Thank God for Globalization
Fellow Malaysians, say what you like but I think we have to be thankful for globalization as it has kept our UMNO-led government on its toes and of late, has prevented it from going overboard with its social restructuring policies.
Every kris-waving 30% equity requirement that is proposed will increase the cost of doing business in Malaysia and lower our competitiveness. With both India and China in the ascendancy, who in their right minds would position themselves at a disadvantage especially if they (i.e. we) do not have a significant technological edge?
First off, in an effort to reduce our budget deficit, the government has been forced to cut down on its spending over the past few years. Traditionally this has been the main way of pump-priming the economy (and boosting rent-seekers’ fortunes).
Secondly, a government can only milk domestic consumption for so long without inducing inflationary effects on the economy as experienced by South Korea’s artificial boom in the 90’s which was fuelled by over-borrowing/over-lending.
This is an excerpt from a Morgan Stanley report commenting on the 2005 Malaysian market:
Private consumption risk also stems from the modern Malaysian household enjoying a sophisticated credit culture, which has enabled it to increase debt in the past few years. Household leverage and consumer credit penetration are already at levels equal to Korea, Hong Kong and Singapore. Consumer and housing credits have been aggressively driving loan growth in Malaysia, and total consumer and housing debt are some 56% of GDP, exceeding Singapore’s 54% and close to Hong Kong’s 60% (Korea is at 60%-plus). However, bear in mind Malaysia’s income per capita is a fraction of that of Korea, Singapore and Hong Kong.
And:
The economy has depended excessively on private consumption fueled by a run-down in savings, expansion in household balance sheets and a sophisticated credit culture. We don’t expect this to continue – the private consumption story is not structural. The main economic strategy of making private investment the growth engine has not materialized so far.
In other words, the UMNO-led government can only do so much to force us poor Malaysians to buy more protectionist cars and products to stimulate economic growth. We have to look at a good balance between export-led growth and domestic demand.
And if we are looking at improving private investment, the last thing we want to do is to frighten businesses away by telling them they have to surrender 30% of their equity.
Malaysia may have gotten away with many protectionist crimes in the past but in a rapidly globalizing and open economy, this will hopefully be the stuff of history books. Wishful thinking for the year of the Dog? Maybe not. Happy Lunar New Year.
posted by hew @ 10:26 am
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