LETTER

Which economic thrust should the country adopt?

Thomas Loh

Published

LETTER | SPV2030 or Budget 2020? The focus is to increase wages which I think it shouldn't be. Increase in wages will result in cost-push inflation which is detrimental to the nation.

I hope the Government will get the direction right i.e. to increase productivity and technology (known as the gross fixed capital formation of a nation).

I strongly support the use of biomass fuel from palm oil to reduce the cost of the subsidy and promote better usage of palm oil. Regardless, it will support oil palm markets in Malaysia and potentially we will able to weather price shocks from oil price fluctuations.

In history, no nation has achieved an advanced economy by merely investing heavily in the construction sectors. Construction sectors are merely supporting the core activities of a nation, be they in manufacturing, tourism or financials. Investment in the construction sectors should proportionately be based on the economic/business activities of a nation. The government should not frequently use investment in construction sectors as a stimulus for our economy because it could potentially lead to higher debts and fiscal deficits. 

At this moment, the government should rethink what infrastructure we really need after previous administration had approved mega-projects which may only bring limited quantum or limited potential growth to Malaysia e.g. the ECRL or the KL-Singapore HSR. At this juncture, we should ask whether we should - at this preliminary stage - become:-

a. A manufacturing hub such as China, Vietnam, Indonesia; or

b. A financial hub like London, Singapore; or

c. A technological innovations/intellectual property ownership nation such as Japan or Korea or the US.

If the government continuous focus on construction, Malaysia may face deflation soon. Due to the TRX and too many unsold properties and tall buildings in the  Golden Triangle, KL City as lead indicator in the rental market will face downward pressure in occupancy and very soon, this will lead to a property crash and at same time due to slowdown in the property sector and the global economy, the effect may be much worse than a recession. 

Any sign of rental reduction in KL City will cause downward rental pressure throughout Peninsular Malaysia. Worse, if the government continues to build infrastructure, it may cause price cost mismatch e.g. the property price for a unit in KL City is RM2 million. After the government poured billions to develop nearby infrastructure, the property prices still remain stagnant.

At this moment, I personally believe Malaysia should focus on agriculture to reduce imports with manufacturing being export-oriented. From there we leap forward to an advanced economy stage through deep research and innovation through our agriculture and manufacturing base. Developed nations such as as Australia, New Zealand or even Japan do export their agriculture products globally. It is wrong to think of agriculture as a low-value sector.

During a market slowdown, the first question we should ask is whether should we send back more illegal foreign workers. We also can encourage more savings/ investments from Malaysian working in a foreign land to buy properties by offering them special incentives/fast track approvals or special interest rates by banks to encourage them to save money in their beloved country.

On tax strategies, we can learn from past mistakes or from tax reform strategies successfully implemented by other nations. I hope in Budget 2020, the government will not be introducing new taxes to shock the public and market community in view of the global economic slowdown. Instead, the government should focus on how to:

a. improve tax collections from illegal activities and black markets;

b. simplify the tax system;

c. broaden the tax base through limiting exemption;

d. promote ease of doing business e.g. raise the audit exemption for private companies and exempt companies that no longer need to appoint a company secretary.

e. Establish a one-stop centre and promote it aggressively so they can assist foreigners who are keen to invest in Malaysia. Some consultants are charging investors of US$2000 just to incorporate a Malaysian company.

Lastly, as I mentioned before, the government should make it compulsory for electricians or plumbers or even mechanics to undergo proper training and be registered and be covered with public liability insurance and other relevant insurances. 

Legislation should be introduced and those who fail to do so should be jailed or fined as they post a potentially hazardous risk to consumers. Through this, it will also raise their income and prevent illegal foreign workers from seizing the "rice bowls" of our Malaysian people.


The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

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