It is a tall order to achieve 4.5% to 5.5% growth during the 12th Malaysian Plan period. That view is shared by Lee Heng Guie of Socio-Economic Research Centre. For 2021, it is likely to be 4% at best. And for the period up to 2025, more likely it will average 3% to 4%. Why?
There are several challenges which are not addressed – productivity, equity quota, education mis-matches, slow adoption of green and higher technologies, policy flip-flop and of course climate of political instability. Recent key data on exports, industrial output, wholesale and retail sales as well as loan demand show a decline in growth. This is no short-term phenomenon. Many businesses are scarred by the pandemic. Only brave souls launch rashly forward. The majority are cautious. Why? With depleted internal resources, and a non-conducive investment and political climate, domestic demand and private investment will be hard-pressed to come by! Cash handouts and moratoriums are short-term relief measures. Then there are slogans and catch-phrases for the medium and longer-terms. MIER’s business confidence index was 87.5, well below the optimism threshold of 100.
Budget 2022 must lay out a solid base for growth in the shorter and medium term. On one hand, it seems quite easy to do so. Why? There are so many apparent “low-hanging” fruits – suspend the NEP; transform the education investment to reflect future labour requirements; create skills and jobs in high value-added sectors; focus on green technology; develop AI for resource-based sectors; reduce dependence on foreign labour through progressive automation of processes (agriculture, construction and services); create champions/models for others to emulate. And many more.
On the other hand, politics will stop progressive moves. The same elite will want larger contracts rather than structural changes. So, there will a push for large, wasteful projects! And the answer is the multiplier and “trickle-down” effect will provide the desired growth. Meanwhile, inequalities will widen and racial rhetoric will increase to a higher decibel.
New taxes are probably on a “back-burner”. There will be some who may want GST back. That tax could be considered if we are a high-income nation and our Gini coefficient has dropped to 0.30 instead of 0.4 or thereabouts currently. But an improved collection system, widening of the excess profit tax and a higher graduated personal tax for the rich (above RM0.5 million per annum) will help reduce the deficit gap. Can we do that?
Reference:
Moderate growth more likely, Ganeshwaran Kana, StarBiz, The Star, 8 October 2021
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