On Budget 2021, former finance minister II says Putrajaya needs to strike a balance between borrowings and development expenditure
by RAHIMI YUNUS/ pic credit: MEDIA MULIA
MALAYSIA needs to focus on the most affected industries while relooking at sectors with strong multiplier effects to expedite the country’s economic recovery post-Covid-19, said former Finance Minister II Datuk Seri Johari Abdul Ghani (picture).
Johari said the government must ensure the economic rejuvenation plan can safeguard the economy from continually falling in the next two to three years despite the negative GDP forecast this year.
“We can still adjust the economy if the GDP does not fall drastically. But if it continues to shrink, it will be hard for us to rebound,” Johari said in a discussion at the virtual launch of the new Utusan Malaysia and Kosmo!, organised by Media Mulia Sdn Bhd on Saturday.
Malaysia’s GDP is forecasted to grow by 0.5% or contracted by up to 2% this year, with no industries spared from the impact of the pandemic.
Johari said tourism would be one of the industries that should be prioritised by the government following devastating closure for months to curb the spread of the virus.
The former minister cited the government’s experience in the 1998 Asian financial crisis and 2009 global financial crisis, noting that the focus would be on reactivating exports and generating higher income for the country, as well as to ensure a positive trade balance.
With an inward-looking economic outlook, Johari said Malaysia needs to review its agriculture sector to reduce import reliance, such as on rice and poultry.
He said Malaysia, which is the world’s second-largest crude palm oil (CPO) exporters after Indonesia, shall devise strategies to further grow the downstream segment and strengthen collaboration with Indonesia.
“We must leverage the raw materials that we have in this country such as rubber and CPO. There are fewer benefits if we were to develop an industry and provide incentives, but it needs to import 90% of the raw materials. The electrical and electronics industry, for example, has thin margins because it needs to import,” Johari said.
As the economy shifts from labour-intensive manufacturing to knowledge-based services, he said the government must also give attention to future industries, such as e-commerce, to drive the economy amid restricted mobility at present.
Johari said the development of the digital economy and entrepreneurship will address the rise of unemployment and help reduce the reliance on foreign workers.
Last week, the Department of Statistics Malaysia reported that the unemployment rate rose to 5.3% in May 2020 from 5% in April 2020, with the number of jobless persons jumping to 826,100.
Johari said the 5% unemployment rate is a stark contrast from a typical 3% rate pre-Covid-19 for Malaysian population size.
“What I am concerned about is that almost four million out of the 15 million working population are in the informal sector and they are badly affected. The problem will get worse in the coming years if we do not address this,” Johari said.
On the upcoming Budget 2021, Johari said Putrajaya needs to strike a balance between borrowings and development expenditure, as the country’s firepower to spend has been reduced with increasing debts following the introduction of various economic revival measures.
With the current political scenario and economic challenges, he said the country needs to send a strong message to its people and investors that it is a politically stable nation to attract investment and instil confidence.