RECENTLY,  Bank Negara Malaysia Governor Muhammad Ibrahim, in his remarks at the Invest Malaysia Forum, said that the younger generation must be optimistic. He argued that the economy is on a strong footing and is “in a sweet spot”, citing the first quarter GDP performance of 5.6 per cent, and our achievements are acknowledged given the “good numbers published by global rating agencies”.

I beg to differ with the governor: The youth in this country have every reason to be worried.

Let me explain.

First, we learn in Econs 101 that GDP growth does not necessarily translate to a corresponding rise in standard of living.  GDP does not tell you who benefits from this growth and if it is sustainable and inclusive. GDP is like a speedometer, just telling us the speed, not if we are on the right road, running out of fuel, or overheating. It is as if to say we have good speed, or we need to go faster, even though we are on the wrong road with little or no fuel. That would be a silly thing to say wouldn’t it?  

What matters to these youth are not headline GDP figures, but the consequences and effects of economic growth on their well-being. Yes, GDP grew, but not wages, nor jobs.

Yes it is true that GDP grew by 4.2% last year, but it did not translate into enhancement of the well-being of these youth. In fact, wages were stagnant last year. The median salary increment for Malaysian employees in 2016, adjusted for inflation, did not even reach RM20 per month.  In fact, the average salary for Malaysian fresh graduates from 2007-2015, after adjusted for inflation, has remained basically unchanged. Let us not be bedazzled by one big headline GDP number.

Second, jobs are harder to find. Despite the growth of the economy last year, the number of unemployed went up by 13% during the same period. Worst, most of the jobs created were low-skilled, not the high-skilled jobs that this country needs to become a high-income nation.

It is worst for the youth. The youth unemployment rate in Malaysia is about 11%, about three-and-half times higher than national average. Even having a degree doesn’t guarantee a job; one in four has no job.

Even if these graduates are lucky to land a job, about one in two earns less than RM2,000 per month. This is worrying in the face of labour displacement by artificial intelligence and automation. There is a labour market mismatch, where limited job creation meets graduates who are not industry-ready. 

Third, these young graduates are highly indebted, and cannot afford to pay for their own housing. The average university graduate has about RM30,000 in PTPTN debt. Can you imagine already having that much debt before even having a real job?

Where do we get all the above worrying figures on wages and jobs? From BNM, as published in their latest annual report. The governor would recall that he himself launched the report, with an understandably worried look as he did so.

Contrary to the governor’s optimism, every Malaysian, and not just the youth, needs to worry about the state of the economy of this country. There are many structural issues that are yet to be addressed.

Data from BNM show that we are a highly indebted nation, be it the corporate sector, households, or even government. We simply have too much debt. The economy is driven by consumption primarily based on debt, and this high debt would inevitably cramp spending. This burden of debt would be a drag on future demand and growth. Investment is also slacking, with consumption overtaking investment in 2016 and 2017. Our manufacturing sector is also focused on the low end of the production line; i.e. assemblies; resulting in lowering contribution to GDP over the years.

Our weak currency is also hurting us. It’s time we stop praising the weak ringgit. Malaysia has undergone 4 years of persistent depreciation, culminating in a 36% loss in value. 

Finally, does the governor really expect us to listen to the global rating agencies? Some may find it incredulous given their track record. The governor would know better than to appeal to the sentiments coming from credit rating agencies (CRAs).  It’s ironic the governor himself recognised this in his speech in the very same conference when he said rating agencies were typically behind the curve in assessing sovereign credit worthiness.  Many studies showed that CRAs did such a bad job rating securities. Of AAA-rated subprime mortgage backed securities issued in 2006 prior to the global financial crisis, 93%, yes 93 out of 100, have now been downgraded to junk. Based on their track record, the public, especially those in charge of monetary policy in Malaysia, should view these global CRAs as people who are not very good at their work and we should not be looking to them for guidance in policy debates. Given their demonstrated incompetence, it would foolhardy if we were to do so.

What we need is an urgent effort to reclaim and regain confidence. This is primary, before we address all the structural problems in education, labour, governance, etc. To regain confidence, we must overcome the trust deficit, and this requires understanding of its origins.

As written by Daim Zainuddin late last year in The Edge, the reason we are facing chronic trust deficit is partly because we lack experts who have moral courage, integrity, and honesty to tell the bitter truth to those running this country. He further added that “the rakyat and investors, both local and foreign, must have faith and confidence in those managing the economy. Lack of intelligence and incompetence cannot be compensated for by loyalty to the leader. Lies can only lead to more lies, and once the rakyat has lost faith in you, even when you are stating the truth, they will not believe you. You cannot fix the problems of the nation when there is a trust deficit.”

The youth have every reason to be pessimistic. The governor’s rose-tinted view is rather alarming. We all should be seriously worried about the future of this country, especially when we find those entrusted with the responsibility to decide policy are inexplicably in denial despite facts to the contrary.  They are not doing justice to this nation. – August 24, 2017.

* Osman Jailani reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.