KUALA LUMPUR: ‘We have survived another year’ – is perhaps the phrase that not only an ordinary citizen can relate to these days but also countries amid the ever shifting global economic tectonic plates.
While Gross Domestic Product remains a common data used to measure growth, there are other indicators that are equally important to evaluate a country’s economic health – the current account, which shows the difference between a nation’s savings and investment.
A surplus in the current account indicates that the nation is a net lender to the rest of the world and Malaysia has been blessed with it for now.
In 2016, the current account surplus settled at 2.1 per cent of Gross National Income (GNI) and is expected to be between one and two per cent of GNI in 2017. Lower current account for 2016 was attributed to widening deficits in the services and income accounts.
However, this is a far cry from the 4.5 per cent surplus achieved in 2014 and 3.1 per cent in 2015, according to Bank Negara Malaysia’s (BNM) data. It has been narrowing since 2008. Reversing the decline depends very much on how the economy is structured.
“If we further diversify our economy and are not overly dependent on any particular geographic location then we might be able to improve (the surplus),” Bank Negara Malaysia (BNM) Governor Datuk Muhammad Ibrahim said.
Malaysia cannot rely on traditional sources of growth, he told a senior editors briefing recently.
“As we move forward, technology, globalisation and trade pacts would change the way the world economy works. And, if we do not find an avenue for our economy to move, then it will be very challenging for us,” he warned.
Huge remittance by foreign workers, Malaysians’ travel bill and payment for external consultants, just to name a few, are to be blamed for the narrowing current account, as well, he pointed out.
The migrant workers’ remittance jumped to RM30 billion in 2016 from RM17 billion in 2008 and Malaysians spent about RM41 billion overseas on their travel. A whopping RM41 billion was also paid for external consultants. Such huge outflow also contributed to the decline in ringgit as it reduces demand for the currency. Among ways to support the current account is to lure more tourist arrivals,” said Muhammad.
The government has given easier visa approval for Indian and Chinese tourists and the number of tourist arrivals has been increasing, which will help boost travel surplus.
Others include import substitution, advocating the usage of domestically produced materials instead of imported, especially in big projects.
Recently, Minister of International Trade and Industry Datuk Seri Mustapa Mohamed said the government was set to formulate a mechanism to monitor usage of Malaysian materials and services in mega construction projects in the country and overseas.
He said the mechanism would be jointly developed by the Malaysian Investment Development Authority and the Construction Industry Development Board.
“Malaysian products have been outstanding (in the export market). There’s no reason why we can’t increase the percentage of local products in the course of construction,” Mustapa stressed.
But, the buck doesn’t stop there. The real cost to the economy is not absolutely due to remittance but the industries that are not going up the value chain, said the Governor.
“We must admit that we need foreign workers in certain sectors such as plantation and construction and we have to be very clear about it,” he said. The issue to be tackled is closer to home.
“The Small and Medium Enterprises (SMEs) sector does not automate their operations. We have a fund that SMEs can tap in order to automate but it is not being used to the maximum,” he revealed.
The SMEs rely on age old methods of production, which is not sustainable.
“We will be defeated in no time (low production cost method) by other countries like Cambodia, Laos and even Indonesia for that matter,” he said.
Such situation calls for measures beyond what policy makers can do. A national service perhaps? For businesses especially developers of huge construction projects to use more local products, SMEs to automate and for Malaysians, in general, to travel more within the country. It is now your call to make. — Bernama