By Rosemarie Khoo
KUALA LUMPUR, Nov 14 (Bernama) -- Juwai IQI global chief economist Shan Saeed shared his view on the country’s economy post COVID-19, recovery process and current political development in a Q & A:
Question: You have a global perspective and strong expertise on global macroeconomics, what is your analysis of the government’s performance from September/October 2021. What are the key variables for Malaysia in making a turnaround with GDP growth in Q2 touching 8.9 per cent this year from a low growth rate of 3.1 per cent in 2021?
Answer: Well, in terms of economic growth, macroeconomic stability and maintaining economic confidence in the country, global investors like us (Juwai IQI) and many others, view macroeconomic stability as perhaps the most important variable, just like what the government of (Caretaker Prime Minister) Datuk Seri Ismail Sabri Yaakob has done.
He has maintained macroeconomic stability.
First is policy consistency, which is equally vital to ensure growth in a structured manner. You look at Europe and the United Kingdom (which reverted policies within days of announcement). Such inconsistency would work against economic growth.
So, investors prefer people who understand the economy, experienced people who can drive the economy in a much more professional manner.
I think what the government has done as of the first half of the year, Malaysia's GDP was 6.95 per cent, 5 per cent in the first quarter, 8.9 per cent in the second quarter, so, the average GDP growth in the first half was 6.95 per cent, which is just below that of the Philippines.
Malaysia is ranked second in ASEAN, ahead of Singapore and Indonesia and other economies in terms of how government has done what we have seen since last September. As of today, the main focus has been to get the population vaccinated, so 98.99 per cent of the population is vaccinated.
That's why the government was able to open the economy ahead of northern and southern neighbours. The others were struggling but the Malaysia was the first to open its economy giving it a boost and that gives a positive signal to global investors that Malaysia is ready for business.
Second, the infrastructure has strong correlation with GDP growth. So wherever you have stable infrastructure, you have strong GDP growth and this is what we have witnessed.
The third element is technology and the government is also focused on it.
Q: How would you describe the economic strategy of the current government taking into account the geopolitical risk such as the conflict between Ukraine and Russia and global recession in advanced economies. Has the Malaysian government under Datuk Seri Ismail Sabri Yaakob navigated the global economic turbulence?
A: They’ve done a pretty good job. They have navigated the economic turbulence as you know, the global economy is on the edge of a massive recession and systems are cracking up.
For instance, oil prices and coal prices are up while the bond and equity markets are taking a beating. So, what the government has done has given confidence to local investors, Once you have confidence in local investors only then FDI will come into the picture.
I give you the latest figures. The trade numbers have touched RM257 billion, up 31 per cent so far. So that clearly reflects that the government has been able to maintain macroeconomic stability and has given economic confidence to local investors that have driven FDI into the country.
Last December, Intel made the biggest investment in ASEAN region of US$7.5 billion (RM30 billion) and they are coming to Malaysia so that sends a positive signal not only to the rerion, but also to global investors that Malaysia is on the move. And that's why a lot of investors are moving to Malaysia.
Q: The trade and commerce numbers for 2022 are still rising with total trade registering double-digit growth in September 2022, reaching RM256.9 billion while FDI was touching an all-time high of RM41.7 billion in Q1 2022 compared to RM48.1 billion in 2021. What are the key factors of the rising trade numbers and FDI figures?
A: The government has been quite focused. It has been quite proactive when everyone was criticising the government last year saying it has not done well in terms of COVID-19 but you have to take into account that nobody had a perfect playbook, how to handle COVID-19.
Everybody was doing trial and error, but I give full credit to Prime Minister Ismail Sabri and Health Minster Khairy Jamaluddin. So, that gave a lot of confidence. As a foreigner living in this country for more than 10 years. I got vaccinated and I feel more safe and secure living in Malaysia.
Q: On inflation, has the government or Bank Negara Malaysia done enough to contain inflation? Is it exogenous or endogenous variables making this impact on the economy?
A: The fact of the matter is the inflation is not from within Malaysia but is coming from outside. It's coming from outside because of a stronger US dollar. If you look at the ASEAN region, Singapore's inflation is 7.5 per cent, the Philippines is 6.9 per cent, Indonesia is 4.7 per cent and Malaysia is still 4.5 per cent.
The inflation in Europe is over 10 per cent. UK is above 10 per cent while Australia is above seven per cent. So if you compare the inflationary outlook, Malaysia still has among the lowest with only Vietnam lower than Malaysia. Other countries are facing higher inflationary pressure. About 60 per cent of the global economy is in stagflation.
So, what is stagflation? It is where you have higher inflation and lower growth. So, Malaysia is still fortunate in that because of the government's policies, the inflation rate is lower.
Q: What do global investors like you expect from the government in terms of economic strategy or the policy framework in the foreseeable future?
A: We expect consistency. And the last one-and-a-half years what we have seen during COVID-19 and post COVID-19. The government has been able to maintain economic consistency. They have provided the framework and let the private sector run the economy.
I believe in free market. The person who has a huge influence on my personality is Milton Friedman, one of the greatest Nobel laureates from the University of Chicago.
I believe the government has given the policy framework and has given economic confidence to the people. That's why you have strong consumption, the FDI is coming into the country. The trade numbers are up. It only happens when you have policy consistency.
Q: Based on Ismail Sabri’s many decisions on various matters especially in putting the economy back on track, do you think he is a capable leader to restore the Malaysian economy and making Malaysia an investment hub in the region?
A: If you ask me, I interact with so many people. I like people who are quiet, who are action-oriented and who have got vision. There's a lot of people who talk but can't deliver.
But the Prime Minister is a very quiet person. However he is action oriented, he likes to deliver. He likes to lead from the front and I've seen during the COVID endemic, the Prime Minister was on the ground. KJ was on the ground and so was the Health DG.
The other thing I like about the Prime Minister is he listens to investors. And I'm a member of the Hong Kong-Malaysia Business Association. They have been interacting and giving views. I'm also a member of the Economic Club of Kuala Lumpur. They came up with a plan before the budget, and they sent it to the Finance Minister and Prime Minister’s office.
So as a prime minister, you have to listen to all the stakeholders and once you listen to all the stakeholders, you get feedback and then you say, Okay, this is the policy that we need to adopt. So as a prime minister, I like him because he's very quiet, and he's action oriented. He likes to deliver economic outcome for the people of Malaysia. So I think he's a good choice. So generally I like people who are experienced who can deliver economic outcomes for the people of Malaysia.
Q: Ismail Sabri is serious in curbing corruption in his administration and his political party UMNO. Former prime minister Datuk Seri Najib Tun Razak is an UMNO leader currently serving imprisonment for his involvement in the 1MDB scandal. Do you foresee this development will help Malaysia regain confidence and its good name among foreign investors and world leaders?
A: If you read between the lines, the Prime Minister has said nobody is above the law, and everyone has to follow the law. As a foreigner, I have to follow the rules and regulation as well.
So I think what I like about the Prime Minister, he said, you know, the law should take his course. He said he will not interfere and that gives confidence to local investors. The rule of law is strong. The judiciary is strong in Malaysia and the judiciary is one of the pillars of the economy along with the executive and along with other pillars of the economy.
So when your judiciary is strong, that gives positive signal to global investors and also to local investors.
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