Statement by the Economic Club of Kuala Lumpur (ECKL)
ECKL: Customisation of policies, programmes needed to support economic sectors
KUALA LUMPUR, July 13 — There is a need for customisation of policies and programmes to enable the identification of sectors or regions where more support is needed amid lockdowns being implemented in the country, said the Economic Club of Kuala Lumpur (ECKL) today. Chairman Tan Sri Abdul Wahid Omar said the third Movement Control Order (MCO) and subsequent Full MCO had stifled the recovery, resulting in the World Bank lowering its economic growth outlook for Malaysia for the second time to 4.5 percent in 2021 — down from the 6.0 percent growth forecast in March 2021. “The pandemic has had an asymmetric impact on sectors and regions. For example, the food and beverage sector experienced higher closure rates, particularly in the northern states where vendors largely rely on tourists from Kuala Lumpur and Selangor to patronise their food trails. “Other manufacturing sectors have experienced particularly high closure rates in East Malaysia,” he said during his welcome address at the Malaysian Economic Summit 2021 held virtually today. Abdul Wahid, who is also Bursa Malaysia Bhd chairman, said the government’s efforts to ramp up vaccination rate should be lauded as it would allow the lockdown to be lifted as soon as possible to save the economy and people’s livelihood. Currently, about 11.6 million doses have been administered. A total of 3.6 million people, or 11.2 percent of the population, have been fully vaccinated while eight million, or 24.6 percent, have received at least one dose of the COVID-19 vaccine. At the current rate of 337,000 doses per day, Malaysia could have some 70 per cent of the people fully vaccinated within 100 days or by end-October 2021. “It is therefore our hope that as the vaccination rate increases, we can uplift and do away with the broad-based lockdown and instead have more targeted Enhanced Movement Control Orders only in highly infected or affected areas,” he said. “But without the broad-based tax such as the Goods and Services Tax, the government’s resources are rather limited with a fiscal deficit of 6.2 per cent of GrossDomestic Product (GDP) in 2020 and expected to widen further to 6.8 per cent in 2021 compared to the earlier official forecast of 6.0 per cent,” said Abdul Wahid. He pointed out that the government had been prudent and introduced initiatives that did not unnecessarily put a strain on its fiscal position but at the same time, cushion the people from the worst effects of the economic downturn. “It is a delicate balancing act. But too wide a fiscal deficit and high government debt level may risk a downgrade in credit rating, resulting in higher borrowing cost and potentially weakening the currency. “Having said that, the saving grace is that our current account in our balance of payments for the first quarter of 2021 remained healthy at RM12.3 billion or 3.3 per cent of GDP, and our BNM international reserves of U$111 billion is sufficient to finance 8.2 months of retained imports,” he added. Abdul Wahid said the banking system also remained well capitalised with core equity tier one ratio of 14.8 per cent, sufficient buffer against unexpected risks. To-date, the government has introduced eight economic packages, from the Prihatin Rakyat Economic Stimulus Package (PRIHATIN) in March 2020 to the most recent, National People’s Well-Being and Economic Recovery Package (PEMULIH), last month. These packages are collectively worth RM530 billion, out of which a significant RM83 billion is in the form of direct fiscal injections. The one-day virtual summit was organised by KSI Strategic Institute for Asia Pacific. — BERNAMA Original article available at https://www.bernama.com/en/business/news.php?id=1981743
He noted that many might complain that the stimulus packages introduced by the government were inadequate.
Opportunities and Challenges in 2021 for Private Equity in Asia
Expanding economic pie will ensure fairer, more inclusive growth for all
LETTER: A panel of experts has proposed a short and long term solutions to the economic challenges and policies faced by Malaysia during a virtual Roundtable on “Expanding Malaysia’s Economic Pie — Where, What and How?”, organised by The Economic Club of Kuala Lumpur (ECKL) and the KSI Strategic Institute for Asia Pacific (KSI), last Tuesday, February 23rd. The panel comprised Tan Sri Andrew Sheng (Distinguished Fellow at Asia Global Institute of the University of Hong Kong), Tan Sri Abdul Wahid Omar (Chairman, Bursa Malaysia and Chairman, ECKL International Advisory Council) and Datuk Dr Madeline Berma (Commissioner, Human Rights Commission of Malaysia). The session was moderated by Tan Sri Yong Poh Kon (Chairman, Royal Selangor International Sdn Bhd). The panel discussed Malaysia’s economic challenges and proposed various recommendations for policymakers. The panel agrees Malaysia is badly affected by the Covid-19 pandemic. Malaysia’s economy has contracted by 5.6 per cent Gross Domestic Product (GDP), making it the worst contraction since the 1998 Asian Financial Crisis. Consequently, Malaysia’s Gross National Income (GNI) per capita has declined from RM45,212 in 2019 to RM42,531 in 2020. According to a recent United Nations Conference on Trade and Development report, Malaysia’s foreign direct investment (FDI) has dropped by more than two-third to RM10.1 billion in 2020, making it the worst drop in the region. Malaysia’s FDI has remained stagnant relative to its neighbours such as Singapore and Vietnam. While the fiscal deficit has expectedly widened to 6 per cent GDP, the current account in Malaysia’s balance of payments recorded a surplus of RM62.1 billion in 2020, making it the highest surplus since 2011. The panel agrees with what many economists have described as a “K-shaped recovery” with a widening gap between the high-income group and the middle- and low-income groups. Such issues are compounded due to the various layers of homogeneity in Malaysian society. Income inequalities also exist between Malaysian states and territories, where median income can range from RM3,563 in Kelantan, RM5,873 in Sarawak, to RM10,549 in Kuala Lumpur (statistics 2019). While Malaysia’s Gini coefficient has improved from 0.399 in 2016 to 0.407 in 2019, there are still pockets of poverty which have proven difficult to resolve, particularly in rural and interior areas which are more difficult and costlier to access. Between 2016-2019, median income has only increased by 1.8 per cent for the B40, 4.1 per cent for the M40, and 4.5 per cent for the T20. Therefore, policies meant to address inequality have not brought about the desired outcome. Covid-19 risks worsening inequalities for the B40 and M40, especially with regular sources of employment and income generation being disrupted. The pandemic has created a “new poor”, where those who were not poor before the outbreak (and may have even been in the T20 and M40 as well as the higher end of the B40) have fallen behind the poverty income line. Many small and medium and enterprises have already wound down, and the unemployment rate are increasing further including poverty rate and the debt-to-gross According to the Statistics Department of Malaysia (DoSM) 2020 data, the incidence of absolute poverty decreased from 7.6 per cent in 2016 to 5.6 per cent in 2019, but the incidence of relative poverty increased from 15.9 per cent (2016) to 16.9 per cent (2019). Despite Malaysia’s dominant economic position in Asean, its economic size has declined from third in 2010 to sixth position in 2020; Malaysia has been overtaken by the Philippines, Indonesia and Vietnam. While the pandemic has exacerbated the structural challenges of the economy, these issues have persisted prior to the pandemic. A key stumbling block is Malaysia’s young but rapidly ageing population coupled with declining productivity rates. One of the major reasons for the slowing labour productivity is that that Malaysia has not invested enough in our youth. It is hope that IR4.0 can reverse the declining productivity growth. This decline in productivity growth if not reversed will have an adverse effect on expanding the economic pie to have inclusivity. The panel also suggested that perhaps a new social compact be drawn up to move the country forward for sustained economic, productivity and inclusive growth. These are some of the issues that has prevented Malaysia from breaking through the middle-income trap, afflicting most neighbouring Asean countries. The panel lauds the recent policies of the government such as the Malaysia Digital Economy Blueprint and the to be launched 12th Malaysia Plan. However, the execution of these policies is extremely important. The panel are in consensus that Malaysia needs to grow the economic pie to ensure a fairer and more inclusive growth for all Malaysians. Additionally, the government needs to work closely with the private sector, civil society and academia to promote innovation in order to create opportunities and jobs of the future. Moreover, predictability and certainty in government policy is necessary to attract and retain FDI back into the country. Therefore, Malaysia needs both ‘whole-of-government’ and ‘whole-of-society’ approaches to address challenges of the 21st century. The panel has proposed short and long-term recommendations for the policymakers. Short-term solutions include: Long-term structural economic changes include: THE ECONOMIC CLUB OF KUALA LUMPUR (ECKL) KSI STRATEGIC INSTITUTE FOR ASIA PACIFIC (KSI) Featured on the New Straits Times