Move to make economy more competitive a win

PETALING JAYA: The Centre for Market Education (CME) welcomes the government’s plan to make Malaysia’s economy bigger and more competitive under its Madani Economy Framework.

The boutique think tank noted Putrajaya’s plan to make Malaysia the top 30 largest economy in the world and improve its global competitiveness ranking to be in the top 12 while committing to fiscal sustainability by targeting a deficit of 3% or lower, would set the right footing for fresh investments and economic development but implementation remains key to its success.

“The reflection brought forth with Focus 1: Malaysia – Leading Asian Economy is particularly important for the future development of the country, and it contains some points that have been highlighted by CME on several occasions,” Carmelo Ferlito, chief executive officer of CME, noted in a statement.

CME added the framework recognition of Malaysia’s premature de-industrialisation, importance of promoting free trade beyond traditional free-trade agreements and pursuing more bilateral and multilateral agreements to promote free movements of workers is a good sign for the future of the local economy which is said to be caught in a “middle income” trap.

CME’s Ferlito also agreed with the move to improve the ease of doing business, strengthening Malaysian Investment Development Authority and promoting industrial infrastructure and the importance of reviving domestic direct investment.

To achieve some of the goals set by the Madani Economic framework, CME believes a few conditions need to be met, namely policy action needs to be implemented at institutional level rather than at micro-level, while direct control over the economy (price controls, labour restrictions, etc) needs to be avoided.

Key to it is for long-term political commitment and this implies political stability.

Ferlito added competent people with good understanding of economic forces and entrepreneurial experience are needed to lead the charge.

Other good points are those calling for a relaxation of visa regulations and for rebuilding fiscal discipline.

“CME hopes that they will find a fast implementation with amended immigration rules and with a comprehensive fiscal reform that needs to be built on a new goods and services tax (GST), improving collection though fiscal devolution (fiscal federalism) and rationalisation of subsidies and government spending,” it noted.

The think tank is however sceptical on the Madani micro-targets such as workforce participation, income distribution and housing policies.

“While the macro-targets listed above can be achieved with comprehensive institutional reforms and no direct interference with market forces, micro targets require more direct intervention, and therefore, may result in market distortions, thus delivering outcomes far away from the original intentions,” Ferlito added.

CME believes the government should focus on the implementation of the macro targets indicated by the economic framework with institutional reforms, pro-market policy actions and remain committed to free trade.

“With political stability and the right set of people, those targets can be achieved, and the resulting positive outcomes will naturally support also the achievement of micro-targets as the improvement of the economy will reflect in the improvement of the living conditions of the rakyat,” it added.