By S Sivamoorthy - Free Malaysia TodayCOMMENT Many business associations will hail Minister in the Prime Minister's Department and CEO of Pemudah Idris Jala for his frank and sincere comments on the economic situation of Malaysia.
He noted that Malaysia is one of the world's highest subsidised countries with 4.7 percent of GDP compared to Indonesia 2.7 percent, Philippines 0.2 percent and the Organisation for Economic Co-operation and Development (OECD) countries at 1.5 percent at an average.
On the other hand the government's debt reached a record of RM362 billion in 2009.
The agreed formula should focus on growing the economy (thereby increasing revenue/GDP) government cost cutting measures and gradually reduce the subsidies over a period of time.
As a step in right direction, the government must initiate measures to improve the business environment in order to attract FDI’s and boost the domestic investment.
This is critical as during the period 2000 to 2008, the amount of FDI grew by average of 3.9 percent as against an average growth rate of 14.8 percent inflows into the region.
Another indicator is the declining share of private investment to GDP from 34.9 percent of GDP in 1997 to 10.9 percent in 2008.
The private sector participation as engine of growth has dwindled to below 10 percent of GDP from 30 percent of GDP at its highest.
There was further erosion of economic competitiveness when the outflow of capital in 2008 was RM117 billion and another RM54 billion for the first half of 2009.
What does the above statistics reveal?
The solution
They clearly state that that there are structural problems in the economy that must be addressed urgently in an accountable and transparent manner.
MIBA has raised several issues as relevant factors that need to be considered.
NEP is inconsistent
NEP framework of 1970 – 2009 is inconsistent with knowledge-led growth and focuses on redistribution of income and not enough on generation of income.
The real cost of NEP that has drained the federal government's financial resources comes in the form of inflated government contract project cost overruns, agriculture subsidy schemes cost of making opportunities in business entrepreneurship, education and scholarship to substandard applicants, concession discounts and pink slips and property ownership.
The worst effect of the NEP regime is the prevalence of rampant corruption which has weakened and created ineffective institutions across all branches, namely legislative, judiciary and the executive.
High dependence on foreign labour
Foreign labour dependency has slowed down productivity, depressed wages impeding human capital and remittances overseas amounted to 1.5 percent of GDP each year.
It must be noted that 75 percent of Malaysian workforce are low skilled and 25 percent of our highly skilled workers migrate – leading to a massive brain drain.
A huge civil service
Malaysia boasts of one of the largest bureaucracies in the world with about 1.3 million in 2009, and civil servants' remuneration amounting to RM 41 billion.
The following statistics indicate the magnitude of the bloated bureaucracy which suffers from “poor public delivery syndrome when you compare the number of civil servants to one million population.
For Malaysia it stands at 4.68, whereas our neighbours have a much smaller civil service - Thailand (2.06), S Korea (1.86), Philippine (1.81), Indonesia (1.79), Laos (1.24) and Cambodia (1.18).
Promote R&D
The government needs to promote innovation creativity and high value activities by intensifying research and development.
Government Linked Companies with about 36 percent of the total capitalisation has to fulfill the Malay Agenda. This means priority of contracts and staff employment is skewed towards fulfilling the Malay Agenda.
Inspite of various GLCs transformation programmes to improve profitability, the GLCs are still recording massive losses.
This can be translated into shortfalls in collection of the corporate tax revenue for the government. Companies taken over by government trust agencies, PNB and GLCs have actually shown declining profit trends and losses after takeover. This is another dangerous trend as well managed companies just disappear from the commercial landscape.
To overcome all these, the government should work of strengthening the pillars of the 1Malaysia concept, highlighting unity in diversity, economic competitiveness and government for all.
We at MIBA also endorse gradual subsidy reduction over a period of time, and government's political will to focus on fighting corruption, removing wastage and improving public sector delivery efficiency as an overall strategy to improve the financial status of the country.
S Sivamoorthy is a Johor Baru-based tax consultant and an advisor to the Malaysian Indian Business Association.
9 comments:
i don't mind for the cutting subsidies.. but the problem stated in the article must be addressed urgently.
I don't mind cutting subsidies as long as the country needs our help...
The government needs to cut down the debts but the people doesn't want too much burden, then how can this be solved?
Potong pun potonglah. Yang penting keadaan eko negara kekal stabil. Jika eko stabil, saya yakin kerajaan pasti akan permudahkan kesulitan rakyat :)
Apapun yang berlaku nanti, saya harap agar semua pihak sama2 mengamalkan win-win situation utk kebaikan bersama.
kekurangan tenaga mahir golongan berpendidikan tinggi adalah disebabkan kekurangan insentif dan gaji yang rendah berbanding negara seperti UK, Jepun, NZ dsb. Saya perhatikan ramai saintis phD tidak rela bekerja dan berkhidmat dalam negara kerana gaji walaupun sudah direvise baru-baru ini tetap rendah berbanding negara luar. bagaimana kita nak capai phd 60% 2010?
promote R&D mengundang seribu pertanyaan? kalau kurang golongan bijak pandai, maka R&D di Malaysia ni tidaklah segah mana...
Malaysia memang benar memberi subsidi paling tinggi berbanding negara-negara Asia yang lain. Singapore pula langsung tidak memberi subsidi kepada rakyatnya. Ia bukti betapa bertuahnya kita dan mengapa masih ramai tidak tahu bersyukur?
kebergantungan kerajaan terhadap pekerja asing adalah amat merugikan kerana begitu banyak wang negara keluar ke negara asing. kerajaan wajar memikirkan alternatif terbaik bagi membendung aliran keluar wang tunai ini dan apakah usaha menarik lebih ramai pekerja tempatan untuk menggantikan tempat pekerja asing ini?
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