On 22 May 2020, IDEAS held a webinar entitled, “IDEAS Webinar: Reopening Malaysia’s Economy: The Role of the Government Ecosystem in A New Normal”. The webinar aims to tackle the questions of GLCs and GLICs supporting industrial development, how SMEs and Bumiputera companies can adapt to new normal, and the long-term implications to fiscal health and economic competitiveness. IDEAS’ Research Manager of Economics and Business unit, Lau Zheng Zhou moderated the event and was joined by three panelists.
In his opening remark and presentation, Lau Zheng Zhou raised up a few questions to spur the discussion. First, are we seeing a case of allocation of resources from the left pocket to the right pocket? Second, what is the quantum of this spillover to the private sector? And third, do we expect to see a bigger government ecosystem in the new normal? In explaining what is the ‘government ecosystem’, he listed down the main players of PRIHATIN stimulus package under four categories, namely direct fiscal spending, GLC and GLIC, public sector and banking sector. Lastly, Lau directed the discussion towards the definition of ‘government ecosystem’, the effectiveness in stabilizing the economy in the short-run and promoting recovery in mid to long-run, and assessing its long-term implications to economic sustainability, resilience and competitiveness.
The first panelist, YB Tony Pua, DAP’s MP for Damansara, responded by highlighting the role of government in reviving the economy. The government needs to make sure it does not fall into the trap of wanting to compete in spending to stimulate the economy. Instead, the government should focus on how to get the private sector to start working it. He also brought up the role of GLCs in the crisis. He believes GLCs have a big role to play and crowding out the private sector is an issue when the economy is booming, not during a recession. On the issue of banks sacrificing interests or TNB is giving discounts, he believes that government intervention in this matter is justified.
The second panelist, Intan Nadia Jalil, CEO of PNB Research Institute, said that the actors in an economic system are the firms, households and the government. While GLCs and GLICs, each of them has their own mandate and different functions. According to her, before thinking about rebuilding the economy we have to think about what are the foundations needed to rebuild the economy. Other economic activities need to be ensured to survive the pandemic in order to rebuild. She believes that the issues that we need to think about in the long-run with regards to public investments are environment, public health investments and a need for a more digitized world in terms of investment in data resources and cyber security.
The third panelist, Richard Record, Lead Economist started by emphasizing that this is going to be the biggest economic contraction since World War II. Governments around the world are responding with large and unusual tools and approaches. He said having GLCs under the disposal of the government has helped giving more choices and means of responding to the crisis but moving forward, Malaysia has to think about raising more revenues, in a progressive way to provide public services and safety net necessary for this type of shock in the future.
For those who missed the webinar session and would like to watch it, the video recording of the webinar is available below.