THE recent revival of the East Coast Rail Link (ECRL) and Bandar Malaysia projects will add a much-needed boost to the economy this year, but the private sector needs to start spending more in order to fuel the country’s growth engines, said an economist.

Lee Heng Guie, executive director of the Socio-Economic Research Centre (SERC), said the revivals of the two previously stalled mega projects would help cushion the impacts of slowing global economic growth and the US-China trade war.

These two external factors had dampened private investor sentiment to the point that investment growth had slowed to 4.5% in 2018 from 9.3% in 2017.

“The government as a policy maker has to be a more effective facilitator for business. The two projects will help to lift sentiments but (the private sector) cannot continue to rely on these big projects,” Lee told reporters at an SERC event today.

The government had announced that the China-backed ECRL will be revived, albeit with a lower price tag of RM44 billion. The new contract for the 648km railway line has increased participation from local business from 30% to 40%.

Meanwhile, Bandar Malaysia, which is at the old Sg Besi air force base in Kuala Lumpur, is expected to have a gross development value of RM140 billion.

“The private sector needs to continue to invest in services, in manufacturing to raise the economy. You cannot always be also looking at the government as it has its limitations. It needs to control the deficit and contain debt,” Lee said.

Private investment made up an annual average share of 16.1% of gross domestic product (GDP) in 2011 to 2018. The next biggest chunk comes from private consumption at 55%. The rest is made up of external trade and public sector investment.

Since the government will need about three years to fix the country’s finances, its investment in the economy will be reduced, said Lee. This gap needs to be filled by the private sector.

“If the private sector continues to be overly cautious, then the overall economy will be dragged down. Last year, private investment share to GDP was 17.4% and its growth has not been strong at 4.5%,” he said.

“The private sector cannot totally rely on the government to drive the economy. You have to play your part.”

On the government’s part, it needs to do more to make Malaysia more competitive as an investment destination, ease the cost of doing business and address the short-term foreign worker shortage, he added.

Although 2019 is a challenging year for the economy, SERC expects that conditions will improve in the latter half of the year.

A survey of businesses by the Associated Chinese Chambers of Commerce and Industry Malaysia (ACCCIM) found that 50.2% of respondents were neutral in their outlook for the first half of 2019, while 37.5% were pessimistic.

In the second half, Lee said there will be more positive sentiment from businesses especially going into 2020 due to the expectation that the government has progressed in its three-year plan to repair the country’s finances.

According to the ACCCIM-BECS survey, 25.7% of respondents said they were positive about economic prospects, while those who had negative outlook declined to 21.9%. About 52.4% of respondents said they were neutral.

Given the external and domestic challenges facing the country this year, SERC expects the economy to expand by between 4.5% and 4.7%. Last year, the economy grew by 4.7%. – April 23, 2019.