IF the jury is still out on whether it pays to be truthful, the verdict is clear – there is certainly a premium for being transparent in revealing the true state of the country.
Apart from the stock market and the strength of the currency, the recent credit rating from Fitch Rating is another tangible sign that the strength of the country is not solely based on whether it complies with internationally accepted practices on managing its balance sheet.
The country does not need a transformation plan or a master plan written by some consulting firm that would not be held accountable if the plan does not work. It needs leaders who are genuine in wanting to bring about governance and transparency.
It needs people who handle public funds with care and regulations that protect investors and at the same time punish those who fail in their duties. We cannot afford another 1Malaysia Development Bhd (1MDB) fiasco.
Fitch retained Malaysia’s rating at A- with a stable outlook despite the government dismantling the goods and services tax (GST), reintroducing subsidies for petrol and raising its definition of national debt to include government guarantees that have crystalised.
A pertinent point in Fitch’s latest rating assessment is that Malaysia is not in any danger of a downgrade because of the Pakatan Harapan’s populist policies. So who says that populist policies are bad for the country?
What is harmful for the country is when there is a severe breakdown in governance leading to the mismanagement of public funds. The country goes on a spiral downwards if institutions set up to provide a check and balance cannot be relied on to do their duties.
Heading the list of government agencies that have failed miserably in servicing their debt is 1MDB. The fund is the epitome of what goes wrong when there is no governance and accountability.
The latest parliament proceedings revealed that even the report by the Public Accounts Committee (PAC) probing into the financial transactions of 1MDB is not reliable because a crucial piece of information was omitted without the knowledge of its members.
That information associated the outflow of some US$700mil (RM2.8bil) to Good Star Ltd, a company that is owned by Low Taek Jho or better known as Jho Low. The information came from Bank Negara and was left out of the report.
Guarantees to other agencies such as Danainfra Nasional Bhd and Prasarana are part of the RM199bil in government guarantees that were previously placed outside the official national debt figures. Although Danainfra and Prasarana cannot be compared to 1MDB, at the end of the day it is transparency and being forthright that matters.
Everyone knows that funds from DanaInfra and Prasarana are utilised to build the public transport system. Public transport is never profitable. So the government has to pump in funds to build the infrastructure.
Shouldn’t the debts be folded as part of the national debt obligation in the first place? Why wait for a new government to state the reality?
Former leaders such as ex-Prime Minister Datuk Seri Najib Tun Razak had warned that the move by the Pakatan Harapan government to change the national debt figures by recognising the default of the government guarantees would come with dire consequences.
He had said that the rating agencies would downgrade Malaysia and stock markets were spooked.
However nothing of that sort has happened.
Since end May, Malaysia’s national debt was re-stated to RM1.09 trillion compared with RM686.8mil under the Najib administration. Debt to the gross domestic product (GDP) ratio, an indicator of the strength of the government’s finances, had shot up to 80.3% compared with 50.4% previously. It is far more than the international norm of less than 55%.
Fitch in its latest assessment, takes cognisance of Malaysia’s latest debt position. In its eyes, the debt to GDP ratio is about 65%, meaning the rating agency recognises that all government guarantees that cannot be serviced by the companies are taken as part of national debt.
In the weeks to follow, the other rating agencies would probably take a similar stance as Fitch.
Bursa Malaysia and the ringgit are down if compared to early this year. But so are the capital markets in other emerging markets as well. In fact, Malaysia is among the better performers in emerging markets, including China, when it comes to the currency and stock market.
This has come about despite the statistics on debts, economic growth and trade figures looking gloomy compared to six months ago. Apart from debts, Malaysian economy is poised to grow at a slower rate this year and next while the export-import figures may be impacted by the on-going global trade wars.
One reason for the view taken by agencies such as Fitch is that, just like the Malaysian people, investors are prepared to give the new Pakatan Harapan government a chance to reform the country. To many investors, the change in government has stopped Malaysia from possibly falling off a cliff.
The measures in the first 100 days have brought about stability and instilled confidence that the new government can continue to manage the country for the next five years. The next 200 days are crucial as the economy needs some real mending.
However, the government should not stop with its populist policies. It is better than putting money in some fund.