RECESSION seems to be the difficult word for all official mention. The Statistics Department announced on February 11 that Malaysia’s gross domestic product (GDP) for 2020 contracted by 5.6% and we have already had three consecutive quarters of negative growth since Q2 of last year.

Prospects for a robust recovery are dim and made worse by the apparent rudderless political leadership. Unless there is a full-scale revamp of our political economy, Malaysians better be prepared for this recession to be a long haul.

In synchronicity with the Statistics Department’s announcement, and also without mentioning recession, Finance Minister Tengku Zafrul Tengku Abdul Aziz laboured to allay fears stating that the government hoped to put the economy right with mega infrastructure projects such as ECRL, MRT2 and LRT.

The facts remain that these projects were already ongoing even before our recession officially commenced after Q3 2020.

Overcoming recession through financial spending, as in infrastructure projects, is the norm from the perspectives of Keynesian and Austrian schools of economics.

However, spending can only be funded through borrowings as tax revenue is sluggish in our current Covid-hit and recessionary economy.

Debt spending is also limited by our current national debt level. As of the end of September 2020, our federal debt alone was RM874 billion or 60.7% of GDP.

Whereas, including other obligations, our government’s debt and liabilities was RM 1.26 trillion or 87.3% of GDP. Going forward, we need to be careful not to succumb to a financial black hole.

If we have to spend through borrowings, we need to ensure every ringgit works. That means no leakages and other nonsense like political patronage, crony project tendering, kickbacks, side deals and the like.

Can our government and our political economy so imbued in systemic racism along with the strings of GLCs led by politicians and board members comprising politicians, deliver and help tame the beast that is the raging bear?  

The High-Speed Rail (HSR) project would have been a good infrastructural investment had it been aligned to our other rail grids like the ECRL, ERL, and LRT lines, and provided that we negotiated well with Singapore.

But no, mainly because of our vehement resistance to the terms of joint procurement of assets and contractual works that the HSR project became a screw-up.

The HSR project spending and the synergy of Singapore’s international business hubs could possibly help cushion the current recessionary fall.

Foresight was absent in the original planning of the ECRL route in not linking to the HSR line. It was again absent when we decided to terminate the HSR project with Singapore and paid compensation.

Can our crop of leaders handle the gargantuan recessionary beast that is only at its beginning along with the societal hardship of increasing magnitude by every quarter?

Tengku Zafrul also mentioned the government aimed to regulate the shadow economy, worth about RM300 billion, with intent to strengthen the country’s revenue base.

The shadow economy, also known as the underground economy, includes all unreported income from productive goods and services that escapes the umbrella of the tax system.

This is usually the result of imperfection in the economic policy and poor governance, such as over-regulation, excessive tax burden, labour policy, skewed taxation system, and poor performance by regulators.

The shadow economy and its effect are the result of our socio-economic policies and political culture entrenched from decades. Merely introducing stricter regulations aimed to collect more tax will not solve the problem.

To do so, and with it the growing burden of recession and a subsequent depression, requires a total overhaul of our political economic culture, and total Malaysian support.

The people need to trust the political leadership. Policies must be fair, well explained, duration targeted, and sincere. Take the affirmative action policy that started from the 1970s as an example. The perceived insincerity and the poor implementation of the policy plagues our socio-politico-economic issues today. We have been a society more divided without narrowing the income gap of different groups.

Tengku Zafrul should know that the people are smart enough to differentiate between lip service and sincere efforts. He should ask himself how many of his cabinet colleagues fully comprehend the meaning and mechanics of debt spending, debt to GDP ratio, middle income trap and their implications. Often, what the right hand in the government does the left does not know.

Examples are plenty about inconsistency, flip-flop, and insincerity of policies. One good example is the recent brouhaha about imposing a ban on alcoholic beverage sales at retail outlets in Federal Territory. Handling of the labour issue is another example of unclear policy.

In summary, it is not just spending on mega projects and regulating the shadow economy. The imperatives of good political leadership, a clean, cohesive and functional cabinet team, plus an all-willing business community and a conscious all-Malaysian effort that will help us weather the recession storm.

This is also how we need to rebuild our nation. – February 18, 2021.

* Captain Dr Wong Ang Peng is a researcher with an interest in economics, politics, and health issues. He has a burning desire to do anything within his means to promote national harmony. Captain Wong is also a member of the National Patriots Association.