THE fate of Budget 2021 remains uncertain. After its tabling to Parliament, my colleagues at the Institute for Democracy and Economic Affairs (Ideas) stated that “the key measures are balanced in their coverage of the vulnerable segment of the population, economic and business activities, but short of a clear direction to guide the country’s development in the post-pandemic new normal”.
We highlighted nine points: that allowing EPF withdrawals could undermine the financial security of individuals and families; that protection of vulnerable groups and support on mental health, prevention of violence and substance abuse is commendable; that the promotion of high technology and innovation will create growth but a clearer agenda for SMEs is needed; that commitments to the National Anti-Corruption Plan are welcome and critical to sustain long-term recovery; that supporting the most vulnerable businesses is justified but should also focus on adaptation; that spending on propaganda is not a priority; that measures on sustainability do not match up to the challenge; that NGOs’ role in public service delivery can be expanded to include policy consultation and monitoring; and that GLCs risk becoming ‘too large to fail’ if social objectives are not substantiated with economic rationales.
Subsequent political disagreements have generally focused on these points. Some need amendment to gain cross-party support; others may be dealbreakers, such as the RM85.5 million resurrection of the propagandising Special Affairs Department (Jasa).
Interpretations of the Yang di-Pertuan Agong’s call to pass the Budget have also evolved beyond the two extremes I previously described. The argument goes that since the royal advice was issued “to ensure the well-being of the people and the recovery of the country’s economy”, if the Budget will not achieve that objective, then MPs should not support it. Clearly, the battle over substance and semantics will continue.
In the meantime, a different agreement was made that may bring a much bigger long-term impact on Malaysian businesses, workers and families. After an eight-year slog by dedicated individuals (including Ideas board member Tan Sri Rebecca Sta Maria, who was part of the team that drafted the guidelines and principles for negotiations), the Regional Comprehensive Economic Partnership (RCEP) was finally signed between 15 member states, namely Malaysia, our fellow Asean countries, China, Japan, South Korea, Australia, and New Zealand. (Read that list again and consider the geopolitical signals, given the animosity that is often attributed in bilateral relations between some of them.)
Indeed, RCEP is significant for many reasons. At a time when populist-fuelled protectionism has made some countries more insular while Covid-19 closes borders, Asean has successfully championed — from the beginning — the creation of the world’s largest trading bloc centred in the Asia Pacific, streamlining the network of existing agreements in the region. It will consolidate the existing Free Trade and Comprehensive Economic Partnership Agreements (FTAs and CEPs) that Asean has with extra-Asean partners, with the possibility of including India in the future. It should offer new growth opportunities, particularly for the less economically developed members, and will provide more flexible regional and global value chains. This is especially handy during a US-China trade war, allowing MNCs to reorganise supply chains in response to tariffs.
The multilateral trade pact is expected to eliminate tariffs for over 92 per cent of goods traded among RCEP countries, and ensure greater transparency on non-tariff measures. It should help to strengthen cross-border e-commerce activities and digitalisation in the region’s logistics sector, and ensure higher standards of ethics and sustainability in business. And it could promote commitment to competition and intellectual property best practices, protecting consumers from anti-competition behaviour while encouraging investments in innovation.
Naturally there are critics, who say the economic gains will be minimal, and that in reality, one country will dominate, increase its leverage and erode others’ sovereignty. These are real risks and we must learn appropriate lessons from previous experiments.
But for a small country historically dependent on trade, such risks have always been present, and the risks of not participating may be even worse. For now, Malaysia continues to be an attractive investment destination despite the pandemic, and signing RCEP will open up greater market access opportunities. Ratification is still needed, but in the meantime more ambitious policies and reforms should be undertaken. Another agreement awaiting ratification is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Though comprising fewer members, it goes deeper and more controversially in some aspects. One is tougher standards on state owned enterprise: a needed domestic reform in any case.
Perhaps, if our politicians worked across the aisle to deliver even better standards and transparency for our GLCs, that would be even better!
Tunku Zain Al-Abidin is founding president of Ideas.