Controlling pandemic key in dealing with challenges

PETALING JAYA: The tabling of the much awaited 12th Malaysia Plan (12MP) for 2021-2025 will hinge on how fast the uncertainties at the political front and the ravaging Covid-19 can be contained, say economists and analysts.

They opined that there is still no clear picture on the tabling of the five-year medium term strategic plan despite being postponed for at least three times.

The government recently announced that Parliament would reconvene on July 26.

Judging by the current political upheaval amid the surging Covid-19 cases, Malaysian Rating Corp Bhd (MARC) chief economist Firdaos Rosli expects the tabling of the 12MP could be delayed again.

He told StarBiz that “It appears that the government is trying to bring the pandemic under control first before tabling any long-term plans.

“I think that we should not view the present crisis and long-term plan as mutually exclusive.

“As a developing economy, we cannot ignore a reverse correlation between the two variables. The lockdowns affect our long-term goals, whereas the latter should also give us an indication as to how we can deal with the former.”

Firdaos noted that the government needs to introduce the 12MP to chart the country’s post-Covid-19 future in the pandemic era.

He also described the pandemic as providing a “once-in-a-lifetime” opportunity for a great economic reset.

A reset in the sense of changing the economic direction which is in contrast with the past, he added.

“Our post-crisis growth rates matter.

“Just like in physics, speed cannot change if the direction (velocity) remains constant. The same rule applies here,”explained Firdaos.

With interest rates set to rise in 2023 and the Covid-19 virus to continue to co-exist, he believed that Malaysia has less than three years to “reset” its economy.

Carmelo Ferlito.Carmelo Ferlito.

According to Centre for Market Education CEO and Institute for Democracy and Economic Affairs (Ideas) senior fellow Carmelo Ferlito, (pic above) the current political uncertainty has made it difficult to make predictions regarding the 12MP and “very much will depend on what happens with the re-opening of Parliament.”

Ferlito felt the current policy response to the pandemic has been pretty inconsistent so far. While the acceleration on vaccination is a welcome move, he said there is a “wait and see” approach until the herd immunity is achieved.

Similarly, businesses had to deal with the ever changing standard operating procedures (SOPs). In this scenario, Ferlito said without an exit plan and a clear economic strategy, there is no recovery on the horizon. Therefore, the 12MP will need to address the current lack of strategy factor, he pointed out.

Sunway University economics professor Yeah Kim Leng (pic below) also concurred that the 12MP would be further delayed given that the forthcoming Parliament session would likely be preoccupied with debating on the emergency order.

Yeah Kim LengYeah Kim Leng

However, Yeah noted that Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapha Mohamed in his recent public engagements had made known that the 12MP should take precedence at the tabling of the coming 2022 Budget which is traditionally released in October each year.

Yeah said the 12 MP should be given utmost importance and be tabled accordingly as it sets out the development goals, policies, priorities and strategies for the next five years.

“We are already half way through the first year of the 2021-2025 period.

“As a medium term plan, it provides the strategic direction and roadmap for the country’s social, economic and environmental development, thereby providing guidance to the private sector on the direction the economy, the policy setting and emphasis, as well as what and where public expenditure and investment will be directed.“Although it is an indicative plan, it provides some clarity and certainty on the country’s development planning, policies and strategies,” he noted.

Given that the pandemic and the accompanying downturn have resulted in severe economic losses and possible ‘scarring’ or permanent damage, he said the plan assumes greater importance in signalling the government’s rebuilding and restructuring efforts.

These include ameliorating the unequal economic impact of the pandemic and leveraging on opportunities to rebuild a society and economy that is more resilient to future shocks, that include disruptive digital technologies, climate change, natural disasters and pandemics, he said.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid (pic below) said it is paramount to table the 12MP soonest as “any delay would mean investors and the business community will remain unclear on the direction of the nation’s economy at a time when the competition from neighbouring countries is likely to intensify.

Bank Islam Mohd AfzanizamBank Islam Mohd Afzanizam

“It is critical how the development expenditure would be crafted amid the ongoing challenges such as the pandemic, the possible rise in the US interest rates and geo-political development.”

With or without pandemic, Afzanizam maintained that the long term agenda has to be laid out so that the government will stay course in elevating the state of the nation’s economy that is highly competitive and to a large degree future proof and agile.

On the measures which should be incorporated in the 12MP in the wake of the current scenario, Firdaos meanwhile said only two things matter: the “repair-reset” plan and how the plan would be financed.

“First and foremost, we must come to terms with our taxation system, both direct and indirect, which must move alongside three variables: a growing economy, changing demographics, and the external environment. The government must make this crystal clear from the very beginning.

“Secondly, under the “repair-reset” plan, investments, in particular infrastructure spending, have got to be our utmost priority as far as spending is concerned.

Access to quality education, healthcare, and employment opportunities will follow an increase in infrastructure spending.

“In particular gross domestic product per worker, the change in the labour market will move to a higher level as well.

In fact, the sooner we push for infrastructure spending, the better. Lastly, there should also be measures that include rebuilding industries that were heavily affected by the lockdowns, such as aviation, healthcare, and tourism.

“Rebuilding critically “wounded” industries will also help reduce credit stresses faced by financial institutions and free up liquidity to extend credit to other industries,” explained Firdaos.

Socio-Economic Research Centre (SERC) executive director Lee Heng Guie (pic below) said the 12MP should look into certain priorities.

Lee Heng GuieLee Heng Guie

He said there are three areas of priorities - equal life chances, equal concern for people’s needs and meritocracy.

Broadening of the tax base, plugging the shadow economy, rationalisation and right sizing of public sector and public pension system reform are also vital, he added.

“Business-as-usual investment will not lead to a stable future unless it achieves environmental and sustainability goals.

“The concept of sustainability must be incorporated in the country’s industrial development policies and integrated into the planning and management system of business enterprises.

“Boosting productivity will be a critical part of our long-term structural reform. Entry barriers should be removed and market liberalisation to foster a healthy competition. Small and medium enterprises (SMEs),” he said.

Under the 12MP, Lee suggested that the government should facilitate and incentivise domestic SMEs to participate in global value chains.

There should also be a holistic approach to foreign workers management with the establishment of a single agency to manage these workers, added Lee.

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