KUALA LUMPUR: Globalisation has been a polarising force with policymakers being challenged to find the right balance between various and opposing objectives, said Bank Negara Assistant Governor Marzunisham Omar at the World Bank International Conference today.
"The retreat from global integration and multilateralism today serves as a wake-up call for us to reflect on the realities of globalisation, to re-examine our policy choices and to recalibrate our way forward," he said.
Outlining the impact of globalisation, Marzunisham said it has resulted in an exponential increase in international trade, financial market flows and the need for human capital to adapt to a changing work environment.
While trade and foreign direct investment have grown manifold, Marzunisham noted also that there is a growing pushback against globalisation due to growing income and wealth inequality.
He said the situation is set to worsen over the next decade as technology accelerates job displacements and potentially worsens income inequalities.
"It is no surprise then that accusations of free trade causing job losses and disproportionate depression of wages have shifted from economic textbooks to the forefront of policy discussions today," he said.
Similarly, financial globalisation has resulted in global bond and equity market flows growing 80 times larger since the turn of the century.
On the flipside, the growth has been accompanied by highly volatile short-term portfolio flows, which have proved disruptive to emerging markets.
"At the extreme, global financial flows can lead to the build-up of domestic vulnerabilities, such as currency mismatches, external indebtedness and broader financial imbalances."
Marzunisham proposed enhancing regional and global financial safety nets to counter these risks, alongside the implementation of flexible and pragmatic domestic policies.
"Moving forward, an important consideration is to bring the various bilateral swap arrangements and regional financial safety nets together with the IMF’s safety net into a coherent framework that will enhance their complementarities and thus, effectiveness in supporting emerging economies in dealing with short term capital flow volatility."
With regards to the impact of globalisation on human capital, Marzunisham said workers have to constantly adapt, re-skill and up-skill themselves to compete in a fluid work space comprising global talent.
He alluded to the proliferation of information technology such as social media, which serves as a global marketplace, marketing tool, recruitment platform and social scene.
He noted that while it has worked towards bringing people together, it has also given rise to the challenge of promoting cultural, ideological and sociopolitical diversity.
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