AS international trade and industry minister, Datuk Seri Mohamed Azmin Ali should always paint a realistic picture of Malaysia’s trade position, and not distort statistics to colour a picture rosier than it actually is.
Instead, what he does is make selective use of statistics.
In the meantime, Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz, apparently in haste to assure foreign investors, told United States news channel CNBC that even in a doomsday scenario, there will be no total lockdown.
People could be dying in the streets, and there would be no lockdown? Is he even authorised by the government to say something like this, considering that such a decision is a deadly serious one and will require an assessment at that point in time, with input from a number of departments and ministries? No one is in a position to give such blanket assurance.
Such distortions of the real situation by two top ministers – Azmin and Tengku Zafrul – responsible for the administration of finance, business and trade in Malaysia further destroy confidence in the country and increase disbelief in the leadership.
Let’s take Azmin first. In the first few paragraphs of his statement in conjunction with the release of Malaysia’s trade statistics, he pointedly ignores the fact that exports in 2020 actually declined. Really, there is no shame in admitting it, as times were tough.
You have to read the trade report to know that exports in 2020, despite recovering in the second half, declined 1.4% to RM981 billion. But that, too, in the second paragraph.
Even the report focused on the rosier side, the first paragraph saying: “Malaysia’s trade surplus in 2020 recorded the fourth consecutive year of double-digit growth, with an expansion of 26.9% to RM184.79 billion compared with 2019. This is also the largest trade surplus thus far, representing Malaysia’s achievement in sustaining a trade surplus for 23 consecutive years since 1998.”
Azmin’s statement reinforced this by saying a few paragraphs down: “Meanwhile, the trade surplus is the highest-ever recorded, thus maintaining a sustained surplus trend for 23 consecutive years since 1998. Malaysia’s trade performance is in tandem with countries in the region, notably Indonesia, Singapore, the Republic of Korea (South Korea) and Thailand.”
Using the trade surplus in this case hides some structural weaknesses. The trade surplus is exports of goods minus imports of goods. When there is economic growth, there is growth in output, which is typically accompanied by a growth in exports. Thus, in good times, exports grow, and in bad times, they typically contract because world demand weakens.
But what about imports? When there is growth in the trade surplus, when exports actually decline, that means imports have declined by a larger amount. One has to look at why imports decline before you come to the implied conclusion that increased surplus is good.
The statistics show that imports declined by 6.3% to RM796 billion, while exports declined 1.4%. Thus, the increase in trade surplus is entirely due to a decrease in imports.
Intermediate goods, valued at RM422.91 billion, or a 53.1% share of total imports, decreased by 9.5%, following lower imports of processed industrial supplies, particularly iron and steel. Capital goods, which amounted to RM90.38 billion, or 11.4% of total imports, declined by 9.8%, due mainly to reduced imports of industrial transport equipment, primarily vehicles other than railway or tramway.
These indicate that there could be a problem with exports in the future – intermediate goods are used to produce finished goods for exports, while capital goods are investments you make to produce goods. Both spell problems in future exports, especially considering that exports in 2020 got a fillip from the increased exports of rubber goods (gloves, etc) and a better price for palm oil.
Instead of couching problems, the country will benefit from a proper discussion on the economy in terms of trade trends and what it means for future growth and production, instead of fitting the existing statistics into a format that paints a positive picture. For instance, a decline in imports of capital goods may well indicate a decline in foreign investments – a problem that needs to be addressed.
Azmin further says: “Going forward, investor confidence has been bolstered by Moody’s latest affirmation of Malaysia’s local and foreign currency long-term issuer ratings at A3, with a stable outlook. This is a testament to the government’s strong fiscal discipline and robust medium-term growth prospects, and demonstrates Moody’s confidence in Malaysia as having a strong credit standing.”
But, he ignores the one-step downgrade to BBB+ by Fitch, which said in December: “Prospects for a further improvement in Malaysia’s governance are uncertain in Fitch’s view. The new government continues to implement some transparency-enhancing measures launched under the previous coalition, and the corruption trials of former officials have continued, but the government’s thin two-seat parliamentary majority implies persistent uncertainty about future policies, in Fitch’s view.”
In June last year, S&P Global Ratings revised its outlook on Malaysia to negative from stable, citing heightened risks to fiscal metrics due to the coronavirus pandemic. Additionally, the ruling Perikatan Nasional coalition, which came to power in March, has marginal support in Parliament. Heightened political uncertainty “undermines clarity regarding the government’s fiscal policy trajectory, and elevates the risk that fiscal consolidation targets are not met over the coming years”.
These issues have yet to be settled, and uncertainty has since increased, not reduced.
Back to Tengku Zafrul. This is what the finance minister reportedly said: “Instead (of lockdowns), the government will focus on enforcing more stringent standard operating procedures should the number of Covid-19 cases remain high in the country.
“Based on the current model, we believe the number of cases will go down. Assuming the worst-case scenario (does come true), it will not be a total lockdown on the economy. We will continue to focus on more stringent SOPs.”
How he proposes to be more stringent with SOPs is not clear, with the government struggling to keep infection numbers down. Instead, they have largely increased because of infections at factories and construction sites. The number of daily cases breached 5,000 for three straight days late last month, giving rise to serious alarm within the community.
It’s really a time for action from key government leaders, not platitudes and palliatives, which don’t cure. There are serious problems, and our leaders are stumbling all the way, unable to come up with measured responses. – The Vibes, February 2, 2021
P. Gunasegaram says the longer you put off dealing with a problem, the worst it gets. He is editorial consultant of The Vibes and executive director of advocacy group Sekhar Institute