In the first of a five part interview, the deputy minister of International Trade and Industry talks financial crisis, China and the country’s future.
AP File Photo
On his new post…
It has been a very steep learning curve. Before as an MP, I was supposed to bring up difficult issues in Parliament; one of the things I used to harp on was FTAs (Free Trade Agreements). Now I’m on the other side where I have to actually respond, so it has not been easy, but it is a very interesting, very challenging ministry. To be able to contribute directly to the economic wellbeing of the country is a real privilege.
The other thing that I find is that I have to read a lot. From day one, the media expected me to know every bit about everything. It’s been tough when they shoot me some really difficult questions (and) I’ve found myself trying to wing it, (but)I’m not allowed to do that actually because now I’m speaking for the ministry, I’m speaking for the government; I’m not speaking for myself.
On the global financial crisis…
We’ve been lucky in that we were somewhat insulated, due to the first experience we had in ’97/’98, during the Asian crisis. The lesson we learned then was that we had too many banks – 30 at the time. So, to avoid a bloodbath, the government imposed on this 30, to start merging. Eventually we ended up with only 9 banks. We’ve built up again, so we now have about 17 but still, it’s a far cry from the 30 we used to have. Financial governance has tightened.
I think that has helped us avoid some of the pitfalls of speculative type of lending. We were not at all exposed to the sub-prime crisis in the US, unlike some of our neighbouring countries. Due to that, we were affected only to a limited extent.
Out of 190 or so countries, we’re the 19th largest trading country in the world. We were impacted, of course, by the slowdown in global trade. January was the worst month for us. Fortunately, it was not only the two stimulus packages that we launched that helped float the economy again. Interestingly enough, the stimulus package in China helped us directly, in that orders coming from China picked up, around the end of the second quarter. Factories in Penang and Johor started getting orders; some had to even re-hire some of their old employees. We are slowly picking up the pace, so the worst is over.
On pushing our potential…
For a long while, the economy has worked on enlarging the middle class and to a large extent we have succeeded in doing that. But it’s been sort of five (or) six years now (and) we haven’t really grown. It’s what we call an ‘upper-middle-income trap’ – incomes have not been appreciating and on the other hand, the cost of living is coming up. We can’t seem to push the envelope, so that we can move from an upper-middle-income to a high-income economy.
We desperately need to do this, because we can’t promote ourselves or market Malaysia as a low cost producer, as we have China and India right next door (and) we can’t stay at middle-income, because we’ve got Indonesia and Vietnam also nipping at our heels. We definitely need to move up and find a new niche. The PM says that in order to do this, we need to be more innovative and more creative. We have to focus on higher value added industries and I think that it is a matter of survival for us to do this.
On Vision 2020…
If you listen to what the PM said, he said that if we dropped to 6% (annual rate of growth) for the next 10 years, the targets of 2020 will only be achieved in 2030. Having said that, to achieve 8% every year (the rate needed to be on course for 2020), for the next 10 years, is not going to be simple. It’s going to take some really extraordinary measures to attract the kind of FDIs that’s going to help us achieve 8%.
It’s not the same as it was in the ’80s. At that time Malaysia was seen as the darling for investors in this region. We didn’t really have China and India competing in the same space, let alone Indonesia and Vietnam. Now, we’re just one among many and the other guys seem to be very attractive, in terms of incentives and future potential. They have huge domestic market(s), which we don’t. So we’re up against some stiff competition. I’m not saying it’s impossible, but we really have to put every resource together.
I think our economy is intertwined with China’s. We can’t help that. We’ve been trading with China for hundreds of years already and interestingly enough, they never felt compelled to invade us, in those hundreds of years (laughs) – unlike some other Western nations.
They consume anything and everything you can produce, especially raw materials. In our case it’s palm oil, rubber, gas and petroleum products. One of the (other) big exports we have from here to them (is) electronic components. China-made products commonly consist of some Malaysian made components, especially computers. We definitely need to intensify the trade that we have with them. They are beginning to invest in Malaysia. I think there is a lot more potential there.
I’m in the midst of attracting a couple of Chinese private companies, which are of a considerable size, to invest here. The government has basically committed to approve a banking licence for a large Chinese bank to facilitate trade and investment as well. So I think that’s going to be really good for us.
Source: MSN News