PETALING JAYA, 3 July 2009: Liberalising may have harmful long-term effects for the country, opposition politicians and an activist said.
DAP Member of Parliament (MP) for Klang, Charles Santiago, said Malaysia needs to develop entrepreneurship further before it can benefit from policies such as the ones the prime minister announced on 30 June 2009.
Santiago Santiago, who is an economist, noted that historically, opening up international markets has only benefited everyone when the countries involved are economic equals.
“Your industries need to have a competitive advantage over others, or you will be taken advantage of,” he said in a phone interview.
Prime Minister Datuk Seri Najib Razak said earlier this week the liberalisation reforms were intended to benefit both the wealthy and the poor. He also said the changes were intended to help pull Malaysia out of the global economic crisis.
Among others, Najib announced an increase in foreign shareholder limits and the removal of regulatory guidelines for equity stakes, mergers and takeovers.
Kohila Yanasekaran, an activist with the anti-poverty and social justice group Jerit, says the policies announced by Najib showed that the government was out of step with the rest of the world.
“When the world is talking about regulation, we are actually liberalising,” she said.
Santiago noted that Malaysia got out of the 1997 financial crisis by imposing currency controls. The solution came from regulation, not deregulation, he said.
“”What really happens is when we begin the process of financial liberalisation, the central bank, including the government, begins to lose control of monetary policies,” Santiago said. “It won’t happen today, it won’t happen tomorrow morning, but that’s the gradual process.”
Kohila said the government’s liberalisation was likely to worsen the situation for working Malaysians.
“Imagine international companies coming in and doing agriculture. What will happen to our farmers?” she said in a phone interview.
Not everyone benefits
Jeyakumar Dr Michael Jeyakumar Devaraj, the MP for Sungai Siput and a Parti Sosialis Malaysia founding member, said not everyone benefits from economic liberalisation even when the economy was doing well.
Market liberalisation is popular with politicians and business people because it increased corporate profits and the Gross Domestic Product (GDP), he said, noting that countries like Malaysia feel pressured to deregulate.
But, he said, once developing nations succumbed to the pressure, they find themselves driving costs and wages lower and lower to keep foreign investors from leaving.
“We’ve had 50 years of it now, and though the GDP has grown and there’s a much bigger middle class, divisions in society have also grown. There’s much more anger, there’s much more disillusionment, there’s still poverty.”
Santiago, however, disagreed that Malaysia would use low wages to have a competitive advantage over other countries.
He noted that Malaysia could not compete with the price of labour in India, Cambodia and Vietnam. Hence, he said, foreign investors would not necessarily flock to Malaysia just because the government opened up markets.
Santiago said he was more concerned that Malaysia would lose control of the policy tools it uses to manage the economy without reaping any benefits. He questioned whether Najib’s reforms would result in economic growth.
“The markets have made up their mind. Mid-afternoon [the day after the announcement], the markets were down, which tells you there’s no confidence in what the prime minister [said],” he said.
Santiago also said that while Malaysia and Singapore were wealthier than other countries in the region, they were also the hardest hit by the global economic crisis because their economies were the most internationally integrated.
Unemployment in Malaysia reached 8.9% in May, and the economy shrank at the fastest rate in 50 years after the crisis hit in the fourth quarter of 2008.