ECONOMIST: M'SIAN ECONOMY TOO STRONG TO FAIL

KUALA LUMPUR, May 31 (Bernama) -- The conjecture that
“Malaysia-will-go-bankrupt by 2019 like Greece if subsidies are not withdrawn”,
while terribly dramatic, overlooks the country’s key pre-emptive strengths to
prevent such financial catastrophe –- Malaysia’s economic outlook, prudent
financial management and tight monetary policies, says Umno supreme council
member Dr Norraesah Mohamad, a Sorbonne University-trained economist.

In assessing Malaysia’s economic position, she said it was “ridiculous to
subscribe to a formula” that Malaysia will be condemned to bankruptcy.

“It's even more absurd to speculate that Malaysia will be another Greece,”
she asserted.

“More appropriately, Greece is but a cautionary reminder of how Malaysia
should manage its spending, control its budget deficits and keep down her total
national debt to GDP.”

Norraesah supported her contention that Malaysia can keep bankruptcy at bay
with the following policies already in place:

• Malaysia's most important saving grace is its economic outlook: Positive
two-digit growth was registered for the first quarter of this year;

• Malaysia’s budget situation will substantially improve over the next
couple
of years because the economy is growing;

• Malaysia's very prudent financial management and tight monetary policies
do not allow for dubious cross country swaps like what happened in Greece that
further aggravated its debt situation;

• Malaysia is not caught in the euro capsule like Greece.

“We have our own money and therefore can deal and manage our costs and
prices” said Dr Norraesah in analysing the declaration last week by Minister in
the Prime Minister’s Department Idris Jala that Malaysia will go
bankrupt in 2019 if subsidies are not reduced across-the-board over five years,
a move which Idris described as the “most unpopular decision that the government
has to make since independence”.

Idris, who is also chief executive officer of the Performance Management
and Delivery Unit (Pemandu), said the cuts are aimed at saving up to RM103
billion (US$1=RM3.29) to partially repay the nation’s huge debt and address
fiscal deficit.

The government now spends RM74 billion a year to subsidise various economic
and
social sectors. It currently owes various parties a total of RM362 billion while
the fiscal deficit stands at RM47 billion.

In addition, Dr Norraesah said that:

• Malaysia enjoys a high saving rate, another saving grace (The Employees’
Provident Fund has accumulated savings of RM360 billion as at Dec 31, 2009);

• Malaysia’s abundant resources and diversified economy are reinforcing
factors that guarantees the country will not plunge into bankruptcy.

Dr Norraesah agreed that phasing out subsidies was a “pragmatic move and a
sound economic decision” that must be made because it eats into Malaysia's
fiscal position, misallocate resources and distort more effective use of
available development funds.

“Besides, the one-size-fits-all subsidy policy is unsustainable and socially
unacceptable,” she said.

“The opportunity cost lost is monumental and therefore must be phased out.
No one can argue with this.”

Nevertheless, Dr Norraesah described the prospect that Malaysia will be
bankrupt in 2019 if subsidies are not withdrawn as a “terribly dramatic, albeit
inappropriate way” to justify the burial of subsidies.

“Once we get beyond the crude look at budget deficits, a favourite attacking
weapon of certain quarters, we immediately see that the parallel between Greece
and Malaysia is not even close,” she said.

Greece, Dr Norraesah pointed out, has all sorts of problems that are not
found in Malaysia.

Her reasoning was based on the fact that:

• While Greece's budget deficit is an unacceptable 13.6 per cent in 2009,
Malaysia's budget deficit has been brought down from 7.0 per cent to 5.6 per
cent in last year's budget;

• Compared to Greece, Malaysia's deficit is respectable and is expected
to shrink further in the 2011 budget; and,

• Greece's total national debt is 113 per cent of its GDP, a level
unimaginable in Malaysia.

“We have a strong current account surplus and big financial reserves,” she
pointed to the fundamental strengths of the Malaysian economy.

-- BERNAMA