorily to our foreign investors? That would help to assuage any doubts and investor fears.
5. Inflation is projected by the World Bank, to grow by only 2.5-3.5 per cent this year. There is “no anticipation of second round effects”, that could raise the inflation even higher this year. Why so?
With currency rates going through so much volatility, how can we be so sure that there will be no further deterioration in our currency exchange rates and inflation as well? All we need is some other Mufti pronouncing dangerous and inciteful statements. Then there will be more uncertainty and greater currency falls and higher inflation can follow.
Worse still, if these highly sensitive remarks from religious leaders go unchecked publicly, there could be more permanent damage to our declining economy. Then there will be more loss in confidence in our good governance and our state institutions.
It is polite to say that monetary policy continues to support economic growth. But at this time of slowing economic expansion, rising unemployment and the widening income gaps between the rich and the poor, perhaps the World Bank could have commented more pointedly on the need to consider the. Introduction of lower interest rates, to sustain higher economic growth and reduce rising Graduate Unemployment.
6. Structural Reforms have been correctly, but only casually touched upon, when indeed they are essential and urgently required. The World Bank position is somewhat vague here. Are they against wage increases and the BR1M payments, and do they prefer “unemployment benefits”.
Instead, I would have thought that we should pay more, encourage more productivity and merit-based policies and discourage the vast inflow of immigrant labour that can cause strains on our social services and cause budgetary problems and spread dreaded long-forgotten diseases, as well?
7. Leveraging on Trade Agreements have indeed, as the World Bank indicates, helped Malaysia to grow and develop. But we have successfully managed to get a lot of trade concessions in the “new generation” trade agreements, like in the case of the Trans- Pacific Partnership (TPP).
We fought hard for and surprisingly gained special preferences for Government Procurement, our peculiar competition policies and the protection of our Government Linked Companies.
We will no doubt ask for similar preferential treatment for the Malaysia-EU Free Trade Agreement and the Regional Comprehensive Economic Partnership (RCEP). So, how much more competitive can we become in the future.
In the meantime, other Asean countries are raising their competitive capacities. So, will the World Bank comment pointedly on these vital issues and question our need to get preferential and protective measures?
Won’t the benefits of open free trade be heavily negated by the preferential privileges we seek and want to get from leveraging on new generation international trade agreements.
8. The World Bank has made some general policy recommendations with regard to strengthening the services sector and the Small and Medium Enterprises.
The World Bank talks about “undertaking productivity enhancing reforms”, but it is not specific enough to enable a follow through in implementation, of recommendations.
The World Bank states that our “applied policies in services trade may remain more restrictive, compared with other countries”. But again the World Bank is soft and slow to make specific actionable progress.
9. The World Bank in a rare thought proposes the establishment of “an Independent Ombudsman Office within Miti (Ministry of International Trade and Industry), to handle investor grievances to ensure compliance of existing policies”. This is laudable as there can be too many Little Napoleons who need to be put straight on their work horses.
This rare World Bank concrete proposal can and should be adopted and acted upon fast, as it would stimulate any sagging investments and facilitate fair business practices and reduce grand corruption.
The World Bank’s Malaysian Economic Monitor, while most welcome, would be much more useful and will get much more press coverage and public support, if only it is more pointed and less polite and accommodating.
After all, the authorities and their officials, will be able to benefit much more from the more open, transparent and honest dialogue with the highly experienced and professional World Bank economists and social scientists.
I was once an alternate director on the World Bank Board of Directors in Washington and I can vouch for their high commitment and dedication to socio economic development internationally. Their zest to serve the countries where they work, especially with good partners and friends like Malaysia, is laudable.
But they must be assured that their constructive criticisms will be fully appreciated, before they will be really pointed but polite, in their monitoring, analysis and their recommendations to our Government. and to all Malaysians.
Ramon Navaratnam is the Chairman, Asli Center of Public Policy Studies.
With a firm belief in freedom of expression and without prejudice, FMT tries its best to share reliable content from third parties. Such articles are strictly the writer’s personal opinion. FMT does not necessarily endorse the views or opinions given by any third party content provider.