How A Good Economy Can be Screwed Up

Malaysia is a rich country naturally endowed with various natural resources like rubber, oil-palm, timber, tin, iron and petroleum. At the time of writing, its GDP stands at or around RM600 bn.


The country is a multi-cultural, racial, religious and linguistic country.  The population hovers around 28 million comprising the Malays, Chinese, Indians, Dayaks, Bajaus, Kadazans and the Orang Asli (Aborigines).


Malaya (before merger) obtained independence from Britain on 31 August 1957.   In1965, it merged with Singapore, Sabah and Sarawak to form Malaysia.  Singapore left the merger in 1968 due to irreconcilable difference between the political leaders in Singapore and Peninsular Malaysia.


The people used to interact freely regardless of race and religion before the 70's.  Inter-racial relationship took a bad turn thereafter because of the affirmative discriminatory socio-economic policies, known as the New Economic Policy.  It features sound objectives but due to slanted and unfair implementation, race relations took a dive at all levels of the socio-economic sectors.


Having to deal with racial problems is bad enough but with bigoted religious polarisation in schools, civil service and judiciary, the schism became even wider and wider among the several races of the country.


Of late, economic development of the country is marred by corruption, money-laundering and fraudulent trade documentation as reported by the Global Financial Integrity(GPI).  In 2014, Malaysia ranked 52nd in the Corruption Perception Index as reported by the Transparency International Malaysia.

GFI reported that Malaysia laundered RM171.11bn in 2012 and between the period 2003-2012, the total illicit efflux of funds from the country approximated to USD1.38 trillion. This works out on the average of about RM100 bn which was being laundered annually representing about 16.7% the country's GDP. Besides, reportedly, taking into consideration the debts and all the financial gurantees granted to GLCs,  the Debt:GDP ratio has surpassed the 80% mark which is about 25% above the danger level.


The Sun of 16 Dec 2014 reported that 205 Federal Government Projects costing in total RM7.0 bn were behind schedule while 82 projects totalling RM2.2 bn are deemed or regarded as "ailing projects".


Of late, the country is saddled by the heavy losses sustained by the national Malaysian Airline which has to be bailed out by Kazanah which pumped in RM6.0 bn in an effort to revive the corporation. 


Again there was reported the 1MDB project which is steeped with heavy borrowings at high interest rate.  It is allegedly saddled with losses amounting to RM41.2 bn.


Faced with the fast decreasing price of crude to below US60/- per barrel,  the depreciation of the Ringgit, increase in prices of gasoline and diesel, hiked up assessment rate and the ominous enforcement of GST on 01 April 2015, the economy looks quite dismal given the fact that more than 80% of the work force are earning below the poverty threshold of RM30,000/- per annum.


It has been estimated there are now about 9 million foreign workers in the country; of which 3 million are legal while the 6 million are illegal. These latter workers are displacing locals from employment in the plantation, manufacturing,  construction sectors and petty trades.


In my opinion and assessment, serious actions have to be taken by the ruling government.  Corruption has to be curtailed if not substantially mitigated by the Malaysian Anti-Corruption Commission.

The Central Bank will have to  tighten the control of illicit funds flowing out of the country.  Prudent spending on socio-economic projects will have to be strictly exercised and monitored.  In addition, attention must be given to minimise documentation frauds.  The Finance Ministry will have to ensure that public expenditure should not exceed revenue.  Tightening of belt is imperative if the country is to be turned around.

Unless the Governement of the day take serious remedial actions, the economic situation of the country is dismal and not too encouraging.