The much-awaited official response from the new Finance Minister Dato’ Seri Najib Tun Razak on the global meltdown was nothing but a letdown. Najib’s response was grossly inadequate, and misses the point entirely.
The world’s financial system is facing the worst breakdown since 1929, with the banking sector in total disarray and all the advance economies – representing 55 percent of global gross domestic product – entered recession, it is incumbent upon any government to respond quickly and effectively in order to mitigate the effects of the crisis.
When everywhere else in the world the crisis and its impacts are discussed daily in detailed fashion, for our government leaders, the only relevant index in Malaysia now is the nomination tally for UMNO leadership positions. Who bothers about the economy?
As a response to challenge by the Opposition to announce a revised Budget taking into consideration the new circumstances, especially the fall of oil prices which formed 46 percent of the budgeted revenue for 2009, Najib promised a proper response on Monday 20th October.
However, apart from saying that the growth rate would be revised downwards, Najib could only manage to announce that the Government would inject RM 5 billion into Valuecap Sdn Bhd so that it can stabilize the stock exchange, as well as a promise that rules for foreign investment will be further relaxed.
The other strategies include the liberalisation of the service sector to attract investment and generate local employment, re-position of government projects to focus on those that generate higher multiplier effects, as well as strengthening of small and middle-scale enterprises.
He also announced that there will be no reduction in budgeted expenditure for 2009, which means a much bigger deficit as a result of a smaller revenue base due to the fall of oil price.
Najib said details would be announced on 4th November 2008 when he concludes the budget debate on budget in the parliament, almost two months after the initial collapse of the financial markets.
In a global crisis of such calamitous magnitude, the Finance Minister is duty-bound to explain to the nation through at least a Ministerial Statement in Parliament as soon as he and the Treasury humanly could prepare for.
But instead the Government acted as if there is no crisis thus a revised budget or even a tentative plan of actions is not needed.
Malaysia is fortunate that its banks are yet to be known to be exposed to the international banking crisis but no one is immune from the global meltdown.
A decade since the 1997/8 crisis, problems contributing to the last crisis – cronyism, corruption and nepotism – are still very much alive. The net effect is that the cost of running the federal government tripled that of in 1998.
Dato’ Seri Anwar Ibrahim’s final budget as Finance Minister was only RM 68 billion in total, miniature to the RM 207 billion budget presented by Prime Minister Dato’ Seri Abdullah Ahmad Badawi on 29 August.
The quality and availability of public goods like education, public housing, public health, crime prevention, have all declined, while child and aged care and public transport are near inexistence, resulting in Hobson’s choice for the poor and middle class of either facing the decline in living condition or ever higher cost of maintaining a decent lifestyle.
57.8 percent of the country’s 5.8 million families live on a combined monthly income below RM 3,000, including 8.6 percent that make less than RM 1,000 per month. The already skyrocketing inflation, and the impending crisis, hit them really hard.
The dependence on government-related employment and foreign workers over the last decade stops the economy as a whole to move up the value chain and to response to a crisis effectively. One in four of Malaysia’s labour force is a legal foreign worker while approximately one in four in the workforce works for the public sector directly or indirectly, for instance, in government-linked corporations.
Private sector lacks capacity to innovate and compete internationally, thus hindering its ability to weather the storm.
The challenges of our time is to ensure that there are sufficient food on the tables of the almost 60 percent of our nation’s families, and to ensure that their life qualities do not descend further.
It is in this context that Najib’s RM 5 billion injection of capital into the controversial Valuecap Sdn Bhd misses the point. It is too little to boost the stock exchange in face of exit of foreign institutional players.
More importantly, it is, in the language of the United States, the Main Street that matters, not the Wall Street.
As Najib misses the point, the country risks missing the boat of curtaining the fallout of the crisis.
