‘Najibnomics’ good for Malaysia, GST necessary – analyst

KUALA LUMPUR: Prime Minister Datuk Seri Najib Razak has not received enough credit for his economic policies despite favourable international assessments, an analyst said.

In a commentary in Singapore's The Straits Times, independent economic and political analyst Bruce Gale pointed out that under Najib's administration, the Malaysian economy has been growing at a rate above the international average.

“The economy expanded by 5.8 per cent in the second quarter of this year compared with the same period last year, the current account surplus widened, and investments rose by 7.4 per cent. Latest figures also show that inflation is well under control, with the CPI registering a rise of just 3.2 per cent in July,” Gale wrote.

Gale said the implementation of the unpopular Goods and Services Tax (GST) and abolition of unsustainable subsidies since 2009 were “necessary and urgent” and a “broadly appropriate” macroeconomic policy.

He explained that the GST was necessary to force the middle class to share the tax burden as tax avoidance in Malaysia was a serious issue, with only one in 10 people paying income tax.

Although the tax is regarded a retrogressive tax which affects all income brackets, Gale noted that basic food items such as rice, fruits, bread, meat and vegetables were exempted, ensuring a minimal impact on the poor.

He also added that Najib had no choice but to remove government subsidies despite inflationary implications.

“To fail to do so would be to place the country on a perilous course. There would be little money left for spending on health and education -- both vital issues for the poor -- not to mention the sort of infrastructure necessary to ensure future economic growth, and therefore jobs,” he said.

The former partner at the Hong Kong-based Political and Economic Risk Consultancy then pointed out that the government tried to alleviate the impact of such economic reforms through programmes such as the 1Malaysia's People Aid (BR1M) cash aid, but added that such programmes should never be a permanent solution.

Gale observed that it took a lot of courage for Najib to pursue such unpopular policies and that observers and critics of the administration need to look at Malaysia's economic issues from a more balanced perspective instead of an emotional one.