Statistics Don't Lie!

Moving Forward:  Statistics Do Not Lie

No matter how hard criticisms fly his way, the Prime Minister of Malaysia soldiers on for the good of the country and its citizens. Even though statistics speak volumes about the progress achieved by the PM’s policies, citizens continue their tirade against him. To be fair, it is timely to stop and take stock of the situation at this point, especially since the UMNO General Assembly will take place from Nov 27th to 29th this year.

For a start, consider the subsidy rationalization programme, which the PM initiated in July 2010 via a reduction in subsidies for fuel and sugar. Cuts in subsidies for these and other products were planned over a three- to five-year period in order to strengthen government finances and improve economic efficiency.

The rationale for the programme is to improve the government's balance sheet.  In 2009, the government spent RM24.5 billion on subsidies contributing to a large deficit amounting to 7% of GDP (Here). Subsidy rationalization will save about RM750 million in 2010. Then, the government projected that it would still spend RM7.82 billion on fuel and sugar subsidies the same year (here).

Following Bernama's statement that Malaysia's A3 Sovereign Credit Rating Stronger Through Global Crisis, on 17 June 2010, the annual sovereign report of Moody's Investors Service for June 2010 said that Malaysia's subsidy cuts were partially responsible for maintaining its standing in financial markets and that there is "upward pressure" on its bond rating. They also confirmed Malaysia's sovereign credit outlook was stable and adequately supported by favorable expectations for economic performance and policy management. The report observed that the country's strong external position, deep and liquid capital markets, and a well-managed financial system underpin its A3 sovereign credit rating.

Many have forgotten or chose to ignore that when the PM launched the subsidy rationalization programme, he emphasized that not all of the savings would go to deficit reduction. Then, he told reporters that the savings from expenditure would be used to fulfill other agenda such as the National Key Results Area (NKRA) and National Key Economic Areas, scholarships for excellent students and healthcare efforts such as the 1Malaysia Clinics. These changes would only minimally impact family budgets and have brought long-term benefits to the nation and four years down the road, indeed the PM’s efforts have borne fruit.

Whilst Malaysians are oblivious to Malaysia’s progress, the Economist Intelligence Unit forecasts that real GDP will grow by 5.7% in 2014 and at an average annual rate of 5.6% in 2015-18, compared with 4.3% a year on average in 2009-13. In fact, they also expect the exchange rate to average M$3.23: US$1 this year, compared with an average of M$3.15: US$1 in 2013. Bear in mind that as we are currently enjoying a rising trade surplus, the value of the ringgit will strengthen to M$2.80: US$1 by 2018.

According to the Department of Statistics, our industrial production increased by 6% year on year in May 2014, marking 14 consecutive months of expansion. The mining, manufacturing and electricity sectors all recorded gains. They also reported that Consumer prices rose by 3.3% year on year in June 2014 -a slightly faster pace of growth compared with May, when prices increased by 3.2%.

Under the leadership of Bank Negara governor, Zeti Akhtar Aziz, our Central Bank has acquired a reputation for the high quality of its monetary management. Recently, Bank Negara raised the OPR to 3.25% on July 10th, from 3% previously, in bid to combat rising price pressures stemming from a strengthening of domestic demand. However, given the central bank’s cautious approach, any future rate rises are likely to be modest.

Analysts such as EIU have forecasted that the economy will remain on a steady growth path in 2014-18. GDP expansion to accelerate to 5.7% this year, from 4.7% in 2013. Domestic demand will continue to be the main driver of overall growth. Gross fixed investment will expand rapidly as more infrastructure projects get under way. Analysts forecast that private consumption will also grow at a rapid pace, aided by a relatively strong labour market. Expansion in exports of goods and services should also pick up amid a sluggish recovery in the euro zone, but will lag behind import growth.

The EIU also forecast that real GDP growth will average 5.6% a year in 2015-18. An expected strengthening of the labour market will boost private consumption, while the continued implementation of the 10MP in 2015 and the commencement of the 11MP will carry on supporting investment growth.

It has been four years since our PM launched the subsidy rationalization programme.  In June this year, the World Bank lauded Malaysia in its subsidy rationalization programme especially on the targeted groups for the new fuel subsidy programme. World Bank country director Ulrich Zachau said the bank was supportive of the approach and the shift from untargeted focus to a targeted one.

“The important thing is the support from the government t is targeted for those who needed it the most, especially the poor, that is good economy policy making and one we support across the world.
The timing is right to address fiscal consolidation as it represents a time when exports are recovering and the economy is growing well,” he said.

The World Bank expects the Malaysian economy to record a 5 per cent growth annually till 2016. That is something that should gladden our hearts.

At that event, Minister in the PM’s Department Datuk Seri Abdul Wahid Omar explained that there would be significant savings to the government from the move. He clarified that he government spent some RM23.5 billion in fuel subsidy, bringing the cumulative total to RM136 billion over the past 14 years.

“With spending of RM68.5 billion last three years alone, it has been huge. We cannot continue with the current arrangement of blanket subsidy.It must be contained and one of the ways is the targeted approach and we are exploring various possibilities in our discussions with various focus groups.”

Since then, a lot of work has already been done in terms of enhancing the skills of graduates and the National Education Blueprint marks one of the many initiatives to boost Malaysia’s trade competitiveness.

Looking forward, it is heartening to note that in the upcoming 11th Malaysia Plan, the government intends to look into design and development (D & D) to develop the area of value add manufacturing activities in the country. Such a move will improve our export competitiveness, which should go a long way in boosting our trade figures. Of course, effort to develop and train local talent, especially graduates, must be stepped up to match the demand for skilled professionals.

Despite such positive signs that our country is moving in the right direction economically, many refuse to acknowledge these facts preferring to carry on slamming the PM as though he has done nothing, amongst other unfair accusations. No collective benefit can be enjoyed if citizens persist in negativism, be it in comments for online portals or general perception. The time has come for Malaysians to be proud of our country and to do something positive to move the country forward. The government, under the leadership of PM Najib, is doing just that. Let us support our government as they steer the country forward.