Big challenges ahead for the economy so let's tighten our belts.
COMMENT
By TK Chua
Wishing friends and relatives a happy New Year is a natural thing to do. We all want a happier time, better health and a more prosperous life.
Once the holiday season is over and reality sinks in, perhaps it is time for us to contemplate hard what the New Year has in store for us.
This is not about being optimistic or pessimistic. This is about being realistic. Shopping, fireworks, and “be merry” can’t sustain us for the whole year. Work, preserving our health and prudent management of our income and expenses will.
Malaysia is confronted with many challenges today, political, economic and social. I do not see any of these challenges dissipating any time soon.
Political feuds will probably continue unabated, leaving the country’s economic management directionless. Short-term expediency is likely to overwhelm long-term measures.
BR1M and other targeted subsidies are good temporary relief, no doubt. But they can’t solve structural problems like the middle-income trap, low productivity growth, low wages, graduate unemployment and massive dependency on foreign workers.
BR1M and targeted subsidies can’t solve the escalating cost of living, continued fiscal deficit, increasing debt service charges, and the falling value of ringgit. They can’t solve uneven earning power, income distribution and economic opportunity.
Long-term measures inevitably involve pain and sacrifice. Given the protracted political struggle in the country, I do not foresee the government taking any serious long-term measures to overcome our structural problems.
Right now, I think they would prefer ephemeral and populist measures to make the people happy. But we know that making the BR1M recipients temporarily happy is different from creating a living environment where their earned income is able to provide them a decent living.
It is highly adventurous to make BR1M a permanent feature in our economic management where the people routinely look forward to it as part of their annual income. We are creating a dependent culture that is pervasive and at the same time instilling in them a false sense of entitlement.
For those not eligible or not dependent on BR1M and other assistance, they too must take appropriate measures to safeguard themselves going into the New Year.
First, I foresee more subsidies being withdrawn from the middle class. Second, services which were previously free or attracted minimal charges will be imposed with “market price”.
Third, growth in employment and higher paying jobs is likely to remain anaemic. Fourth, the full impact of ringgit depreciation is yet to be felt.
When the next round of imports comes in, I think the prices will be very different. Even goods and investments from China will be more expensive, just watch.
I don’t mean to dampen your New Year mood. But it is better to be prepared than to live in ignorant bliss.
TK Chua is an FMT reader.
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