Escap observed that the crisis has moved rapidly from its first stage of a financial crisis emanating from developed countries and causing contagion in Asia and the Pacific, to a second stage of crisis for the real economy in the region based on plummeting exports and curtailed domestic demand.
The organisation believed that Southeast Asia could be among the most affected by the crisis, given its integrated industrial production base and linkages to the global supply chain, thus deepening unemployment. It expected an overall economic growth rate of 1.2 percent for Southeast Asia this year, the lowest among the developing Asia Pacific sub-regions.
This situation does not augur well for the country. Based on several observations, the unemployment rate is expected to climb to more than 5% by the end of this year. The economy is heavily dependent on FDIs and exports to support growth. Both of them have plummeted this year. A number of companies I have spoken too are taking precautions by averting financial and investment risks. Most of them will not make any new investment this year.
This will result in further reduction in jobs creation. The main problem for the country is how to generate enough jobs for the society if the economy is projected at zero growth. It will be difficult for Malaysia to create enough jobs at 3-4 percent growth, worse if it is at zero percent. Another 600,000 are expected to join the job market this year. The government has offered grants to those who are interested to pursue postgraduate degrees. However, this offer is not expected to reduce the number of new entrants significantly.
Another worry is policy flip-flops from the government. It has imposed a double levy on foreign workers but was told to review its decision by several BN leaders. The ministry of human resource has postponed the levy hike by another month. It will have to decide on it soon. I have argued that the issue of foreign workers will have to be analysed in a long term perspective. Sending back low skilled and cheap foreign workers will not create immediate jobs for the locals. Most of them are not willing to work in the same environment as the foreign workers.
The government needs a firm review on these areas:
- Address immediate economic bottlenecks e.g. technology and production gaps, skills gap, industrial development process, archaic labour, investment and trade rules and regulations etc.;
- Create new industries and new jobs;
- Address important issues on market reforms to strengthen private sector governance, rationalize the role of GLCs;
- Promote transparency in GLCs such as EPF, Khazanah and SOCSO;
- Enhance key performance indicators on public projects and announce the members of the technical monitoring committee on the second stimulus publicly;
- Pursue real process improvements in the public sector to cut and reduce wastage and inefficiency;
- Regain public confidence on the economy; and
- Rebuild the administration confidence
The work is cut out for Najib but the nation's focus will be drifted again to the by-elections. After 7th April, expect Penanti and Bukit Lanjan to follow up. When can we start to focus on the economy despite the gloom?