thestar Online
Comment by Wong Choon Wai
THE signs are everywhere, the global economy is slumping and it will be a while before growth becomes part of the landscape again.
In its latest report, the World Bank said the world economy was now expected to slow to 0.9% growth next year from 2.5% growth in 2008.
That would be the weakest expansion since the bank started keeping records in 1970.
“For developing countries, the situation has really changed since the beginning of September,” said Hans Timmer, who directs the bank’s international economic analyses and projections.
The extent of the downward shift in developing country growth rates is expected to be more dramatic than even during the Asian financial crisis in the late 1990s or the bursting of the dot.Com bubble earlier this decade, with growth expected to slow from 7.9% last year to 6.3% in 2008 and 4.5% in 2009.
Malaysia has been spared the worst, thanks to the reforms the Government introduced in the wake of the 1997-98 Asian financial crisis and its huge foreign exchange reserves.
Economists note that Malaysia has enough financial resources to mitigate any fiscal adversity and domestic banks are also in a strong position to weather an economic downturn.
But we will feel some pain.
We will not feel the pinch as badly as Singapore, Taiwan and other countries with less diversified economies but we will feel the pain.
The number of jobless Malaysians will increase as the demand for goods and services in our export markets contracts.
Sales of cars and houses will slow as Malaysians zip up their wallets in anticipation of a slower economic growth.
In 1998, during the peak of the Asian financial crisis, some 80,000 Malaysians were rendered jobless.
It may be too early for the Human Resources Ministry officials and those in the manufacturing sector to estimate how severe the retrenchments will be.
But we should take pre-emptive steps.
We should set up a retraining fund so that those laid off can have their skill sets upgraded.
At the same time, these workers should be given a monthly allowance of between RM500 and RM1,000 to tide them over during the downturn.
The Government should also be more flexible in allowing the private sector to tap funds from the Human Resources Development Fund.
The downturn will also present the Government with a slew of opportunities. For a start, how about making structural changes to the economy?
Malaysia can no longer be a centre for cheap labour and low-cost production. The country simply cannot compete with the likes of China, Vietnam and Cambodia.
What the Government has to do is repatriate the 600,000 foreign workers as promised and cut down dependence on foreign labour.
Until that happens, companies will not favour innovation and measures to improve productivity.
During this time, the National Economic Council, comprising ministers and representatives from the private sector and the unions, must also take the approach that nothing is sacred.
If the Foreign Investment Committee is an impediment to foreign investments flowing into the country, it must be abolished.
If the New Economic Policy has to be tweaked or held in abeyance during this difficult period, so be it.
It is heartening to hear that the National Economic Council and the International Trade and Industry Ministry are on the verge of liberalising the services sector and keen to push through the free trade agreement with the United States.
The point is this: Malaysia and the rest of the world are going to be facing a rocky ride in 2009 and possibly 2010. But at some point, recovery will happen.
Malaysia must be in a stronger position to ride the upswing then.
It can only happen if the Government presses ahead with structural changes to the economy.
In every crisis, there is an opportunity.
The window of opportunity is now. It is time to make the changes.
– Datuk Wong Chun Wai is group chief editor of The Star.
Comment by Wong Choon Wai
THE signs are everywhere, the global economy is slumping and it will be a while before growth becomes part of the landscape again.
In its latest report, the World Bank said the world economy was now expected to slow to 0.9% growth next year from 2.5% growth in 2008.
That would be the weakest expansion since the bank started keeping records in 1970.
“For developing countries, the situation has really changed since the beginning of September,” said Hans Timmer, who directs the bank’s international economic analyses and projections.
The extent of the downward shift in developing country growth rates is expected to be more dramatic than even during the Asian financial crisis in the late 1990s or the bursting of the dot.Com bubble earlier this decade, with growth expected to slow from 7.9% last year to 6.3% in 2008 and 4.5% in 2009.
Malaysia has been spared the worst, thanks to the reforms the Government introduced in the wake of the 1997-98 Asian financial crisis and its huge foreign exchange reserves.
Economists note that Malaysia has enough financial resources to mitigate any fiscal adversity and domestic banks are also in a strong position to weather an economic downturn.
But we will feel some pain.
We will not feel the pinch as badly as Singapore, Taiwan and other countries with less diversified economies but we will feel the pain.
The number of jobless Malaysians will increase as the demand for goods and services in our export markets contracts.
Sales of cars and houses will slow as Malaysians zip up their wallets in anticipation of a slower economic growth.
In 1998, during the peak of the Asian financial crisis, some 80,000 Malaysians were rendered jobless.
It may be too early for the Human Resources Ministry officials and those in the manufacturing sector to estimate how severe the retrenchments will be.
But we should take pre-emptive steps.
We should set up a retraining fund so that those laid off can have their skill sets upgraded.
At the same time, these workers should be given a monthly allowance of between RM500 and RM1,000 to tide them over during the downturn.
The Government should also be more flexible in allowing the private sector to tap funds from the Human Resources Development Fund.
The downturn will also present the Government with a slew of opportunities. For a start, how about making structural changes to the economy?
Malaysia can no longer be a centre for cheap labour and low-cost production. The country simply cannot compete with the likes of China, Vietnam and Cambodia.
What the Government has to do is repatriate the 600,000 foreign workers as promised and cut down dependence on foreign labour.
Until that happens, companies will not favour innovation and measures to improve productivity.
During this time, the National Economic Council, comprising ministers and representatives from the private sector and the unions, must also take the approach that nothing is sacred.
If the Foreign Investment Committee is an impediment to foreign investments flowing into the country, it must be abolished.
If the New Economic Policy has to be tweaked or held in abeyance during this difficult period, so be it.
It is heartening to hear that the National Economic Council and the International Trade and Industry Ministry are on the verge of liberalising the services sector and keen to push through the free trade agreement with the United States.
The point is this: Malaysia and the rest of the world are going to be facing a rocky ride in 2009 and possibly 2010. But at some point, recovery will happen.
Malaysia must be in a stronger position to ride the upswing then.
It can only happen if the Government presses ahead with structural changes to the economy.
In every crisis, there is an opportunity.
The window of opportunity is now. It is time to make the changes.
– Datuk Wong Chun Wai is group chief editor of The Star.
