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By Teik Lim Saw in Malaysiakini All you have to do is spend a little time watching CNN and BBC and you will be inundated with all the news of falling stock markets, financial crunch in banks, credit squeeze affecting businesses, predictions of worldwide recession, government bailouts and intervention and much, much more. On the other hand, when you watch the business news carried by local TV networks and the media, we hear of reassurances from the government that all is well and we should not be unduly worried about the Malaysian economy.
Time and again, we're told that ours is a resilient economy and our fundamentals are strong. And all this does not make any sense to me. I mean when you hear the IMF managing director saying that the world economy is ‘on the cusp of a global recession’ and our leaders here at home tell us all is fine and well and will continue to be so, then that can only mean that the Malaysian economy is decoupled from the world economy and that we are a closed economy. This cannot be further from the truth. Malaysia with a population of some 27 million consumers is in no way a closed economy. In fact, we are a trading nation and a large segment of our economy is dependent on exports. Whilst we have made inroads into the emerging markets of China, India, the Middle East and others, a large proportion of our exports are still for the American and EU markets. And these two economies are the most severely affected so far as can be seen by the flurry of activities by their governments in pumping in hundreds of billions of dollars to shore up their financial systems. Dr Mahathir Mohamad is already asking the question if our government is underestimating the effects of the fallout of the global financial crisis. In his typical sarcastic style, TDM said: ‘I'm glad Malaysia will be spared. This ability to isolate Malaysia and Malaysian banks from the effect of the bankruptcies of all the biggest banks in the world must be regarded as a miracle’. He further said: ‘We will sail calmly through the seas of shattered economies’. I think we can reasonably expect that we will all be effected one way or another. The question is how severe and for how long? Already Singapore is in recession (defined by two quarters of negative growth) and many Malaysians (300,000 plus) working in the republic could be facing retrenchment soon. Our government may claim all it wants that our fundamentals are still strong but how long will they remain so? How long can we continue to produce goods once our overseas customers stop buying our goods? And once we stop producing goods, we then have to cut down our workforce and the spiral down effect begins. Granted, the government did recently announce the guarantee of all deposits in Malaysian banks up till December 2010. This will at least prevent capital flight which will otherwise worsen the situation. On top of this, the government did move to double the capital of ValueCap Sdn Bhd by RM5billion so that it will shore up the stock prices of beaten-down blue chips (which are mostly government-linked) but what about the rest of the stocks on Bursa Malaysia, those in private hands? In a nutshell, there is no running away from this impending gloom. I will not even venture to offer a solution to this impending problem since I will be so far out of my depth. But I do know that we need our best economic brains to be working on solutions 24/7 starting from now, if it’s already not too late. I would like to see the government forming a panel of sorts, from all political affiliations and all segments of industry and society, to start looking into ways to soften the hardship that millions of Malaysians may be facing soon. I do not think we should waste anymore of our resources trying to prevent something which is inevitable. As the IMF managing director said, ‘there is no part of the world being immune’. For starters, the government should table a new budget for 2009 since the present one being debated now in parliament has already been overshadowed by recent world events. Furthermore, can we as a nation afford all those populist expenditures in the budget for political reasons given that we now know what is heading our way? I hope that the government realises that whilst too much politicking destabilises the country, it will be far more dangerous when this politicking is done on empty stomachs! Maybe Umno Vice-president Muhiddyin Yassin is right after all in saying that another five months of squabbling within Umno, the backbone of the BN government, will be too much. It may cause the death of us all!
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