Rating agencies have not downgraded Malaysia’s rating, but deteriorating economic conditions could force a review
By ALIFAH ZAINUDDIN
The government is preparing a policy paper that outlines the plans and priorities for the next few years as Putrajaya battles to pacify investors over the absence of clear economic directions.
Former Finance Minister Tun Daim Zainuddin said the move would allay fears among investors and credit rating agencies over the absence of clarity in Malaysia’s economic directions and reform agenda.
“I think the government is now preparing a paper to say this is the situation when they took over, and this is what they want to do — the way forward. I’m sure they will do it,” Daim told reporters after a luncheon talk at Universiti Teknologi Mara in Shah Alam yesterday.
Daim, who was the chairman of the disbanded Council of Eminent Persons (CEP), said: “I don’t know about a white paper, but the government will come up with a policy or statement, and say this is what we are looking at.”
The Pakatan Harapan administration has been criticised over the lack of clarity in its economic and reform agenda, especially by rating agencies and international investors. Clarity, especially on economic reforms and priority areas, is key to wooing investors. In the past, the government had clearly spelt out areas of importance to the country’s growth — especially relating to foreign investments.
The new government had to battle a spiralling debt of RM1 trillion, including contingent liabilities, widening deficits and reduced revenue.
Rating agencies, however, had not downgraded Malaysia’s rating, but deteriorating economic conditions could force a review which will increase borrowing costs.
Daim defended the new government, saying that Putrajaya needed time to scrutinise all accounts before it could proceed with any plans.
“First of all, when you take over the government, you need to go through all the books. When you know the real situation, then you can plan.
“It will take a bit of time. But the problem is, it is so messy…it is not easy to reconcile. Now that they know the picture, they have to announce what is their priority,” he said, adding that for many Malaysians, the cost of living remains the key priority.
Daim said the recently launched National Anti-Corruption Plan and the establishment of several high-level committees, including on debt and cost of living, were some of the ideas mooted by the CEP.
The CEP was established by Prime Minister Tun Dr Mahathir Mohamad, weeks after the 14th General Election, to advise the new government on economic and institutional reforms. The council was set up for 100 days, after which it had submitted its recommendations to the prime minister.
Daim also said the government will proceed with the reforms of government-linked companies (GLCs), including the selling of state-owned enterprises.
He said many GLCs are undertaking a comprehensive study of their business following the appointments of new directors and CEOs.
“The GLCs have new boards. So, they are now doing all these studies. Soon, they will make their proposal to the board on which companies they would want to divest. I think next, they will call for tender.
“As I’ve said, these are big companies and they have so many companies under them. They would have to identify which companies they want to divest first,” he said.
Over the last eight months, Putrajaya had changed board members and CEOs of state-owned enterprises and GLCs as it seeks to put professionals to run these entities.
Some investors had also criticised the government’s exposure and stakes in companies which provide unfair advantage over competitors. The government is expected to divest its stakes in non-strategic companies to recoup billions in revenue to help plug the hole in its finances.