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2008-11-19

A Joke

Question: Which is the only country insulated from the global economic turmoil?
Answer: Malaysia.

This joke has been making the rounds in corporate offices, at dinner tables and in the living rooms across the country as Malaysians and foreign investors wonder whether the feel good statistics trotted out in the last few weeks suggests a government in denial or a government with a cavalier understanding of the global meltdown.

Neither it seems, checks by The Malaysian Insider show. What you have are planners who worry that people can talk themselves into the worst outcomes during an economic slowdown if confidence is allowed to ebb.

What you have are government officials crunching on numbers and scenarios and anticipating the impact of the recession in the United States, UK and Japan on the level of unemployment, foreign direct investment and even the crime situation.

A member of the Economic Council told The Malaysian Insider: “We are not in denial, the fact is that we are in a stronger position than most countries and we need to tell Malaysians that. But things could get bad.’’

How bad? The picture on Main Street is not pretty. At the height of the Asian Financial Crisis, some 80,000 Malaysians were made jobless. The early indications are that the retrenchments may not reach those numbers, though there has been a spike in the last couple of months.

Already there is anecdotal evidence that several factories are laying off workers as a result of depressed demand for their goods. The government expects the number of laid off workers to hover around 20,000 for the year but given that the full brunt of the economic slowdown has not been felt yet, this number could double or triple next year.

Government officials told the Malaysian Insider that there are plans to retrain those retrenched and even provide them with a monthly allowance.

In 1998, retrenched workers were given RM500 a month. The idea is to put money into people’s wallet and encourage them to keep on spending. Finance Minister Datuk Seri Najib Razak said yesterday that the government could unveil another stimulus package.

It is understood that change will be the only constant in the next 12 months.

The Economic Council – comprising ministers, senior government officials and corporate captains – believe that Malaysia needs to respond not only to the worsening global economic situation but also to incentive and stimulus packages unveiled by neighbouring countries.

A council member from the private sector explained: “What we did during the Asian Financial Crisis was defensive in nature, we had to protect our market and jobs. But this time, there is a will and need to go beyond that; we need to open up our economy more, improve the processes.

“We cannot afford to lag further behind Singapore and Hong Kong and lose out to Vietnam and Indonesia.’’

There has always been a gap between plan and action in Malaysia, mainly because of the sensitive issues of the New Economic Policy and bumiputera equity. Still, government officials said that a paper to liberalise certain sectors of the services industry will be tabled before the Cabinet soon.

Also being discussed is a more liberal policy of issuing work permits to skilled foreigners.

Still, the move to open up and liberalise and ensure that Malaysia does not end up a laggard when the global economic situation improves is not likely to be without challenges. For example, there is resistance to completely abolishing the Foreign Investment Committee, a body which approves property purchases and other investments by foreigners.

A senior Umno minister told several businessmen recently: “The FIC has no place in Malaysia. It is a waste of time. But if I said this publicly I would be hammered by Umno politicians.’’

So he has stayed silent. Meanwhile, the debate on the future of the FIC continues in the Economic Council.

“Nothing is sacred in the council. We are prepared to confront any issue but we also know that all our plans will be useless if there is a severe confidence deficit in Malaysia. We cannot afford that and we cannot afford having people to stop spending," said the council member.

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