[ Laman Ehwal Semasa ReformIS ]
Date: 26 Aug 1999
Time: 23:27:08
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The MALAYSIAN justice, progress, unity Issue No. 25 – 26 August 1999
“Others” To Derail Recovery? Dr Mahathir Mohamad said Wednesday he was “very happy” with the resumption of economic growth in the June quarter, but warned that “other people” might undermine the recovery. “We do not know what will happen in the third and fourth quarters,” he told reporters following news that gross domestic product (GDP) grew 4.1 percent in the second quarter.
“We will stick to one percent for the year,” the prime minister said. “I'm very happy we are going to show good growth. But I cannot predict what other people might do to undermine our economy.” Is this an indirect admission of the fragility and narrow base of the recovery and its dependence on external demand?
As was reported in yesterday’s Malaysian, second quarter GDP growth was very much due to the massive rebound in the semi-conductor industry as well as the tremendous increase in palm oil output, both of which actually have little to do with government policy. Indeed, palm oil is now under threat, prices now being less than one-half of what they were at the beginning of the year.
The other major component of growth was in the car industry, partly a result of a rebound from a massive collapse in demand last year, partly a result of easier credit and easy purchase terms. The major increase in pre-election government spending has yet to make much of an impact. In any case, this is not a sustainable, long-term feature.
The first three items alone, on their own, accounted for 2.5 per cent growth, and it is the effect of these three that account for the bulk of the remaining components of growth.
Given the extent to which growth has been externally driven, as well as the need to get in foreign capital, such talk of “others” derailing the economy is not exactly the right medicine for a still fragile recovery.
The Ups And Downs Of Recovery Last year, while the economy was in the depths of recession, it was the rural economy that basically kept us from doing worse. Specifically, it was the stellar performance of the oil palm sector. The ringgit devaluation further exaggerated this effect. This was all to the good as it kept rural incomes up and helped minimise the pain of the recession -- the rural population still accounts for more than half of the country’s population. Their incomes are still significantly less than average urban incomes, and the gap actually increased in the boom years of 1987-1997.
Now, however, as the economy goes into a cyclical upturn, the rural economy is in a downturn. Palm oil prices are now less than half of what they were, and rubber prices are down almost 20 per cent. This impacts severely on smallholders -- oil palm smallholders account for a half of the output of the country. There is as yet no end in sight of the massive downturn in palm oil prices, given that its main competitor, soya bean, is now at a 30 year low.
Bail-Outs For The Cronies; How About The Poor Tens of billions of ringgit have been spent to bail out the cronies. Petronas alone has spent a few billion to bail-out the PM’s son’s shipping company, save Bank Bumi yet again, take over Proton, fund Putrajaya and the KLCC Twin Towers. Bail-outs have been done, allegedly, because the companies of these cronies are crucial to the economy, that it wasn’t their fault that the companies ran into trouble, that it was the fault of ill-intentioned foreigners and speculators. Let’s assume this to be true. Why then no bail-outs for rubber smallholders? Or for oil palm smallholders? It’s not their fault that the price of rubber and palm oil has collapsed; and their endeavour and enterprise are indeed crucial to the economy, numbering as they do in the millions. Indeed, oil palm smallholders who produce half the output in the country contributed in a major way to the 4.1 per cent GDP growth in the second quarter of this year. Assistance to them will quickly translate into assistance to the Malaysian economy. It will improve domestic demand, and primarily for domestically-produced goods, thus spurring recovery.
Furthermore, from a welfare and caring society point of view, assistance to these smallholders will be assistance to the lower income and the poor. Even when rubber prices are good, many live just barely above the poverty level. When prices fall as they have, many are not able to meet even basic needs. So why has there been so little assistance to them?
Private University Built With Public Funds The Selangor state government recently received permission from the Ministry of Education to establish a private university. Yes, a PRIVATE university.
By what justification can public funds be used to establish a private university when demand for places in the public universities can hardly be met? How will a state-funded private university help resolve problems of shortage of staff and inadequate facilities in the public universities? Instead, it will draw away staff and further reduce the incentive to improve the public universities.
Then, in order to sustain the private university, recipients of state scholarships will likely be directed towards it, thus further draining public funds. The very idea that public funds can be used to set up a private university is a measure of the degree of confusion the BN government has between what is the people’s and what is the BN’s, between the public and the private, between politics and business, between education and commerce.
You Saw It First In These Pages Respected business weekly, The Edge, this week confirmed our report of the plans to save bankrupt Intria Bhd, including the possible injection of the Penang Water Authority into the re-structured company as well as the concession of the Penang second link. It also confirmed that the man slated to take over Intria Bhd is indeed Samsudin Abu Hassan. Probably as a result of this report, Intria shares were among the most actively traded in the KL Stock Exchange early this week. The Edge also reported that the Penang state government is expected to participate in the rescue plan for Intria by raising its interest in the bridge. Intria Bhd holds the 25 year toll concession on the Penang Bridge.
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