The Malaysian Economy from a Different Point of View

Malaysia’s weakened competitiveness in the region overshadowed its growth rate of 7.2 percent in 2010, said Opposition Leader Anwar Ibrahim.

The former Finance minister said the growth rate of 7.2 percent as announced by the government should not be viewed in vacuum, pointing out that neighbouring Singapore and Indonesia had outperformed Malaysia’s growth.

“Singapore and Indonesia registered a growth of 14.5 percent and 6.1 percent respectively in 2010. Both outperform Malaysia’s growth especially considering that Indonesia’s 6.1 percent growth was calculated on a higher base as Indonesia did not face economic contraction in 2009 unlike Malaysia or Singapore,” said Anwar.

Anwar said Singapore’s 14.5 percent growth had been achieved against a backdrop of a strong rebound in manufacturing sector, recording an annual growth of 29.7 percent.

“(Malaysia’s) growth is half of what Singapore achieved while the growth in manufacturing sector was only 11.4 percent for 2010, nearly a third of Singapore’s manufacturing growth.

“There is big contrast in the ways each government explains this in spite of the fact that both countries are export oriented and highly dependent on the global economy – while Singapore cites a strong external demand for its manufacturing products, Malaysia claims the opposite,” explained Anwar.

‘Najib’s economic plans in isolation’

Anwar stressed that Malaysia’s manufacturing sector was steadily losing competitiveness in the global market, saying it continued to be among lower rung of the value chain while Singapore upgraded its value chain.

“This was pointed out a decade ago, yet nothing effective has been put in place to stem this decline apart from continuous rhetoric paid for by taxpayers’ money.

“The relatively lower manufacturing growth is compounded by contractions in the fourth quarter of 2010 in two fundamental sectors of the economy,” said Anwar, adding that both mining and agriculture which formed a significant revenue earner for the government had registered contractions of 1.3 percent and 4.3 percent respectively in the fourth quarter.

“The annual growth of only 0.2 percent and 1.7 percent in mining and agricultural sectors respectively is another symptom of stagnation plaguing the economy,” he added.

Anwar said the figures were correlated by key indices used to gauge the sentiment of business community and the public on the direction of the economy, citing the Business Condition Index published by the Malaysian Institute of Economic Research (MIER), which lost 5.4 points quarter-to-quarter in the last quarter of 2010, settling to below 100 points for the first time in nearly two years.

“In fact, the business community’s confidence on the overall outlook of the economy has been on the decline since the beginning of 2010. As for the public sentiment, while the Consumer Sentiments Index did improve to 117.2 points in the fourth quarter, it has not recovered to the level of 2007 prior to the fuel price hike of 2008,” said Anwar.

On Indonesia, Anwar pointed that the fiscal management of the economy also revealed a stark difference between the two countries as Indonesia had managed to avoid recession in 2009.

“Unlike Malaysia, Indonesia has managed to avoid recession in 2009 and continued to register a strong growth of 6.1 percent in 2010 in spite of the higher growth base, making it one of the best performing economies among the world’s top 20 rich and developing countries,” he said.

In contrast, Anwar pointed out that Malaysia’s government debt had ballooned to RM407 billion as at the end of 2010, representing 53.1 percent of the country’s GDP.

Anwar said prime minister Najib Razak’s economic plans were severed from the current realities faced by the business community, describing the series of announcements on the economy as “smokescreen” that only benefited a section of elites.

“No amount of glossing and public relations campaigns can confuse the public of the urgency to undertake vital economic reforms to reverse the slide,” he warned.

– Harakahdaily