While it is important to debate the OPP3 to chart out the growth
prospects and the strategies and policies that go with them for the next
ten years, it is even more important to debate the RM3 billion economic
stimulus package in view of the worsening economic conditions as reflected
by:
The Standard and Poor’s revision "indicates diminished prospects
for a near-term upgrade" amid modest progress to reduce the unusually
high budget deficit of 5.7 percent of gross domestic product (GDP)
last year. It said "Greater political uncertainty, as Prime Minister
Mahathir Mohamad's iron grip is loosened, and modest slippage in a still
strong external position because of an unexpected decline in reserves,
also restrain improvements in creditworthiness".
The Parliament debate on OPP3 should be deferred to allow the more urgent Parliament debate on the RM3 billion economic stimulus package in view of these worsening present economic conditions.
The first question Parliament and the country must consider is how the country got to such a terrible economic mess and whether the RM3 billion economic stimulus package is the proper and adequate answer.
The Prime Minister’s announcement of a package of measures to stimulate the economy in the face of a slow down in the US has been met with a yawn by the markets.
The package is made up of a hodge-podge of policies put together without much thought, and reflect little or no understanding of the dangers Malaysia faces as a consequence of developments in the US which top gross mismanagement of the Malaysian economy by the Government’s reckless policies in the recent past.
The warnings and worse case scenarios offered by many analysts at the time of the budget for the current year are now coming to pass. The so-called “ pre-emptive measures” announced by the Prime Minister are unlikely to aid the economy and may indeed do more harm on an already battered economy.
It is generally acknowledged that direct impact of the US slowdown will be felt through a sharp fall off of Malaysian exports of electronics to its principal market.
Coupled with the weak demand and low prices for primary commodity exports, total exports are thus likely to plunge sharply in 2001. Export growth, the driving factor that enabled Malaysia to register positive growth after the catastrophic crisis of 1997, will no longer be present.
The Government’s massive pump-priming through public spending which represented the other element in the recovery, will no longer be sufficient to pull the economy out of an externally driven recession. Thus, the prospects for growth are bleak and the country is likely to see the fragile recovery to slip away.
The Government has essentially squandered the opportunities to correct the imbalances by rigidly using capital controls and the pegging of the ringgit, whilst being unwilling to restructure the economy, leaving un-addressed the bubble conditions created in the first half of the last decade.
Inept policies have had disastrous consequences. Foreign Direct Investment (FDI) has virtually dried up; there is ample evidence of capital flight; and the mountain of debt to finance bailouts has continued to grow.
The misguided view that an expansionary fiscal policy would by itself restore the economy to health and place it on a sustainable path was clearly compounded by the political expediency of wishing to save cronies, siblings and courtiers of those at the helm of power.
Pump priming, the other prop that contributed to growth in 1999 and 2000, was a policy that was clearly unsustainable.
By ignoring the economic fundamentals, and throwing caution to the winds, the BN Government gambled unwisely. That gamble has been lost. The true lessons from the 1997 crisis were never drawn --- poor corporate governance and an excessive reliance on debt finance to fund ill-conceived bubble creating projects were continued.
The BN Government has also failed to take account of the fact that mega-projects of the past were a contributing factor to the crisis of 1997. And yet it has persisted with these without any heed being paid to the economic consequences of a squandering of resources.
No serious attempt was made in the post crisis period to correct corporate mismanagement by introducing serious corporate debt restructuring and exercising the regulatory power that the statutes demand.
Bailouts have been the order of the day. It would be repetitive to list these. What has become even more alarming is that the bailouts are not directed at saving the troubled corporate entities but at protecting the wealth of individual tycoons.
Thus, despite the billions paid from the public coffers, MAS continues to be burdened with a mountain of debt; the LRT companies continue to be managed by the very same executives that placed them in jeopardy in the first place, and public resources have been used in a wanton manner o save the Renong empire.
The nation is now ill equipped to cope with the adverse external environment. Three years of inaction in addressing the issues of corporate governance and enhancing the competitive position of Malaysian corporations, and the emergence of a hostile environment for foreign investors have left the economy in an extremely vulnerable position
Foreign investors have shunned Malaysia for reasons that are all too clear – corruption, the erosion of the rule of law and the destruction of the judiciary, constant shifts in economic policy, a political scene that raises deep concerns about stability, the total lack of respect for minority shareholders and last but not least the repetitive tirades of the Prime Minister against globalization and the industrial countries. If ever there was a recipe for disaster, the policy mix pursued in the past three years, represented such a recipe.
Parliament has failed to address these urgent economic questions, which must take priority over the debate on OPP3.
(6/4/2001)