Nazir yesterday addressed the CIMB Private Banking investment conference here and touched on economic and political issues.
“I have repeatedly spoken about the NEP because there is too little rational discussion of it. NEP transformation is not abandonment of the NEP but the restoration and strengthening of its purpose as an instrument of national unity and its character of mere policy,” he said.
Nazir said the ideal system would be open to improvement, subject to a timeline and measurable results and be able to gather support of the vast majority of the population.
“The New Economic Model (NEM), the Government Transformation Programme (GTP) and the Economic Transformation Programme (ETP) are designed to begin delivering the changes needed to Malaysia’s political economy. However, in doing so there seems to be a reluctance to confront the issue of affirmative action,” he said.
He also said the political outlook for Malaysia was the most complex among Asean nations and the one most closely linked to the country’s economic future.
Nazir. Photo by Chu Juck Seng
“The pressure for change in Malaysia that has created the biggest challenge to its political system arises out of the same aspiration for accountability and democratic governance we have seen in Indonesia, Thailand, the Philippines and even Singapore,” Nazir said.
“There is a historical inevitability to this impulse that cannot be resisted.
“In each country, there are fundamental issues to be faced but the test of the health of a political system is its ability to deliver the change that is needed in a way that people can believe in.”
On Prime Minister Datuk Seri Najib Razak’s comment that there would be slower growth in the second half of the year, Nazir told reporters later that this was in line with his view on the increased risk of the double-digit dip.
“In the past couple of weeks, we have seen some signs that indicate a cooling of the global recovery. That’s why I think it is important the government continues to execute rapidly its spending plans to sustain the economy. Malaysia is fortunate that the government comes in quite aggressively to pump the economy,” he said.
The government is currently in a cost-cutting phase, aiming to reduce its budget deficit from 7.4% of gross domestic product (GDP) in 2009 to 5.3% of GDP in 2010. In 2009, the fiscal deficit climbed while the government released RM67 billion worth of stimulus funds to revive the waning economy.
On the deficit, Nazir added: “In terms of debt-to-GDP, we should make sure it remains comfortable. We should reduce the deficit in time, but even if we do not meet the 5% target, it is not tragic. In the long-term, we have to be prudent between balancing the economy and our fiscal position.”
With regard to other economies, Nazir said other significant contributors included domestic consumption, savings rates and well-capitalised banking systems, although government spending was still a factor.
“Singapore is most dependent on the external sector, but the government fiscal position is very strong. Thailand will remain interesting as the market has been discounted due to political concerns. Indonesia is least exposed to the external sector with its growth trajectory of domestic consumption,” he said.
Nazir also commented on Western nations that were suffering from the withdrawal of government spending and excessive levels of banking capital requirements.
“This could see a change in US and Europe that will stifle access to capital and credit for businesses for years to come.”
This article appeared in The Edge Financial Daily, July 8, 2010.
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