It is too early to say what effect Pakatan Harapan’s (PH) policies will have on the economy, according to Barjoyai Bardai, a professor at Universiti Tun Razak’s Graduate School of Business.
However, he said there was indeed a need for the new government to come up with a clear economic plan and well articulated policies.
Najib, in a recent interview with FMT, referred to Bank Negara Malaysia’s downward revision of the GDP growth forecast and attributed this partly to the cancellation of “much-needed” infrastructure projects and slow payments to government suppliers.
He also spoke of the increasing rate of exports, the outflow of funds after the May 9 polls and the “high cash balances” left by his administration in Bank Negara, Petronas and Khazanah Nasional.
Barjoyai acknowledged “some truth” in Najib’s statements, but rejected the implication that mega projects would always lead to sustainable growth. He said some of the projects might turn out to be unsustainable.
“This is the pump priming model where mega projects are catalysts for economic growth,” he said. “This same strategy was used by Dr Mahathir Mohamad to fight recession in the 1990s. It works for a while to make the economy grow, but it won’t last.”
On the outflow of funds, he said this was due to the strengthening of the US dollar, noting that it was affecting other countries as well. “The American economy is growing at 4% per annum. So many foreign investors are going back to the US.”
Referring to the cash balances that the Barisan Nasional government left in several institutions, he said this did not mean there were enough funds for current expenses.
“You have to keep in mind that we’re reading reports of at least RM35 billion in tax refunds which weren’t returned to the people,” he said. “That’s a big chunk of money, along with the repayments for 1MDB’s debts.
“Also, although Bank Negara, Petronas, and Khazanah are owned by the government, they shouldn’t be seen as ATMs for Putrajaya. Their reserves should be for them to manage.”
Barjoyai said it was crucial for the government to boost investor confidence which should be done through clear policies and an economic plan to balance growth and distribution and take into account a possible recession.
Institute for Democracy and Economic Affairs chief executive Ali Salman also gave his comments on Najib’s statements.
He said it would be wrong to assume that infrastructure-led growth would always be good for the economy, especially if it wasn’t driven by sound economics and was carried out under a “shroud of mystery”.
“What we really need is a set of forward-looking economic policies that can give a message of stability and predictability to businesses,” he said.