Q: When do you think things will pick up and what should we do in this time of economic uncertainty?
A: This global crisis is having a very brutal effect on the world economy. We must acknowledge that it is not just an economic slowdown. This is a crisis that is going to shake the core of the world economic order. And in my view, it is important that the Malaysian government show economic leadership, not just orthodox fiscal stimulus and monetary measures.
I think a major economic dislocation and enforced reconstruction of the world order present not only severe challenges but also tremendous opportunities. In that context, when I talk about strategic leadership, the government should look at more than just signing a big cheque and reducing interest rates. They need to take the lead in terms of key strategic moves in this environment so that we advance Malaysia’s economic position.
If you look at history, major dislocations like this present huge opportunities to claim a more (meaningful) position. Therefore, five key strategies that should be looked at are as follows:
First, it’s timely to re-examine the New Economic Policy (NEP). In particular, we need to look at how the NEP actually retards national unity, investments and also economic efficiency. We need to develop a new, more relevant framework to govern policy.
Secondly, we need to look at how we leverage on the Middle East, China and India (MCI). What is clear to me from this crisis is that there’ll be an acceleration in the shift of economic power to the MCI. Malaysia must further exploit its unique strategic connectivity with these economies — culturally and geographically.
Thirdly, we need to encourage a greater cooperative spirit between academia, business and civil service or ABC as we call it. That is collaboration towards developing and executing development plans.
Fourthly, we need to see government stimulate acquisition of brands and distribution capabilities. They need to develop a clear framework of incentives and co-investment opportunities to take advantage of what is out there today and fill the traditional gaps that Malaysia has in distribution and branding.
And the fifth one that I would advocate is to take this opportunity to attract talent. Clearly, the weak labour markets in the developed countries are a source for talent to work in Malaysia. And we should do this with particular emphasis on filling gaps in the education sector. And in that context, especially in teaching English and Chinese.
The bottom line is fiscal and monetary stimulus would only provide a temporary boost to the economy. What we need is strategic proactive economic leadership to advance Malaysia’s economic position in this new world order that would emerge. It’s a seismic shift that is happening before our eyes and it’s very important that Malaysia is well positioned for the aftermath.
Q: These things that you suggested, they are long term…
A: We are spending too much time talking about the size of the second stimulus cheque. I think we are missing the point if we are just concentrating on writing bigger cheques.
Q: What is your expectation on the second stimulus package to be announced by the government?
A: I don’t have one because I don’t think it’s terribly important. I think it’s up to the government to do the maths… what can the government handle in terms of budget deficits. And in that context, how is the money best spent. I think those are probably simpler issues compared to pinning down strategic framework for the economy going forward.
Q: Those are more of long-term initiatives… How about short term?
A: It is good if in this environment the government comes up with a fairly comprehensive strategic plan as well as a stimulus package. In the context of stimulus package, I think there are key strategic long-term initiatives that we should embrace.
Q: With all the strategic suggestions, when would you like to see the NEP reviewed? Is it an immediate concern?
A: I have talked about this before. NEP is almost 40 years old. It was meant to be for only 20 years. It’ll be 40 in 2010. I think it’s important that it be reviewed. I don’t want to prejudge it. It is an important step for the nation. I think there should be a platform for Malaysia’s best and brightest to debate and arrive at a new framework. Obviously it doesn’t take much genius to look at some of the present policies arising from the NEP that are undermining national unity and also investment.
Q: Do you think in this crisis, Malaysia is particularly exposed by the NEP?
A: I think in this crisis there is scarcity of investment and we need to go out there and attract investors. In that context, the bargaining hand has shifted to the hand of the investor as opposed to the investee. Countries need to do whatever they can to attract investments.
Q: When you say retard… how serious is it?
A: As a judgment, it is relatively serious. We continue to hear comments of investors having a lack of clarity of equity ownership levels, etc. I’m not talking exclusively on foreign investors, I’m also talking about Malaysian investors.
Q: You’ve criticised the NEP a lot before and last year you criticised the windfall tax on IPPs. Have you communicated your feelings to your brother? You’ve got a direct line to the top office…
A: This is not a criticism. This is a suggestion that we broaden the focus of the stimulus plan. I don’t know what the focus of stimulus plan is except what I read in the media… and from what I read in the media, the focus seems to be on the size of the cheque.
So, I’m just urging that we take a more strategic perspective in terms of the leadership that the government can provide in this environment. Not just monetary and fiscal but to actually deal with some of the long-term strategic issues, which in hindsight later, could really be a turning point for Malaysia.
Malaysia is in a good position — strong national resources, strong reserve, strong financial system, etc. But tactically, I think it’s important to understand the global dynamics… it’s a seismic shift and Malaysia must be well positioned.
Not a criticism. I wouldn’t criticise. I have not communicated this to the government but many of the points are not new. They have been discussed in the past by me and by others. If I’m consulted, I’ll be happy to discuss it.
Nazir Razak’s suggestions to advance Malaysia