Not resilient enough?

THE Institute of Strategic Analysis and Policy Research (Insap) had the honour of participating in a thought-provoking forum titled “Weaponisation of Economics and Restoring the Global Economic Order” on June 13 at Universiti Kebangsaan Malaysia; the event was co-hosted by the Institute of Malaysian & International Studies, and East Asian International Relations Caucus with support from the Australian High Commission Malaysia.

According to Prof Shiro Arm-strong, editor of the East Asia Forum at the Crawford School of Public Policy, Australian National University, the process of economic engagement and open trade has always involved risks. However, these risks have been mitigated relatively well under the US-led, rules-based multilateral order that has governed them since World War II. East Asia has been one of the biggest beneficiaries of the multilateral trading system, he added.

However, he expressed concerns about this very system – the system that has mitigated risks over the past few decades is now under threat given the rise of Great Power rivalry. This resonates with Insap’s concerns about the global economic outlook, specifically for the Asean bloc.

Insap noted a generally positive sentiment among the distinguished attendees about how Malaysia has significantly benefited economically in recent times due to heightened US-China tensions, particularly in the semiconductor industry. The nation’s relatively neutral position has made it an attractive alternative for firms looking to diversify amid trade wars, where sanctions have become a common “economic weapon” – as seen in the case of the US-China trade war.

However, these successes must be approached with caution given the high-level risk. If this trade war leads to a coercion of the traditional economic and trade systems, Malaysia and the entire Asean region could suffer greatly due to their high interdependence and reliance on multilateralism.

Can Malaysia and Asean survive a collapse of the multilateral trade system?

Prof Armstrong foresees an adverse economic impact of large magnitudes. Insap echoes this concern and urges both businesses and ministries in Malaysia and Asean to not become overly optimistic or complacent.

The power play and trade war could potentially tip things over and send shockwaves, hitting Malaysia hard. Thus, there is an urgent need to build a robust economic system and protect it from a collapse.

Insap calls on the Malaysian administration and those of neighbouring Asean countries to take proactive steps that will strengthen regional economic resilience while also maintaining the multilateral trading system which has been vital to the region over the past century.

Fundamentally, a strong domestic economy is the foundation for regional economic resilience. The Madani government must prioritise improving Malaysia’s own economic conditions to achieve this goal. Thus, in light of these conditions, Insap reiterates our position that more must be done to improve trade balances and realisation of the many foreign direct investment projects announced; most importantly, more must be done to improve the livelihood of Malaysians who are currently facing the rising cost of living while carrying the country’s heavy debt burden.

INSTITUTE OF STRATEGIC ANALYSIS AND POLICY RESEARCH (INSAP)

Insap, established in 1986, is one of the pioneer think tanks in Malaysia, focusing on political-economic research. Representing Insap at the June 13 event were director Kat W. Wong and researcher Edwin Oh Chun Kit.