YOU can call the proposed economic council by any name. But the bottom line is the council Prime Minister Tun Dr Mahathir Mohamad plans to set up has to be effective.
Malaysian can do with an economic council for several reasons.
Firstly, the country is led by a seasoned Prime Minister supported by a relatively inexperienced Cabinet. The other arm of the administration, which is the civil service, is led by a new team at the helm following Pakatan Harapan taking over Putrajaya last May 9.
At the moment, the single most important decision-making body is the Cabinet which meets weekly. There are other committees comprising several ministries and civil servants looking into matters affecting the economy. Ultimately, directions come from the Cabinet.
The Cabinet does not have representation from the private sector which is an important component to drive growth in the economy.
A council would be a good platform to facilitate opinions and views from the private sector. What normally happens is the council’s secretariat sift through the various proposals and issues at hand and package them well before it goes to the Cabinet for deliberation.
Datuk Mustapa Mohamed used to head the secretariat of the National Economic Action Council (NEAC) when it was set up in January 1998. The report that came out for the government to act on touched all segments of the economy.
There are many economic issues that cut across a few ministries; from plantation to manufacturing and oil and gas.
The problems that the private sector faces can only be resolved through the coordinated action of a few ministries.
It will be difficult for the private sector to approach each ministry individually. An economic council will give it a platform.
Secondly, the world is looking at a slower economic growth this year. Next year some countries may see a recession. Cautionary signs are already emerging. For instance, banks in the United States are getting more stringent in their lending.
Towards this end, the International Monetary Fund has predicted a slower 2019. From the United States to Europe and Japan, the economies of all the major developing countries are looking at a slower growth this year. Economists are predicting a worse 2020.
Many in the new government would know what an economic slowdown means in theory. But only a handful have the experience of managing the country’s economy when there is a slowdown.
Dr Mahathir led Malaysia through its worst ever economic crisis in 1997/98. He was much younger then and could take on the world with his unorthodox economic measures to reflate the country’s economic activities.
In 1997/98, the IMF pushed Malaysia to raise interest rates to prop up the ringgit. Dr Mahathir, instead, imposed capital controls which prevented the outflow of the ringgit. It allowed Malaysia to keep interest rates low and stimulate the domestic economy.
There are many such instances. But now, the Prime Minister needs a team comprising the public and private sectors to rally behind him should the country go through an economic slowdown due to external environment.
Finally, we need an economic strategy with input from the private sector to drive the country to the next level of growth.
Soon after May 9, Dr Mahathir set up the Council of Eminent Persons (CEP), which essentially is a five-man team to understand the state of the economy.
To some, the CEP was the powerful economic body headed by Tun Daim Zainuddin. However, in reality, the CEP collated data and packaged it as a report for the government. The report, which seems more like a status report, is now with the government.
We need more than a status report to drive the economy. The status report tells us the problems of the economy. It helps to point where taxes can be cut and extra sources of revenue can be extracted.
But investors are already asking where Malaysia is going with regard to its economic policies. Somebody has got to start making noises on Malaysia’s new economic path. Investors like to hear new growth strategies.
Towards this end, an economic council will help. Its effectiveness will depend on its composition, mandate and resolve to see things through.
It should not be too big and certainly not include anyone with even the slightest tinge of vested interest.