KUALA LUMPUR, October 1 – We have entered the final quarter of 2022, which by various data points will go down in history as Malaysia’s “turnover year”, after two years of debilitating economic hardship brought on by the pandemic. We have had economic growth for three consecutive quarters: 3.6 percent in 4Q2021, followed by 5.0 percent in 1Q2022 and 8.9 percent in 2Q2022.
Unemployment stood at 3.7 per cent in July this year, significantly lower than the peak of 5.3 per cent in May 2020. Our business was at a record high of RM1.35 trillion in the second quarter of this year and we are on the ground. At the upper limit of 5.3 percent – 6.3 percent GDP growth forecast for 2022.
These are all clear, encouraging signs of the economic recovery we have worked so hard for. Government policy responses in Malaysia, coupled with efforts from various sectors, have enabled our people to successfully return to the aftermath of the pandemic.
But now we must temper our optimism with a dose of realism, while simultaneously preparing our nation and its people for an imminent global economic recession in 2023 that will hit small trading nations like ours.
Historical rate hikes by the US Federal Reserve to limit its domestic global inflation are also meant to spur its economy, the effects of which have undoubtedly been felt around the world, including Malaysia. These harsh rate hikes contributed to a stronger US dollar, affecting most countries that primarily trade in the US dollar, although global inflation played a much larger role in propelling prices than a stronger US dollar. Is.
Furthermore, it doesn’t help that the war in Ukraine has dragged on much longer than expected, with disrupted global supply chains affecting millions of people, leading to higher prices due to more demand chasing less supply.
Perhaps the root cause of the current problems of the world also needs to be questioned. Have we sold the concept of globalization, with its attendant huge carbon footprint as the supply chains chase the lowest-cost producers a few continents away? Why is the whole world dependent on a single reserve currency? Is de-globalization the next mega-trend, as more and more countries focus on becoming self-reliant, especially on food and energy security for the well-being of their people? Perhaps Asia needs to consider a new world order to protect the interests of its 4.7 billion population.
In the meantime, how do we prepare Malaysians for future volatility? How can we build resilience faster? From 2020, I am advocating a long-term approach while being responsive to short-term needs. The responsive, responsible and reformist policy-making approach of the MoF is now more important than ever, especially in preparing people and businesses for an impending global economic downturn, and the need for de-globalization by countries such as China, India and the US. In an increasing inclination.
How can our corporates help Malaysia build resilience among its people when the big powers are rapidly globalizing? This is where our whole nation approach will be more important than ever.
How Corporates Can Help Build Household Resilience
We have to strengthen ourselves internally. One way is to incorporate ESG principles into the government and the GLIC ecosystem. But while it supports our long-term objectives, I think there are some low hanging fruits that corporates and market players can take advantage of to help the country, but note that the list I am sharing is non-existent. – Extensive.
First, companies can and should spend as much of their earnings as possible within the country, and this may require redesigning their supply chains to include locally produced inputs. Corporates can help empower small businesses by including them in their supply chain, instead of entrenching them on the CSR pillar.
Second, expanding the social safety net and improving social security should not be with the government alone. A social safety net program is best complemented by financial literacy, which corporates can take to educate and enhance the communities in which they operate. Coincidentally, we have just entered October, which is the Financial Literacy Month designated by Malaysia’s financial industry.
Third, corporates and GLIC should also play their part in attracting high quality investments and creating high paying jobs. With China’s zero-Covid policies, many investors from different countries have expressed interest to relocate to Malaysia, some public-private partnership could certainly work.
Fourth, people in the tourism sector can further encourage and promote domestic tourism. In fact, we have still not fully utilized some of the budget 2022 allocations for the tourism sector. The sector should also intensify cross-industry collaboration with the medical industry to promote quality medical tourism.
Fifth, large corporates must also assist smaller companies – particularly those within their ecosystem – to achieve their ESG goals. While the government has taken several steps to adopt ESG in many of its operations, the corporate sector, especially large businesses, must also play their part in encouraging their customers, suppliers and vendors to drive ESG ideas.
Small (disciplined) steps that will reap big dividends
I am not at liberty to share what measures will be included in Budget 2023, but I can say that discipline is a major theme in next year’s budget, especially as we prepare ourselves for the tough year ahead. We do. In that direction, apart from the proposed Fiscal Responsibility Act at the end of the year, it will also help instill a more disciplined mindset for our people and businesses.
The analogy I want to share is that when I moved from 85kg to my current 70kg frame several years ago, I started running and eating less. Instead of cutting down on rice 50 percent all at once (too hard!), I cut it down 10 percent each week. Eventually, I reached my target weight within just 2 months!
I think this is the way we should approach our subsidy rationalization – slowly, but with determination and discipline – to achieve fiscal flexibility in the future. Why do we need this? Let’s go back to our RM80-billion blanket subsidy bill this year. If we extend our subsidies only to those who really deserve it, and can save RM30 billion, how many schools, hospitals and better public transport can we have for the masses?
The logic is simple: those who can afford it have to pay market prices. And while it was the responsibility of the government to take care of its people and businesses during the pandemic, today all economic and social sectors have reopened and we are no longer in pandemic mode. For example, through our RM21 billion wage subsidy, we have helped 358,000 businesses and 2.96 million workers get back on their feet. It is time that he continued the journey without further hand holding by the government.
The government will always do everything possible to protect Rakat against short- and long-term challenges, but it is a difficult balancing act when a global recession is imminent. So, we really need a little discipline from everyone at Keluarga Malaysia, but we must start now to help us tide over the tough times ahead, and secure a more resilient future for ourselves and our children. Can go
Datuk Seri Tengku Zafarul Tengku Abdul Aziz is the Finance Minister of Malaysia
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