Institutional reforms are key

Discussion time: Economic roundtable panel guests (from left) Nungsari, Shanmugam (moderator) Gomez and Lee.

The Pakatan Harapan government has promised bold measures to drive the reform agenda towards strengthening the check-and-balance mechanism at all levels to restore trust and confidence in the country’s key institutions. These changes may not bring immediate economic value, but are important to regain investor confidence. The education system is seen as one area that needs an overhaul if the country is serious in bringing about reforms.

Private-sector investments have been on a downtrend over the last couple of years. Is it because we don’t have a new economic story to tell?

Lee: Former Prime Minister Najib came up with the Government Transformation Programme (GTP) and Economic Transformation Programme (ETP).

Following this, we started to see the numbers picking up in terms of the GDP, private investment. Only over the last two years, we started to see the numbers coming off it could be because it was a period close to the election and sentiment was impacted.

Then, the second-quarter numbers started to pick up again, but I am still cautious because we have a new government and the market is watching to see the policies being implemented and for more clarity on certain issues.

Only then will we probably see a pick-up in private investment.

The government has deferred several major infrastructure projects and this will also dampen sectors related to construction and building materials. The global environment is another factor to take into account. Regionally too the competition is great. If you look at Asean’s foreign direct investment (FDI) numbers, Singapore is always number one. Malaysia is ranked fourth in US dollar terms and we have lost out to Indonesia, Vietnam and the Philippines in terms of the magnitude of increase. This is despite having the GTP and ETP initiatives. What does it tell us? That there are structural problems that we have to address.

Nungsari: If you look at the GTP/ETP, it was based on doing more of what we had already been doing in sectors like oil and gas, plantations, etc. We need more new areas of growth.

Lee: The plan mentions the use of technology to enhance value in agriculture, construction and SMEs. So, the market is waiting for the International Trade and Industry Ministry to roll out its fourth industrial revolution (IR4.0) plan to extract value from different sectors, including for SMEs to leverage on digitalisation.

How many years do you think we need before we can see some changes to the reforms promised?

Lee: I think we need at least five years - the duration of one Malaysia plan.

Nungsari: You have to go with the political cycle. If you don’t do the hard part now, in two years’ time, the runway will get shorter and institutional reforms will be harder to institute. By then, the election will be close by too.

Gomez: The Education Ministry has a huge role to play.. it’s all about human capital. If you do not produce the human capital with the right skills, how is the economy going to function? Where are the enterprises going to get the workforce they need to feed into the economy?

We have been talking about changing the curriculum, about institutional changes in education as well as making sure our school teachers are well-equipped.

Another is the public sector in terms of delivery of public policies, We can come up with all the great plans but can these be implemented without hindrance, as even the prime minister has complained about the “little Napoleons” who are hindering the implementation of these public policies.

These are major structural reforms and it requires political will to bring about these changes. The question is, do they have the vision to do that?

So, there is no point telling a new story when the structural reforms needed are so deep?

Nungsari: In my view, if you sort out the education system right up to the university level, some of these problems will sort out themselves and the story will unfold itself.

I was reading a survey done at school, tertiary education and people entering the workforce. What came up was quite clear: 98.5% of employers are SMEs but the remaining 1.5% employs a huge chunk of the workforce.

If you slice it further, those who are employed on a contract or part-time basis ... that segment is growing.

The non-employed and self-employed, these people are not even part of the statistics. And increasingly, young people are going into the job market in a different way or what is termed as the gig economy.

Essentially, the nature of work has changed while we are advocating SMEs.

So, some of the safety nets need to be for them if you want the labour market to absorb these young people coming into the workforce.

Like the EPF, one can continue contributing even if one is not employed. Likewise, for Socso, you have to make allowances for the self-employed or partially employed too.

I am concerned about this because the nature of work, employment and employers are changing. I think this is where the government should spend money on.

Lee: I would like to point out that for the self-employed, we have private retirement savings schemes. As to whether the government ought to take care of this lot, to me, what’s more important is teaching people how to manage their finances. You cannot keep looking to the government for assistance, as we are not socialist. We have not reached that stage. Even subsidies given out should be very targeted as opposed to dishing out blanket subsidies.