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Our recovery process must be Recovery Plus Plus

By October 26, 2021November 1st, 2023No Comments

It would be meaningful to aim for a resilient economic growth to prepare the economy for globally sustained development, once the global supply chain is back in operations, with new business linkages and connectivity while the digital economy is fully in place. – NSTP file pic

PREPARING the national budget for the coming year will be challenging, with the economy still on an uncertain path and people’s lives and livelihoods are just beginning to improve.

This budget has to give renewed confidence and a much-needed boost to the economic recovery process, as well as put the country on a right long-term track.

It would be meaningful to aim for a resilient economic growth to prepare the economy for globally sustained development, once the global supply chain is back in operations, with new business linkages and connectivity while the digital economy is fully in place.

Of course, the implication of this posture is a higher public sector debt position.

On the revenue front, it may not be the right time to put in place new sources of revenue other than enhancing the efficiency and efficacy of revenue sources, such as reducing tax avoidance.

The income level generated from the pick-up in economic activities is not yet significant enough to reintroduce the Goods and Services Tax next year.

The government will, however, have to assume an expansionary role by increasing public development expenditures to lift the economy to a more durable recovery phase and by mobilising private sector liquidity all round.

The overall deficit will have to increase.

This has to be tolerated in view of the unprecedented economic situation.

Indeed, the recovery process has to be durable enough to also mount new initiatives for sustained economic development by promoting new sources of recovery.

It must be Recovery Plus Plus (or Recovery ++).

An economy that is moving forward without a basis on sustainability can wipe out its growth momentum, and if overall growth is not based on new growth sources post-pandemic, digitalisation of the economy included, it will not generate the income needed to significantly reduce poverty and social inequality.

On the expenditure side, public health facilities — covering hospitals and clinics, staff and their training, as well as equipment and amenities — demand a lot of new investments, given the inadequacies we saw during the pandemic.

This must be supported by more expenditure on research and development in the health and medical sector.

In the recent past, public investments were favoured by many infrastructural facilities in the Klang Valley to support a trade-oriented economy.

The concern about healthcare financing is real, given the size of health expenditures and rising costs of medication.

A form of health insurance scheme can be established along the lines of the Employees Provident Fund and the Social Security Organisation, all contributing to the fund.

It may be worth considering an additional allocation for food security as well, in view of our high food import bill and less attention paid to food production beyond our rice self-sufficiency policy. Even the productivity among our small-scale farmers needs much more attention, especially outside of major rice-producing areas.

Aspects of food security involve domestic food production and investments, adequate imports of those supplies that are otherwise more expensive to produce locally, and the availability and distribution of these food items to all parts of the country. These can involve plantation and small farmers.

The lack of interest in agricultural jobs can be overcome by greater infusion of small technologies, such as fertigation, hydrophonics, and the modern concept of farming.

Youth, now highly qualified, can be attracted to modern farming as a source of self-employment. Another policy area is to review our industrial incentives system in line with our intention to go for technology based industrialisation, such as the Fourth Industrial Revolution, digital economy and artificial intelligence, and ending the reliance on labour-intensive industrialisation.

We have lost our competitiveness in these types of industries and the share of manufacturing in total output has been declining.

Being a tax authority, the Finance Ministry can suggest new initiatives to attract high quality investments.

Further, one cannot but ponder on the need to beef up the productivity of our workforce to much higher levels, like in South Korea and Taiwan.

But how?

The National Productivity Corporation (NPC), which has been in existence for decades, may need to examine new approaches for productivity enhancement.

Surely, the above policy issues will have some bearing on the role of many developmental institutions, such as Malaysian Investment Development Authority, NPC, Federal Agricultural Marketing Authority, Institute of Medical Research, and ministries, such as the Science and Technology, Agriculture, Trade and Industry, Health, and Human Resources.

Business as usual is no longer a new normal.

We need to ride these challenges beginning with right initiatives in the 2022 Budget.