Radical economic approach needed to fix economy, says Malay council

Nabihah Hamid

Malaysia needs to adopt a radical approach to fix the economy, says the Malay Economic Action Council. – The Malaysian Insight file pic, July 18, 2022.

PUTRAJAYA needs to shift its focus from exports to consumption to fix the country’s economy, Malay Economic Action Council (MTEM) senior fellow Ahmad Yazid Othman said.

“The best way for the government to keep the economy constantly growing and developing is to radically change our economic approach from being too focused on the export market to being equally focused on the local market (people’s spending),” he told The Malaysian Insight.

“These two markets need to strike a balance. Too much focus on the export market is in fact one of the main factors contributing to low wages as well as dependence on foreign workers.

“The way to focus on the local market and increase household spending (consumption) is through an increase in salary.”

Yazid also thought there was room for a consumption-based approach because the Malaysian economy was still in a state of “under-consumption”.

“To what extent can we take a consumption-based approach? The limit is when we reach the living wage income level. Therefore, in the management of our economy - the level of wages and household expenditure should be among the main indicators,” he said.

He, however, noted that in order to achieve growth in demand in the local market (domestic demand) there must be a clear and long-term strategy.

“At the same time, the government needs to implement such measures: strengthen anti-profiteering and anti-monopoly laws, and introduce programmes to reduce food imports that are currently at the level of RM50-RM60 billion a year,” he added.

On ways to handle the weak ringgit against the US dollar, Yazid said Putrajaya can perform “barter-trade” with countries that have a need for palm oil.

“Barter-trade with countries that have a need for palm oil to obtain the required food supply or food input without relying on the value of the US dollar but on value agreements between the two countries,” he said.

On fiscal policy, he suggested more ways to collect taxes.

“In terms of fiscal policy, there is more room to collect taxes such as GST, windfall tax in every sector, income tax from the rich, and corporate income tax. Capital gains tax and more can be introduced,” he said.

He said untargeted subsidies benefit the rich more than it helps the masses.

“It is also heavily abused by cartels that engage in smuggling and manipulate the subsidy system.”

“The total allocation of subsidies should be channelled directly to the people in the form of cash assistance,” he said.

Last month, economist Prof Dr Barjoyai Bardai said an endowment programme can be a long-term solution to address Malaysia’s ballooning subsidies, which could cost taxpayers close to RM80 billion this year.

The academic at Universiti Tun Abdul Razak said the government could demand that large conglomerates and the super-wealthy in Malaysia contribute to the funding scheme.

“Our subsidies are the largest ever given by any country, and of course the cash aid is just a short-term plan.

“There needs to be a ‘correction’ so that our situation now will not be compared with Sri Lanka, where subsidies were given without control and the loans taken finally led it to bankruptcy.

“Note, Sri Lanka’s debt is much smaller than ours,” Barjoyai told The Malaysian Insight.

An endowment programme, he said, would be a “specialised source” to ensure sustainability in funding cash aid for the hardcore poor, B40 and even M40 groups.

Malaysia’s unsustainable subsidy programme is the elephant in the room, even as the government announced that the projected expenditure of RM77.3 billion this year would be the highest in the country’s history.

Finance minister Tengku Zafrul Abdul Aziz also said subsidy expenditures could reach RM80 billion this year.

Besides subsidies to maintain food ceiling prices, it also covered cash aid to needy groups, fuel subsidies, and propping up of the agricultural sector. – July 17, 2022.

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  • Direct cash transfers should not be encouraged. It may provide immediate relief but for how long? Moreover, once you give cash handouts, It becomes a permanent feature and difficult to discontinue. If cash transfers can't be avoided, dispense it through religious bodies, welfare organisations and NGOs which would enable the Govt to stop such cash transfers once the situation is addressed.

    The key to long term prosperity is jobs, jobs and jobs. Give a person a fishing rod to fish for his meal rather than giving him the fish to feed his family.

    Posted 1 year ago by Super Duper · Reply