The haze over our economy

Met  a businessman friend yesterday and had a chat with him. He was quite pessimistic about the economic situation in our country. He mentioned that there is not much of incentives to invest in new businesses, and retail sector is at best struggling. With the uncertainty of how long the present PM may last in office, and a looming party fight for some of the BN parties, including UMNO and MCA, foreign investors would be either investing elsewhere or withholding their funds to wait for a clearer picture.

Without much foreign investment coming in, the country’s growth is mainly dependent on the good prices of petroleum and commodities. With the US in a state of recession, our export manufacturing sector would probably be affected as well. The share market is also not doing as well as it should be due to the political scenario in the country. All these add to his pessimism and he is thinking of investing probably overseas.

I am sure he is not alone.

With inflation rearing its ugly head, the ordinary people will be very hard hit. We were told to tighten our belts, but sooner or later, there is no more space to squeeze our belt any more. It would be so tight that we will not be able to breathe.

Subsidies in the long term is bad, and i personally am not in favour of subsidy in the long run, but perhaps now the gvernment should really think of using the Petronas money to subsidise our fuel prices until the economy is on the boom again. Our petrol prices are among the more expensive among the petroleum-producing countries. We should not compare our prices with those countries that have no petroleum output.

The govenrment needs to give more impetus to businesses, and a more level playing field must be instituted. NOw we are almost at the mid term of the 9th Malaysian plan, but how many of the projects under 9th plan has been implemented? Those which are being carried out are contracted out to certain parties only and not much has trickled down. There are also so much of wastage , like the 4.7 billion PKFZ fiasco.

Perhaps a relook at NEP should be done and done urgently. Restrictions on foreign investment should be reviewed to attract more foriegn business here. With a more level playing and fairer system, perhaps even local businessman can start to invest more within the country, thereby creating more jobs and more business activities.

According to livemint.com of the Wall Street Journal, “Malaysia falls behind Singapore, Vietnam and China in attracting FDI and is far from becoming the new Asian metropolis; FDI dropped from $5.5 billion in 2001to $3.9 billion in 2006”.  2008 will not be any better, looking at the economic activites in the country.

Can the government go back to the job of governing and improving the economy? With so much of politicking, I really doubt so, and I tend to agree with my businessman friend that economic prospect may remain dim for the next year or so.

According to reports, the haze situation will be bad this year, but I think it will not only envelop our country physically, but economically as well.