Filling a gap on ‘Najibnomics’ in M’sia

The Malaysian Reserve interviews author Dr Bruce Gale on his latest book, ‘Economic Reform in Malaysia: The Contribution of Najibnomics’

Why did you write this book?

Gale: I have been interested in Malaysian affairs for many years and have written quite a few books about Malaysia in particular and South-East Asia in general…(pause) I suppose you could say that I wrote this book in order to fill a gap.

Much has been written about the economy under Prime Minister Datuk Seri Mohd Najib Razak, but almost all of it has been by people with political agendas.

The arguments they have presented have therefore often been clouded by political slogans.

Few observers have tried to step back, strip away the politics and take an impartial look at the big picture.

That’s what I was hoping to do when I wrote the book.

Najibnomics

Few observers have tried to step back, strip away the politics and take an impartial look at the big picture — Gale says this is what he was hoping to do when he wrote his book (Pic: TMRpic)

In general, your book presents a very positive picture of Najib’s economic policies. Were you paid to do it?

Gale: Wouldn’t that be nice! (laughs) But the book is not a political treatise. My hope is that it will be read with an open mind by academics and others.

Not everyone will agree with me, of course, but I would like to think that they would respect my views as I respect theirs.

Then we could have a fruitful discussion.

The book does not refer at all to the 1Malaysia Development Bhd (1MDB) controversy or the serious problems facing Felda Global Ventures holdings Bhd (FGVh). how can you write about Malaysian economics and not mention them?

Gale: First, it is simply not true to say that the book does not refer to these issues!

They are mentioned, albeit not in great detail.

Second, my aim was to assess “Najibnomics”, which I defined as a determination to press ahead with economic and administrative reforms regardless of their political costs.

Both 1MDB and FGVH were conceived as corporate strategies, so they were not really relevant to what I was trying to do. (pause) In any case, the corporate strategies they embody are not really new.

Setting up government-owned companies to achieve economic restructuring goals have been tried with varying degrees of success since the early 1970s…

Of course, the 1MDB and FGVH issues are important! In fact, they require careful study.

But I am not sure how anyone could do that objectively in the current highly charged political environment.

Many have criticised Najib for allowing prices to rise to the point where the poor are really struggling to make ends meet. What do you say to that?

Gale: It is true that in recent years the food and beverage component of the Consumer Price Index has risen faster than the general rise in prices.

The price of residential housing has also risen significantly. The result has been a worrying increase in the level of household debt.

In fact, it is possible to argue that these two issues constitute the most pressing macroeconomic problems facing the country today.

But I think it would be unfair to blame all of this on Najib.

He became prime minister at a time when government subsidies had simply become unsustainable.

These subsidies had to be removed despite the inflationary implications. To fail to do so would be to place the country on a course that would ultimately end in national bankruptcy! There would be almost no money left for spending on health and education — both vital issues for the poor — not to mention the sort of infrastructure necessary to ensure future economic growth, and therefore, jobs. The government has tried to alleviate the impact on the poor by introducing programmes such as the 1Malaysia People’s Aid.

Of course, such handouts are not a permanent solution. For that, you need the opportunities created by strong and balanced economic growth.

But you are only going to get that if you are willing to take the unpopular measures necessary to reform the economy.

As for the Goods and Services Tax (GST), this was necessary to force the middle class to share the tax burden.

Tax avoidance in Malaysia is a serious problem. Only one in 10 people actually pay income tax.

This is significantly lower than many other middle-income countries, and far lower than in the high-income economies everyone says they want Malaysia to emulate.

And let us not forget that while GST is generally regarded as a retrogressive tax, its impact on the poor has been minimised by ensuring that many common food items such as rice, fresh fruit, bread, meat and vege- tables are GST exempt.

how can you defend Najib’s economic policies when the ringgit has lost so much of its value during the period he has been in charge of the country?

Gale: I think that the economic impact of the weak ringgit has been exaggerated.

After all, a weak currency makes exports cheaper and encourages foreign investors to take advantage of the lower cost of establishing manufacturing bases in a country.

Some critics like to suggest that the weak ringgit is a direct result of the lack of faith foreigners have in the country.

But the stock market has not collapsed, and international institutions such as the World Bank and the Inter- national Monetary Fund have consistently issued favourable reports about the country’s economic policies.

It is possible to cite many causes for the ringgit’s weakness, but when you look carefully, it is clear that most of them are the result of the operation of global, rather than domestic factors.

Okay, but surely the fact that government debt under Najib has risen to more than 50% of gross domestic product (GDP) is clear evidence of wasteful spending?

Gale: Najib took over the Ministry of Finance (MoF) at a time when the world was facing a global financial crisis.

Governments everywhere were pumping huge sums into their respective economies in order to prevent what many at the time believed could develop into another global depression.

Malaysia, under Najib, did the same thing and the result was that debt as a percentage of GDP surged from about 41% in 2008 to 52.8% in 2009.

But since then, the proportion has remained fairly steady, rising in some years and falling in others. So, there is no pattern of profligate spending.

It is also important to remember that historically the proportion of Malaysian government debt to GDP has been much higher. In 1990, for example, it reached 90%!

So, you think Najib is a good prime minister? (laughs)

Gale: It is not for me to say whether he is a good prime minister or not. That is something for Malaysians to decide.

The point I am making in the book is that Najib’s macroeconomic policies have been broadly appropriate, given the particular circumstances faced by the country.

Of course, this is not the same thing as saying that he has solved all of the country’s economic problems.

  • Dr Bruce Gale is the author of various books including ‘Politics and Public Enterprise in Malaysia’ (1981) and ‘Political Risk and International Business: Case Studies in South-East Asia’ (2007). He has also written over 300 articles published in the Singapore Straits Times.