Pick up pace to stay on track

THE World Bank’s Malaysia Economic Monitor, December 2017 had both good and disappointing news.

The good news is that the Malaysian economic growth has exceeded all expectations. It is now estimated to achieve the highest growth of 5.8% this year since 2014 and to keep a steady pace to attain about 5.2% growth next year.

The latest International Monetary Fund (IMF) report is more optimistic and projects growth from 5% to 5.5% for next year.

But the sad news is that these high growth rates have not been sufficient to ensure that Malaysia will achieve its target of becoming a developed country or reaching highincome nation status by 2020. Instead, we might acquire developed economy status only from between 2020 and 2024!

But here again the World Bank has a serious caveat. To make this vital breakthrough, we have to undertake more major reforms or greater socioeconomic transformation.

These proposed reforms have been stated before. Indeed, we have adopted some reforms but they have not been adequate to move the economy forward to become a developed country by 2020.

The World Bank in its charac teristic diplomatic style has mildly urged us to enhance productivity, raise our competition in key markets and reduce deficits in critical skills.

I wish the World Bank could have made more specific recommendations on how to improve our productivity, competition and critical skills. The World Bank recognises the heart of our socioeconomic and even political problems but seems constrained or reluctant to provide the particular prescription to treat our major economic structural weaknesses.

That is probably why it also has not highlighted the major complaints and concerns of most Malaysians. These pertain to rising inflation, the weak ringgit, high unemployment rate especially among graduates and low international ratings for our education standards in general, all of which has caused some decline in the standard of living and quality of life especially for our lowincome groups.

I wish the World Bank would also measure our socioeconomic performance against the wealthier former developing countries that were once weaker than us. What reforms did they introduce and implement that we failed to do or did somewhat slowly that caused us to miss our target of achieving developed nation status by 2020?

The latest Moody’s Investors Service has specifically cautioned that “Malaysia’s reserves at current levels are insufficient to meet maturing external longterm debt repayments and shortterm debt”. Moody’s, however, consoles us that our economic growth and other factors “could mitigate this vulnerability to sudden shocks”.

But the message is clear. We need to build larger reserves and stronger economic resilience.

The World Bank expects private consumption to remain the main driver of economic growth. But household debt is also high and therefore not very healthy.

I am also disturbed to learn that youths between the ages of 25 and 44 comprise the largest group (about 60% or 94,408) of bankrupts reported from 2013 to August 2017. So we can ask whether our private consumption and economic growth are, to some extent, being pushed up by the rising number of young bankrupts. Their conspicuous and wasteful consumption must be discouraged or we will face more problems.

I believe Prime Minister Datuk Seri Najib Tun Razak is right when he said the World Bank and IMF reports are “proof that we are heading in the right direction”. However, the reports also subtly and cautiously warn that our successes may not be sustainable unless we reform more strongly and at a faster pace.

Greater public confidence can stimulate economic growth, strengthen the ringgit, enhance productivity, lower inflation and raise wages and incomes especially for the lower income groups.

There is no doubt too that better racial and religious understanding and tougher action against extremism from all quarters would help raise domestic and foreign confidence in our national capacity to progress so that we would avoid postponing our target date of 2020 for achieving developed nation status.

We cannot afford to be complacent. We have to undergo more reforms and faster, especially when the politicking after GE14 has settled down, so that we can all march forward as a united nation towards achieving much greater heights.

Let’s hope and pray we all have a happier new year. TAN SRI RAMON NAVARATNAM Chairman Asli Center for Public Policy Studies