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The economy is already starting to improve, but will this last?
When we read the headlines, it appears that the country is bouncing back from the dark days of 2020 and early 2021. Finance Minister Tengku Datuk Seri Zafrul Aziz estimates the economy will grow between 5.3 and 6.3% this year.
However, economist Dr Geoffrey Williams suggests that this growth is short-term in nature.
“Economic growth in 2022 has been very strong due to EPF withdrawals as well as the effects of opening up,” the Malaysia University of Science and Technology (MUST) professor told SAYS.
“On top of this is a pre-election boom fuelled by government spending. This is not sustainable, and the economy is expected to slow down after the elections,” he added.
So what can actually be done to ensure that economic growth persists for the long haul?
We asked a few experts this exact question and here are the key areas they’ve identified that will provide sustainable growth for the country.
1. Helping the little guys
“Only 2% of the companies in Malaysia are categorised as ‘large’ but they contribute to 67% of Malaysia’s total GDP,” Datuk Seri Johari Abdul Ghani said during a Budget 2023 discussion on TV3.
“This is why even though the GDP figures may look promising, it does not truly reflect the struggle that the majority of companies in the country face,” the former Finance Minister explained.
Image via Hanna Morris / Unsplash
The Malaysian economy is highly dependent on a few large companies. There is high employment within the over one million small companies, but at low wages due to a lack of opportunities to grow.
According to Dr Geoffrey, “Help should be provided universally, not based on specific projects, programmes, or target groups. Allowing the small companies access to grants and loans to spend on their direct needs rather than some specific scheme devised by a ministry is better.”
2. Rethinking our ‘mega projects’
The term ‘mega projects’ refers to massive construction projects undertaken by the government such as highways or railroads. These projects are important for any economy, as it creates new jobs and stimulates growth.
However, many of these projects in Malaysia have not been able to provide the positive outcomes that they should.
Image via Tolu Olubode / Unsplash
“Large construction projects require foreign workers, which is very difficult at the moment and also does not always create very many local jobs or spinoffs,” said Dr Geoffrey.
The MUST professor urged the government to conduct proper economic and social impact studies to fully understand the benefits of such projects before they are approved.
“Also, if these mega-projects make business sense, they should be left to the corporations with the government having a monitoring role,” he added.
3. Surging prices
When prices rise much faster than wages, it can negatively affect our ‘purchasing power’ where we basically have to spend more money to purchase the same thing.
You may be asking yourself, what is the reason for this?
The disruptions brought on by the COVID-19 outbreak and the Russia-Ukraine war dramatically reduced the availability of imported goods into Malaysia, causing prices to skyrocket.
Image via Jun Low / Unsplash
This does not mean that the country needs to start producing everything itself.
Dr Carmelo Ferlito, CEO of the Center for Market Education (CME), said, “Self-sufficiency is extremely costly and ultimately harms consumers. Malaysia needs to be even more open to import what cannot be locally produced efficiently,”
By doing this, Malaysia will be able to focus its efforts into goods that it can produce more efficiently, to increase its exports and bring in more money into the country.
“The government will need to stop interfering in the market, particularly with price controls. A sound plan of gradual government spending cuts is the only (painful) way to tackle inflation,” he said.
Ultimately, these three key areas require significant changes in policies in order to rectify their underlying issues
Image via Kyle Glenn / Unsplash
In the past, many policies were chosen based on which ones will garner the most support from voters, rather than which ones will provide the most benefit for the country in the long run.
“The new government will have to be brave and adopt unpopular measures if they really want Malaysia to navigate properly through the downturn,” said Dr Carmelo.
“We need to restructure government policy away from the election process and toward sustainable policies focused on promoting competitive, agile businesses,” Dr Geoffrey added.