The Malaysian Regional Programme (MRP) is part of the Asian Experts Programme (AXP) under chairperson Datuk Paddy Bowie OBE.

This global professional and business networking forum allows members to interact with notable leaders in industry, commercial directors, senior government officials, socio-economic and political analysts and other experts.

More Photos

MRP Review:  April 2017

Written By Maria Townsend 29/4/2017
  
Dr Jomo Kwame Sundaram, a leading scholar and expert on the political economy, shared his views with MRP members on 20 April 2017 at Aloft Hotel Kuala Lumpur Sentral on events that have been shaking the world politically and economically. 
 
Looking at the global economic health, Dr Jomo noted two main influences - investors and global trading. While investment is the most important macroeconomics variable that can affect economic growth, investors require some degree of predictability, particularly in making long term decisions. Global trade has barely increased since 2010 and we are now seeing a lethargic growth in the economies of the OECD (Organization for Economic Cooperation and Development) countries generally. 
  
Current World View

From the elections in Turkey, the staunch nationalistic views of Trump, and the negotiations between the UK and the EU following the BREXIT referendum, it is difficult to ignore that there is an almost anti-globalisation movement and a growing far-right pro nationalism trend taking place around the world.  This is arguably the main factor affecting both investors and global trade.

We observe more and more examples pointing to a clear and definite retreat to nationalism, reversing the decades-long trend of globalisation before. Politicians are winning votes with promises of bringing back jobs to their countries, and taking a stand against immigration. Relationships seem to be souring further between the USA and China. Leader of the French National Front, Marine Le Pen’s advance in a presidential election could determine the future of the European Union and France’s place in the world. In Japan, Prime Minister Shinzo Abe has adopted a militant and extreme, right-wing stance. These events will have an effect on the global economy and well-being of the economy in Malaysia.

With a growing trend to the political right, what effect does this make economically?


Keynesian economics are generally associated with social diplomacy and the political left. Dr Jomo stated that it is a myth that Keynesian policies cannot be used to get the world out of its economic stagnation. As such, having disregarded Keynesian economics, we are left with very few instruments to utilise.

US Dollar

So why did the US Dollar remain resilient despite predictions of the currency tanking just as the Pound Sterling fell following Brexit? Was this simply due to Trump’s business acumen and ability to negotiate deals to “make America great again”? Trump’s bullish trade policies of putting “America first”, pro-deregulation, weakening of Dodd-Frank rules for the big banks, and cutting taxes across the board, his promises, his eccentricity and his megalomania that we saw during the presidential campaign have softened since his inauguration. His policies perhaps are not that far removed from past presidents during a time of depression. Or perhaps it was the view that Trump’s proposals, including pledges to cut taxes and spend as much as $500 billion on infrastructure, are inflationary and would lead to higher U.S. rates and bolster the dollar’s allure? The short term strength of the USD (and general confidence about the U.S. economy) is grounded more in the direction of the economy, than being a confidence indicator about Mr. Trump’s presidency. Arguably, the USD would have surged if Secretary of State Clinton had won (and she alone would not be able to take credit for it).

In brief, Trump wants US trade surplus to sustain the US dollar’s strength. He is not pumping money into the US economy.

Solutions?

In view of the traditional markets of the West looking inward, and bucking the trend of globalisation, it is time for the rest of the world to pull together and take action. It could prove to be an era for the developing countries as they utilise relationships and negotiations exploring relationships with other, newer markets. An increase in commercial relations between developing countries is the way out. For instance, between the years 2000 to 2014, African nations experienced high growth in mineral trading, not through an expansion of trading relationships with the EU, but with Asia. ASEAN will now emerge with greater importance as the West retreats, and Malaysia and the rest of the world economies are beginning to look for new opportunities and in keeping open all avenues of possibility.


Malaysia

Malaysia can and should make the most of this time. The country has experienced two decades of slow growth, which now 20 years after the Asian Financial Crisis of 1997/98, is difficult to still attribute to the financial crisis. The main concerns with the Malaysian economy are great uncertainty and ambiguous data such as unreliable statistics of foreign workers, and the depreciation of the ringgit. Statistics seem skewed painting a picture of a healthy economy, yet we are far from having achieved the developed nation status we aspire to be. Politically, it is important for the country to show stability in order to attract much needed foreign investors. 

There are currently two investment options. The far-sighted, long-term investment is to provide a slow and steady income flow. But most decision-makers favour a short-term cash-out early investment which is not ideal in a healthy economy. The emphasis must be on the long-term. Malaysia needs to ensure it is being proactive and innovative in its strategy in order to put the country in a better global situation.