Feb 13, 2009

Tun Mahathir : Country needs to increase people’s income to boost economy

Former Prime Minister Tun Dr Mahathir Mohamad wants Malaysia to be like Singapore and find its niche.

KUALA LUMPUR, Feb 12 — Be like Singapore and find your niche.

That is what former Prime Minister Tun Dr Mahathir Mohamad wants Malaysia to do.

He cited Singapore as a country that not only found its niche in financial services, but had managed to increase both its gross domestic product and the income of its people to reach a developed nation status.

“Since their separation from Malaysia, every year they (Singaporeans) increased their wages but remained prosperous, although not so now,” he told Malaysia's Business Times in a recent interview.

He said that Malaysia too needs to increase income so that the economy will benefit.

“The main thing is to increase the income of our people so that the economy will rise through higher consumption of local products,” he said.

Dr Mahathir also said this cannot happen overnight.

He said Malaysia first needs to find out what kind of business or industry it can excel in and work on increasing efficiency through more automation and innovation, “so we can have less labour cost but higher wages”.

Dr Mahathir also gave his take on how the government should tackle the current economic crisis.

In response to people saying that the government was too slow to act, he said it needs to plan carefully before it can act.

He said that before dispensing money, the government has to carefully study the multiplier effect the money would bring to the economy.

“It is not just giving money here and there... giving it to this school or to this area, that area... that is not the way. We have to structure the whole economy and structure which part needs support.”

He said that during the 1997/98 Asian financial crisis, when he was the prime minister, daily meetings to discuss economic data from all sectors took place.

“Every day we would sit down, from morning to 1pm, to study the economy. We had all the data, all types of consumption data from electricity to restaurants... so that we know what the economy is like. We must have all the data regarding this crisis, the causes, then only can we plan on how to use the money.

“Just because it is called pump-priming, so we just give money?” he asked.

“The leadership must be knowledgeable and understand what really needs to be done and can't simply expect civil servants to help overcome this problem. The leadership has to tell them and unless things change, you will lose the next election.”

Last week he told the Star newspaper that the government is capable of allocating RM35 billion for the second stimulus package if it wants to.

“(It) is 5 per cent of gross domestic product,” he said.

The Employees Provident Fund alone has funds worth some RM250 billion, he told reporters at a forum on the global financial crisis.

Corporate leaders from various industries had said that the first stimulus package worth RM7b was not big and effective enough.

Dr Mahathir also advised corporate leaders to be very careful in exercising cost-cutting measures, especially in cutting wages.

“When people have less purchasing power, people will buy less and this would have an effect on the economy on the macro scale,” he said.

No comments: