Business

Monday May 25, 2009

Adjusting to economic changes can be difficult but necessary

Comment by Tan Sri Sulaiman Mahbob


Economic planning can be done without tears

THE previous Prime Minister, Tun Abdullah Ahmad Badawi, once said that managing a country like Malaysia could be most difficult. Given its diversity in population, culture and languages and, more importantly, the varying expectations of its people who want to be a developed society come 2020, planning for the economy and the society to advance forward has several trappings.

The Government’s “economic growth with distribution” policy aims to ensure that the benefits of economic growth and development are shared by the whole population. Poverty has been reduced significantly, while employment and educational opportunities have benefited all Malaysians.

Malaysia is even absorbing the unemployed from the neighbouring countries. The distributional objectives have been pursued in a manner that does not deprive the upper echelon of the society and the middle class from achieving their goals of improving their incomes and quality of life. In this process, the private sector has been instrumental.

In moving forward, we cannot afford to rest on our laurels. The processes of globalisation and international competition, which can affect the rule of comparative advantages in our favour or otherwise, are constantly changing, pressurising us to make policy adjustments. Malaysian policy makers have to be constantly on guard to ensure that corrective adjustments and changes be made at the appropriate time so as to protect the standards of living of Malaysians.

The experiences of economic crises in 1985/86, 1997/1998, and the present financial meltdown in advanced economies which impacted our external sector, are cases in point of the need to be on guard and the need to be ready to make policy changes however unpopular they may be.

The recent announcements on liberalisation of the services sector by the Prime Minister illustrate the seriousness of the Government to make changes in its policy for the long-term opportunities that these positive changes can bring. It is imperative that our economy must grow on a sustained basis to create the wherewithal for distributional opportunities to take place for the benefit of all Malaysians, especially the low-income population.

Adjusting to changes can be difficult and painful. But we have to change and adjust without sacrificing our long-term aspirations and ideals.

We want to be a developed society in our own mould. We want to further increase or even double our income, if possible, and further enhance our quality of life by 2020 and also significantly reduce our socio-economic disparities, which have been seeds of discord in the past.

The challenges of economic planning in the years to come will be plenty. In the international front we will be faced with new processes of globalisation and internationalisation of our economy.

At home we have to continue to improve the efficiency of our delivery system to enhance the nation’s economic competitiveness.

Additionally we have to invest in our human capital with skills and technologies so as to facilitate restructuring of the economy towards a high income and high productivity, meet the expectations for greater competition, transparency and accountability, and the needs for sustainable economic development.

Indeed our work culture has to change given the various challenges we are facing and yet to face. Some sacrifices are essential for the good of us in the years to come.

Certainly the concern for the welfare of our children and of future generations demand us to be more prudent in our mobilisation of natural (energy for example) and financial resources (our national savings) in our efforts to implement projects and programmes both in the private and public sectors as well as in our efforts to pursue transformation of the economy.

A greater exercise towards market-based pricing must be pursued in order to attract only investments which are economically viable demanding less subsidies, incentives, and price supports, thus minimising misallocation of resources while promoting entrepreneurship that can withstand competition in the market place and the test of time.

Thus, the challenges to economic planning in the years to come, especially after the call by the Prime Minister on the need to examine and explore new models for economic growth and development, can be formidable.

The demands of the marketplace have to be adequately factored in if economic growth is to be sustained and social costs minimised. The impact can be tearful to some who have been used to easy times. However, if we fail to plan to accommodate these changes, and adjust accordingly, we plan to fail.

Our society cannot afford to experience economic stagnation for it can breed social instability. We therefore have to forge ahead with economic transformation and development to create the opportunities for everyone to benefit from.

l Tan Sri Sulaiman Mahbob is director-general of the Economic Planning Unit, Prime Minister’s Department.

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