Joint Jeffrey Cheah Institute (JCI) – Malaysian Economic Association (MEA) Seminar: Revisiting the New Economic Model (NEM) – Lags and Prospects
Malaysia’s economy grew at an annual average rate of 7.7% in the 1970-1997 period, and so the official expectation in 2001 was that the economy would grow an average of 7.5% in the 2001-2010 period. The outcome has been disappointing as growth only averaged 4.6% annually in 2001-2016.
“The good news is that there exist straightforward policy actions that the Government could implement effectively to put the economy back on course to realise Wawasan 2020,” according to Prof Woo Wing Thye – President of the Jeffrey Cheah Institute on Southeast Asia (JCI) at Sunway University – at a seminar on August 1, 2017. This seminar is the first of four seminars on the Malaysian economy, co-organized by JCI and the Malaysian Economic Association (MEA).
This JCI-MEA seminar series discusses key economic issues and identifies the specific policy measures needed to accelerate economic growth; to distribute more of the income growth to the poorest 40 percent of the population; and to ensure compatibility between economic growth and the health of the natural environment. The JCI-MEA seminar series is also a constructive forum to help inform the present efforts by the Government to formulate the Transformasi Nasional 2050 (TN50) blueprint. Top economists will discuss the important lessons from the reform experiences of foreign countries, and about the new policy directions and new implementation mechanisms that should be adopted in order to restore economic dynamism.
In the opening address at the first seminar, MEA President, Tan Sri Dr. Sulaiman Mahbob – former Director-General of the Economic Planning Unit – emphasised the importance of good economic management and strong institutional governance for tackling the challenges of the Malaysian economy.
Tan Sri Dr. Lin See Yan – former Deputy Governor of Bank Negara) – pronounced Malaysia to be caught in the Middle-Income Trap. He said that the real economy has lost its edge, and that recent growth masks the underlying economic fatigue. The symptoms of which include investment slow-down, absence of upgrading in the manufacturing sector, virtual zero improvement in technological innovation (Total Factor Productivity), and the high rates of youth and graduate unemployment. Tan Sri Dr. Lin recommended structural reforms (particularly in labor and education policies) to return confidence in the Malaysian economy, the absence of which is manifested in the present weakness of the Ringgit against the US$ and against most regional currencies.
Datuk Dr. Awang Adek – former Deputy Minister of Finance – hailed Malaysia as one of the better performing economies in Southeast Asia and globally, and he emphasized the difficulty of doing significantly better than the current global norm of low growth. He nevertheless acknowledged that the service sector is plagued by low labour productivity and technological backwardness. Datuk Dr Awang identified the new policy goal to be a large expansion in manufacturing activities.
Professor Rajah Rasiah of the University of Malaya agreed that Malaysia is still stuck in the Middle-Income Trap. He saw the key challenge to improving innovation to be governance. Drawing from the experiences of Korea, Taiwan, Japan and Singapore, Professor Rajah called upon the Malaysian government to set up a strong appraisal mechanism for its funding of innovation-promotion programs. Policy-induced rents to spur innovation cannot succeed if there is inadequate oversight in weeding out non-performers.
Dato’ Latifah Merican Cheong – former Assistant Governor of Bank Negara – also concurred that Malaysia is still caught in the Middle-Income Trap. “Malaysia has regressed in many areas because of the interference of vested interests and the lack of a political will to reform.”
Dato’ Latifah also said that the private sector must be the main driver of economic growth and warned against allowing the the GLCs to crowd out private firms. Furthermore, the civil service should be leaner and less bureaucratic; and that the National Development Policy Council should be reinstated to drive the implementation of challenging policies to reform the Malaysian economy.
The second seminar, Lessons for Malaysia from the Reform Experiences of Other Countries will be held first on 25 August 2017 in Bank Negara Malaysia, Kuala Lumpur and then again on 26 August 2017 in Bangunan U.A.B, Penang. Admission to the seminar is free with limited seats available.
