19/07/2009
Malaysia: Liberalisation is the only moral way forward
With the caveat that there is a lot more that needs to be done, I applaud the Malaysian Prime Minister’s bold moves to make the country’s economy more liberal. It is true that the Malaysian government is still meddling in too many things that the market could do better. But the recent liberalisation moves are a good start.
Malaysia’s liberalisation drive is taking place during a time when many other countries are turning to protectionism. In America, many, including President Obama, have talked about the need to “Buy American”. Other countries are following suit. China, Russia, Australia, and several countries in the European Union are also anxious to protect their domestic industries.
Some Malaysian politicians, including those in the ruling coalition, too have fallen into the protectionist trap. While Prime Minister Najib Razak is trying to open up the markets, some politicians in his own coalition have supported a “Buy Malaysian” campaign, effectively calling for the opposite of the Prime Minister’s effort. Surprisingly no one seems to realise that this confused political message could damage the country’s liberalisation agenda.
Other Malay politicians are using this as an opportunity to accuse Najib of ignoring Malay rights. The opposition Islamic Party of Malaysia (PAS) is beginning to sound more nationalist than Islamist. Some PAS leaders claim that Najib’s slashing of the 30% Malay equity quota threatens the Malays’ economic rights. Rather than championing the free market principles of Islam, PAS now wants to be a champion of chauvinistic Malay nationalism.
The Malaysia Think Tank is a member of the Freedom to Trade Coalition which was launched in London at the same time with the G20 Summit. The F2T Coalition has 71 organisations as its members, from 48 countries. Through F2T, we campaign for freer trade, and, we highlight the dangers of protectionism and economic nationalism.
In the 1930s, world trade collapsed following a raft of protectionist measures by countries around the globe. America’s Smoot Hawley Act was a catalyst for increased economic nationalism in many countries, culminating with the tragic World War II. History has shown how protectionist measures would end in catastrophe.
Commenting on this, Alec van Gelder, coordinator of the Freedom to Trade Coalition said “Protectionism made no sense then and it makes even less sense now. Today’s global economy is much more integrated and we are all much better off because of reduced trade barriers, especially the poorest countries.”
It is easy to understand why van Gelder feels protectionism makes no sense, especially for a country like Malaysia. Let’s take just one example – car prices.
A very quick internet search would reveal that a new Toyota Camry costs around RM180,000 (US$54,000) in Malaysia. But in America a similar model would cost less than RM90,000 (US$27,000). It is twice more expensive to buy a similar car in Malaysia because of the protectionist tariffs and import duties.
If we compare car prices in Malaysia with the United Kingdom, we will discover the same situation. Cars in Malaysia are phenomenally expensive. That is why many students sponsored by the Malaysian government to pursue their postgraduate qualifications in the United Kingdom return home with a Mercedes to accompany their scrolls.
Protectionism makes cars more expensive in Malaysia. The well-connected cronies may not feel the impact too much because they can afford the inflated prices, or they know ways to avoid the import duties. But the poorer Malaysians can only afford to dream on. When governments introduce policies that knowingly hurt the poor, how can we say that that makes sense?
In fact, any policy that intentionally and knowingly hurts the poor, or keeps them poor, is not just illogical, but also immoral. Malaysia’s economic liberalisation must continue not just because it is the only way for the country to prosper, but more importantly because it is the only moral way forward.
Prime Minister Najib must vigorously pursue wider liberalisation agenda because that is the moral thing to do.
Having said that, it is not yet time to give a blanket endorsement of Prime Minister Najib. Yes, the liberalisation moves are good and the country’s economy may prosper, but Malaysia needs much more.
Malaysia will only enjoy a strong and vibrant economy if economic liberalisation is coupled with a drive to strengthen the country’s democratic institutions. For investors to come into the country, the judiciary must be, and must be seen, as independent. How the government conducts itself during Anwar Ibrahim’s second sodomy trial will have a big influence in how Malaysia’s judiciary is perceived internationally.
The Malaysian legislature too needs to play its proper role to check and balance the executive. So far the legislature is still impotent when it comes to checking the executive. This must change.
Needless to say, corruption must be curbed too. It does not help when the very agency tasked with curbing corruption last week found themselves being accused of racism, and questions are asked about the agency’s alleged role in the death of a witness after questioning.
Even more still needs to be done in the markets. The Malaysian government still has too big a role in the country’s economy, despite recent announcements. There are still dozens of government-linked companies crowding the market.
The government also needs to stop meddling with prices of goods. Malaysia Think Tank’s Trade Policy Fellow, Hafiz Noor Shams, warned that “prices and supply control regimes are still in place to distort signals in the market in the name of welfare, discouraging the development of an adaptive culture in favour of a static one.”
Within his first 100 days the Malaysian Prime Minister has shown that he prefers the morally superior path of economic liberalisation. He must continue on that path.
Wan Saiful Wan Jan is Director General of the Malaysia Think Tank (www.WauBebas.org)
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