KUALA LUMPUR: Economist Jomo Kwame Sundaram has called for the bottom 70% of the country’s population to be given greater spending power in view of the global economic outlook.
Presenting the United Nations Conference on Trade and Development (Unctad) 2019 Trade and Development report, the former member of the Council of Eminent Persons said issues such as debt, the US-China trade war and global warming could significantly impact Malaysia’s economy.
“First thing to recognise is that the world’s economic situation is very bad. The International Monetary Fund has revised its projections downwards five times already in the last one and a half years. This is quite unprecedented and many recent developments do not hint at things getting better,” he told a press conference yesterday.
He said the coming budget should counter “all the downward forces in the world”, and this includes ensuring the bottom 70% can spend more.
He said Putrajaya must be “consistently counter-cyclical” and flexible when it comes to the targetted 3% budget deficit.
“When times are good, you pay off your debts; when times are tough, that’s when you need to spend to compensate for the private sector spending collapse.”
Jomo, who served as an assistant secretary-general in the UN Department of Economic and Social Affairs, again called for a review of government projects that cannot contribute to economic revival.
“What we need to do is to cut out on many of those wasteful projects and instead focus on making sure that if there’s going to be additional debt, it has to be contributing to additional economic capacity and growth,” he said.
Jomo also said the regulation of foreign workers is important as their presence indirectly affect the wages of Malaysian workers.
“We have, for decades now, a situation where a large presence of foreign workers serves to suppress the wages of Malaysian workers because it’s always so easy to get a foreigner to do twice as much work as a Malaysian for less money.”
He cited a recent study by Khazanah Research Institute which found that nearly 20% of Malaysian households earn less than RM1,200, while 70% of the population earns less than RM3,000.
“So this use of the term B40 and all that is completely arbitrary. You can say that 70% of the population is not living in luxury. And perhaps that the top 30% live all right but not all of them are doing wonderfully,” he said.
“Given the very serious situation in the world today, it is important for us, borrowing a Malay expression, to make sure the umbrella is ready before it rains.”
The Unctad report warns of a slowdown in the global economy and calls for the financing of a new global green deal to meet the UN’s Sustainable Development Goals.
It urges new industrial policies such as targeted subsidies and tax incentives to encourage the de-carbonising of the global economy, highlighting the need for a drastic increase in public investments.
“Under the current configuration of policies, rules, market dynamics and corporate power, economic gaps are likely to increase and environmental degradation intensify,” said Unctad’s globalization and development strategies division director Richard Kozul-Wright.