Continue fiscal, financial reforms

  • Letters
  • Tuesday, 07 Jul 2015

THE decision of Fitch Ratings to upgrade Malaysia is a piece of good news which has been well received in the market, with much relief among the public weary of the excessive politicking.

The upgrade in our sovereign rating is a recognition of the strong fundamentals in our economy and an endorsement of the Government’s management of the country’s fiscal and financial policies, giving confidence to investors that, despite 1MDB, Malaysia has the capacity to contain the fiscal deficit and achieve sustainable growth, as projected in the revised budget and the 11th Malaysia Plan.

While there is much to celebrate, we must be aware of the daunting external challenges which can give rise to all kinds of uncertainties.

The geopolitics in the hotspots involving the big powers, the financial crisis in Greece and its possible effects on the Eurozone and perhaps, as some say, on NATO too, and the timing of US interest rate increase – these are imponderables which can add to the volatility of the external environment in the coming months. Malaysia, with its open economy, is bound to be affected.

Malaysia must brace itself for these uncertainties by continuing on the path of reforms to strengthen further the Government’s fiscal and financial position and at the same time, deal with the more difficult structural issues affecting the longer term growth prospects for the economy.

These issues include education, the brain drain problem, the New Economic Policy (National Development Policy), the institutions of law and order, human rights, religious tolerance and the openness of the political system to allow for the necessary changes to be publicly debated so that the country can arrive at the right solutions for the future.

There will of course be resistance to some of the changes from certain groups. This is to be expected given the multicultural make up of our country. But while the opponents of change have the democratic right to express themselves as long as they stay within the boundaries of the law, the rights of others who are in favour of reforms must also be respected so that the nation can emerge the stronger from the open discussion of the sensitive subjects.

The progress on reforms in the area of fiscal and financial policies has been encouraging, as noted in the World Bank and International Monetary Fund (IMF) studies on Malaysia and reaffirmed in the recent statement by Fitch Ratings.

Having strengthened the revenue base with the introduction of the GST and removal of the subsidies on petrol, the Government should step up on the measures to cut down on the excesses and wastage in Government expenditure, especially the operating expenses on travel, entertainment, official celebrations and ceremonies at both the Federal and state levels.

Recently, the Government issued a freeze order on new intake of staff into the civil services. There is no doubt that with modern technology, a high percentage of the support staff in government departments is becoming redundant.

Government should explore opportunities for saving on the expenditure on salaries and emoluments as this item alone consumes about 70% of the operating budget.

Considering that there are only 1.2 million income taxpayers in the country, a civil service with 1.4 million employees makes the ratio extremely high in comparison with other countries.

By saving on this big expenditure item, more funds can be released for repair, maintenance and upgrading, which is necessary to keep the ageing government assets, especially roads, schools and hospitals in good working condition. Spending the money on repair and maintenance works is a lot more productive as it can generate contract jobs for small entrepreneurs and create more economic activities.

Money saved on salaries can be used for training of the civil servants and selecting the bright ones to be trained at top business and management schools around the world to prepare them for leadership positions in government service.

Continuous learning among civil servants should be made compulsory to open their mind towards understanding how the country can be efficient and competitive like the other successful countries in this East Asia region which have broken through the middle income trap several years ago.

In all these successful countries, they select the best graduates into their civil service and use meritocracy as the basis for promotions.

Government procurement has always been considered one of the sacred cows under the New Economic Policy. Yet it is one reform that must be addressed to make it transparent and efficient, thereby saving the rakyat from the huge amount of wastage arising from over priced contracts, delays in completion and poor quality of work done.

Government departments should be forced to adopt competitive bidding, including e-bidding to make the process transparent for the public. The Federal Treasury should report annually to the public how many percent of government contracts are procured through competitive bidding.

In the case of education, one issue frequently raised by employers is the low quality of graduates coming out from local public universities.

According to some sources, the problem can be mitigated by raising the university entrance qualifications but this apparently, is also a sacred cow involving racial balance in university enrolment.

Some solution must be found to ensure that those who wish to enter university are truly qualified for high level academic education, because each student is highly subsidised by the taxpayers and must therefore, be worthy of the subsidy.

At the school level, teacher training must be given higher priority so that the children can receive quality education from an early age.

Proficiency in English, science and maths coupled with ability in critical thinking and the social skills that come with a proper mix of learning in and outside the classroom, are the qualities essential for employment in the major companies and financial institutions, where most of the high paying jobs are.

It is important for social justice that rural school leavers and local graduates be well-educated all round so that they can be competitive with foreign-trained graduates in the employment market. We cannot allow a dichotomy in the employment market where the children of the rich and powerful get the better jobs because they lived in the big cities, went to private schools and received a foreign education.

With a good education system that inspires parents to educate their children here, less Malaysian families will want to migrate. It will also help to reduce the brain drain and attract Malaysian talents to return to the country to enrich our human resources with their skills and experience.

There must be compromises on the education policy to bring about the desired results, instead of treating it as another sacred cow.

Turning to the rule of law, it is important that the judiciary and the enforcement agencies in particular the police and the MACC earn the respect of the public by being truly professional. At the same time, the media and civil society should be given the space to become the conscience and voice of the people, in line with the democratic practice in other countries and more importantly, in line with the guarantees on freedom of expression and right of assembly under our constitution.

The law must protect the rights of citizens to express themselves freely and in a peaceful manner and should be strictly enforced when any group endangers the peace and stability of the country, especially by using race and religion to threaten other citizens.

Malaysia is getting more attention in world news for the wrong reasons. Foreign journalists and investors are puzzled at the growing intolerance and the creeping intrusion of religion into schools, universities and government offices as well as in everyday life, for they have always taken for granted that Malaysia is among the most progressive Muslim countries.

Instead, they are seeing Malaysia being in the Western and UN watch list of countries not fulfilling their international obligations on human rights, freedom of religion and treatment of refugees.

This trend is worrying Malaysians too as the growth of the economy and the happiness of the people depend very much on the country taking the moderate path in line with the principles enshrined in the Federal Constitution and our obligations as a member of the international community.

As trade with the world is the cornerstone of our economy, we must not take the risk of being punished with sanctions on our exports, foreign investments and tourism on account of our bad behaviour.

In other countries, their extremist policies have driven out their best talents and investors and plunged their people into abject poverty.

The tragedy which has befallen several Muslim countries is that when the leaders realise it’s necessary to change, it’s too late.

Having ridden the religious tiger, its impossible to dismount. Often, the tiger will turn on the rider and devour him.

We hope our leaders will take the necessary steps to uphold the supremacy of the Federal Constitution and the rule of law as these are as important as managing the macro-economic policies for financial stability and sustainable growth.

We also hope the moderate path taken by our Prime Minister will be fully supported by his cabinet colleagues, as well as by law enforcement and religious officials as this will certainly help to reinforce the good feeling that the recent upgrading of our sovereign rating is an indicator of better times ahead for the economy and for our multiracial society.


Kuala Lumpur

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Opinion , Letters; Fitch Ratings


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