Form emergency task force to address crisis
THE economic situation in the country is dire and there is an urgent need for intervention, even if it is deemed contrary to the principles of the free market.
The ringgit’s descent against the US dollar has been quite sharp and the exchange rate has fallen to its lowest since the Asian financial crisis in 1998.
There is a need now for the establishment of an emergency economic committee that would look at all aspects of the economy and prescribe immediate solutions to the problems, as opposed to presenting it to the cabinet to be mulled over by non-economic experts.
A dedicated team of experts would be a good start to building confidence in the economy. The terms of reference for the committee can be like the emergency committee of the National Operations Council in 1969. The experts would need to come up with solutions swiftly and decisively to the problems plaguing the economy.
The organisation must be given the same powers and authority as those given to the National Operation Council during the 1969-1971 Emergency. It should be funded by the government and include civil servants and experts in various fields.
Among the notable members of the committee would be the likes of former Malaysian Institute of Economic Research executive chairman Tan Sri Kamal Salleh, Genting Bhd director Datuk Dr. R. Thillainathan, former central banker and financial regulator in Asia Tan Sri Andrew Sheng and former finance ministry secretary-general Tan Sri Mohd Sheriff Mohd Kassim.
A cursory examination of some vital statistics would suggest that we are heading towards an economic iceberg and this must be averted by firm action.
Last year, the current account surplus plunged 58.6 per cent to RM22.78 billion from RM55.1 billion in 2022. In the fourth quarter of last year, the current account surplus declined to RM0.25 billion from RM27.51 billion in the same period in 2022.
The primary income deficit, which consists of the net flow of profits, interest, and dividends from investments, increased to RM20.86 billion in the fourth quarter from RM11.56 billion previously.
The ringgit is only a whisker away from reaching 4.885 per US dollar, a level last seen in 1998 when the Asian financial crisis ravaged the region’s currencies.
The newly formed economic committee would need to quickly identify why there was a massive outflow of funds from the country and put in place remedial measures.
As the interests of the nation are of the utmost importance, politicians from both sides of the divide must put aside their differences and work together to support the committee in resolving the economic crisis.
The committee must consider all options for resolving the economic problem, such as, if necessary, pegging the ringgit to ensure certainty for exporters and importers and avert further escalation of the cost of living due to the sinking ringgit.
While some allude to the fact that it is contrary to the principles of the free market, the dire situation requires such urgent measures.
It must also look to bolster consumption and domestic investment as the external headwinds and tepid demand for exports do not bode well for international trade.
To achieve this, increasing food production should be made a priority to reduce the over-dependence on imports, which currently amount to RM80 billion.
The committee must also deal with food cartels that can impede all other efforts to bring down food prices.
Subsidy rationalisation and the resultant price increases can dampen consumption, something that the government cannot afford to do now. As such, it must defer its implementation.
The government must reintroduce the Goods and Services Tax (GST) to shore up its revenue, which may increase by about RM20 billion. It needs to ensure that the administration and collection of GST are more efficient and that there are no backlogs in refunds.
The committee must work to diversify the investment and export markets away from the traditional markets to insulate against economic volatility.
Above all, the semblance of political stability must be felt and experienced by foreign investors before they will come and invest in Malaysia.