Is anyone really in charge of our economy?
By Matthias Chang
I have given up hope that our Prime Minister, who is also the Finance Minister, will be able to chart a course that will enable Malaysia to overcome the deepening global financial crisis.
One would have thought that with all the resources and expertise at their disposal and the benefit of hindsight, our experts ought to be able to put their act together and get their economic analysis right, but the recent press statements by Bank Negara, Treasury and EPU regarding the massive contraction of our economy are most distressing.
What is more depressing is that the data presented by the relevant institutions show that the key advisers to Najib are involved in some sort of turf war and are at logger heads with one another as to the extent of the downturn and what needs to be done.
Judge for yourselves from the following news reports:
New Straits Times, May 27, 2009
Remarks by Second Finance Minister:
Malaysia economy may contract by more than 1 per cent this year but is expected to return to positive growth next year, Second Finance Minister Datuk Ahmad Husni Mohamed Hanadziah says. ‘It will be lower than minus 1 per cent this year. This is below the forecast we made last year,’ he told reporters after officiating at the launch of the Securities Commission Executive Enhancement and Development Programme in Kuala Lumpur.
The SUN, May 28, 2009
Remarks by the Governor of Bank Negara (Central Bank):
Malaysia’s first quarter gross domestic product this year contracted by 6.2% from a growth of 0.1% in the fourth quarter last year, but the prognosis for improved economic conditions looks brighter in the second half of the year.
Bank Negara Malaysia Governor Tan Sri Dr. Zeti Akhtar Aziz, in announcing the GDP figures, attributed the contraction to the significant deterioration in external demand following the deepening recession in advanced economies. ‘Export demand continues to be weak and the environment is still challenging. Despite early signs of improvement, Q2 will be similar to Q1,’ she told a press conference on the country’s economic performance here yesterday. ‘However, economic conditions are expected to improve in the second half of this year supported by fiscal stimulus measures and enhancing access to financing,’ said Dr. Zeti. ‘Malaysia is expected to see a significant improvement in the third quarter this year and a higher degree of positive growth in the fourth quarter that would continue into next year.’
So who is right – positive growth in second half of this year or next year? Or will it continue to be negative next year?
The STAR Biz, May 29, 2009:
Remarks by the Director General, Economic Planning Unit:
There are mixed signals on the economic recovery front although some confidence has returned. However, a clearer picture will emerge in the next two to three months when more impact from the stimulus package would have been felt.
Based on some economic indicators we believe there are signs of improving demand in the market, for instance, the rising price of crude oil (US$36 per barrel in mid-January to US$62 per barrel), palm oil (RM1,700 per tonne in January to RM2,772 per tonne) and rubber (lowest RM4.48 per kg in January to RM5.64 per kg) as well as better performance of the stock market, said Tan Sri Sulaiman Mahbob, the Director General of the Economic Planning Unit.
We believe the current economic crisis is about to bottom out…
However, he believed the Malaysian economy would experience a relatively gradual recovery before picking up in the second half of next year.
So the EPU takes the view that it is only in the second half of 2010 that we can see growth and not the second half of 2009!
The STAR Biz, May 29, 2009
Remarks by PM Najib
The worsening external economic situation has prompted a revision of the country’s economic performance to a contraction of between 4% and 5% for this year from a contraction of 1% and a growth of 1% before.
Prime Minister Datuk Seri Najib Abdul Razak said at a press briefing yesterday that the economic climate had deteriorated more than expected.
In tandem with new developments, the government is revising the real gross domestic product performance of Malaysia for the year to a contraction between 4% and 5% from a contraction of 1% and growth of 1% previously, he said.
According to Najib, private sector investment had fallen by 26% from a year ago while foreign direct investment was also down by half compared to last year.
So who is right, the Second Finance Minister’s contraction of more than 1% or Najib’s 4% and 5%? Of course “more than 1% can mean anything from 2% to 6%.
Why the difference in approach and evaluation from three key institutions?
By any measure, a 6.2% contraction in the first quarter of 2009 is huge. How these experts could underestimate the deepening crisis even with the benefit of hindsight as the global financial crisis had deteriorated further in the last quarter of 2008 is hard to comprehend.
If they could not get it right in the last quarter of 2008 moving to 2009, how can we trust their prognosis that second half of 2009 or that 2010 will be rosier and we will have economic recovery?
In all my previous articles in 2008, especially in the second half of 2008 I had warned the government that we will have negative growth in 2009 but the warnings were all ignored.
Let me say it here and now, loud and clear – we will have negative growth even in 2010 and will be lucky to see some “green shoots” in 2011.
Recent appointments by the Prime Minister, specifically the former CEO of Malayan Banking to be the chairman of the NEAC do not inspire confidence when this banker was responsible for the acquisition of an Indonesian bank which turned out to be a multi-billion ringgit scandal!
It goes without saying that Malaysia’s economy will definitely be beyond repair when our Prime Minister appointed the 5th Prime Minister, Abdullah Badawi as adviser for the development of the various “economic corridors” when these pet mega projects of Badawi have been utter failures.
Adding fuel to the fire, there have been rumours that Najib is putting his cronies in charge of Petronas – our country’s cash cow!
I suppose, if one is going to be a one term prime minister, there is only so much time to loot the dwindling coffers!
Malaysia deserves better.
[Matthias Chang is a barrister of 31 years standing and was once Political Secretary to former premier Mahathir Mohamad. He is also the author of three novels Future FastForward; Brainwashed for War, Programmed to Kill; and The Shadow Money Lenders and the Global Financial Tsunami]