What the government does not want Malaysians to realise

On September 17, Prime Minister Datuk Seri Abdullah Badawi who was then the Finance Minister switched portfolios with Defence Minister, Deputy Prime Minister Datuk Seri Najib Tun Razak. There were mixed reactions to the sudden exchange of offices but it was a matter of better-late-than-never as the future of the country's ailing economy seemed bleak.

Being a graduate from University of Nottingham with a Bachelor's degree (Hons.) in Economics, many saw Najib as a more suitable candidate to lead the Ministry of Finance. His predecessor, Badawi on the other hand graduated with only a Bachelor of Art in Islamic Studies.

And it took Badawi this long to realise Islamic Studies had nothing to do with economics.

In just than a week in office, the new Finance Minister announced that Malaysia is heading for an economic growth rate of 5.5% or 5.7%; provided the US economy remains stable.

PUTRAJAYA, Sept 25 - Malaysia is on track to achieve the targeted 5.5 per cent or 5.7 per cent GDP growth if there are no more disastrous news from the United States, Deputy Prime Minister Datuk Seri Najib Tun Razak said today. [The Malaysian Insider, 25/9/08]

So, does it mean that the Malaysian economy is getting any better?

The optimism and confidence in the country's economy shown by Najib may just be nothing more than a smoke screen to dilute the magnitude of the current economic situation. However, it is not to imply that the announcement of encouraging GDP growth is a total lie by the government as there could be understated issues affecting the economy which has gone unnoticed by the majority of Malaysians.
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Malaysia's Corruption Perception Index (CPI) remains at 5.1 this year, showing no major improvement since 2001, said Transparency International Malaysia president Tan Sri Ramon Navaratnam. [The Malaysian Insider, 23/9/08]

On September 23, Malaysia's Corruption Perception Index (CPI) remained unchanged to last year's; at 5.1. The CPI works a scale of zero (highly corrupt) to 10 (highly clean). Transparency International Malaysia president Tan Sri Ramon Navaratnam told reporters that Malaysia's CPI have lingered within 4.9 to 5.1 since 2001. The absence of any signs of improvement can only be explained by Badawi's empty promises of reforms to curb corruption when he assumed office in 2003. Nonetheless, the country's CPI may have been stable but Malaysia's ranking have slipped from 43rd to 47th among 180 countries this time around.

Our closest neighbour, Singapore scored 9.2.
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The inflation rate has jumped to a 27-year high of 8.5 percent in August, driven by the escalating cost of food and fuel. [Malaysiakini, 24/9/08]

On September 24, the day before Najib announced a positive growth for Malaysia, it was reported that the inflation rate for the month of August have skyrocketed to 8.5% - the highest ever in 27 years. The hike was driven by the reduction of fuel subsidies in June which witnessed the price of fuel reached an unprecedented peak of RM2.70 for petrol and RM2.58 for diesel. Hence, the prices of products ranging from rice to transportation increased as well. The price of fuel have since been reduced to RM2.45 for petrol and RM2.40 for diesel.

However, the government would be naive to believe the current reduction of fuel prices would bring the prices of goods and service down too. Most products off the shelf of supermarkets and grocery stores remained high despite lower fuel costs.

Can the projected 5.5% GDP growth be able to increase household incomes and help the middle-class cope with rising costs?
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Foreign direct investment (FDI) outflow in Malaysia has exceeded inflow for the first time ever, underscoring fears that investors might be losing confidence in the government and its economic policies. [Malaysiakini, 25/9/08]

According to the United Nations Conference on Trade and Development's (Unctad) World Investment Report 2008, FDI outflow in 2007 surged 82% to RM38 million from 2006. The net outflow was also reported to be almost RM9 billion.

Many economists perceived that the increase in FDI outflow reflected the maturity of many local sectors as more companies were accelerating cross-border acquisitions to expand regionally. Nonetheless, Malaysia's Inward FDI Perfomance Index ranking fell to 71st position from 67th in 2006. Ratings Agency Malaysia chief economist Yeah Kim Leng told the Business Times Singapore that larger reverse investments are acceptable, but there would be a concern if domestic investments and FDI inflow declined sharply in future.
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Malaysians certainly do hope that a graduate in Economics could do a better job in turning the economy around this time. However, the predicament is not solved until the link between Islamic Studies and the military has been figured out.