“We need to change the fundamentals of our economy.” – Saiful Bahari Baharom

Facebooker Saiful who has worked for former premier Najib Razak as well as a previous finance minister wrote in a recent posting that in the last several weeks, a few people have asked him what he thinks Malaysia’s economic prospects would be in the next few years.

“I did not give a definitive answer as I have not been well to really think about it, but I think I can answer the question now,” he wrote.

Alas, he fears that this country’s future prospects are not too bright.

“The basic and fundamental problem is our size. We are a small medium country – we are not tiny, like Singapore, Brunei, Qatar or Maldives – which would mean specialising in just a few sectors and do it really well (or just sell oil & gas!).

“Neither are we big enough to have a strong agricultural/mining sectoral economic base to provide us with at least some support, no matter what, like Indonesia or Thailand.”

This being neither here nor there – being not technologically innovative nor do we have the critical economic mass in agriculture and basic heavy industry, is a major issue that we have to deal with.

He wrote that Najib set out Malaysia to be a high-value economy with a smart pool of talents to spearhead the direction forward.

“We began to bring back and also attract foreign talents to take us to a higher level in the value chain but what happened – well, since 2018, nothing happened. The PH government stupidly changed all of Najib’s policies for the sake of changing them. That “I hate Najib” syndrome that blinded their decision-making process.

And now we are stuck.

He said that because of the abolition of the GST and the additional expenditure due to Covid-19 pandemic, our debt to GDP has gone up from Najib’s era of around 54% to 67%. That is a huge jump.

“This ratio is obtained by dividing the size of the debt by the size of the GDP. To shrink the ratio, you either reduce the size of the debt or you grow the size of the GDP.

“Here is the catch – economic wisdom says it is okay for a country to get into debt if the debt is used to build infrastructure. The logic being infrastructure creates or catalyses economic activity and economic activity grew the GDP size.

“Well, what infrastructure did we build when the debt went up from 54% to 67%?” he asked.

What does this mean for Malaysia?

Saiful asked that once our economy has stabilised from its pandemic woes, where will our economic growth come from? What will propel the sale of our exports? Palm oil? Until when? We failed to be the world’s leading exporter of downstream palm oil products. We spectacularly failed to create a world-class palm oil product brand (which is exactly what Lever Brothers have done, but Felda did not) which we could have sold to Third World countries everywhere.

“Unfortunately we are not as agile, as hardworking or disciplined as the South Koreans. This is a fact that we have to face and to change our life values and culture now is impossible.

“And our universities, much to my shame and dismay, by and large, have thus far failed to produce a workforce that I think can actually make an appreciable change in the way our economy operates in the next 5-15 years.”

He feels that those who keep repeating ad nauseam “Malaysia’s economic fundamentals are strong” are stupid.

“An old house built in the 1950s would still have it’s strong fundamentals – strong walls, strong foundations etc but it’s economic returns in terms of rental will continue to shrink as new houses built with newer technology, materials and design compete in the property market.

“We need to change the fundamentals of our economy. The United Kingdom has successfully navigated itself out from its old post WWII economy to a post-modern technology and service-driven economy.”

The question is, can we? – New Malaysia Herald