Building an Ideal Malaysia: A Session with the World Bank Group and IDEAS Malaysia

With GE14 coming around, Malaysia’s seemingly turbulent state of economy proves to be the front of most worries along with controversial bills being implemented by our current government at their most opportune moment. We may wonder if there is still a semblance of balance for Malaysia’s future as a growing economy with secular and democratic governance.

On the 3rd of April, an event organized by the Nottingham Economic Society (NES) which had guest speakers from the World Bank Group and IDEAS Malaysia elaborate on the topic of “Building an Ideal Malaysia” were able to provide us clarity that Malaysia has not faltered in its way to becoming a fast-developing nation.

The two speakers of the day were Shakira Teh Sharifuddin, who is an economist specializing in macroeconomics, trade, and investment for the World Bank Open Group, and Ali Salman, a director of research at IDEAS Malaysia and the CEO of Istanbul Network for Liberty who has a well-rounded background as an economist, public policy expert and a think tank professional.

Malaysia Economic Monitor

Malaysia’s Economic Monitor, which are reports on Malaysia’s economic outlook published by the World Bank Group and the latest being the report released on December 2017, was depicted using an impressive number of slides which showcased Malaysia’s economic health via graphs and charts.

Shakira’s presentation showed that Malaysia’s economy grew strongly throughout the year 2017, achieving a growth rate of 5.9% in the fourth quartile. The main driver of the growth was from domestic consumption with private consumption being the larger fraction.

The domestic demand would also insinuate that the labor market is stable which proves to be true as the unemployment rate had fallen to 3.3% in December 2017. Our current account surplus also drew improvement which was underpinned by the continued demand for manufactured goods. Headline inflation rate however, has much deviated from the observations of the core inflation with the former being at 3.5% and the latter at 2.2%, both as of December 2017. This divergence can be attributed mainly to higher cost in the transportation industry. Conditions in the domestic financial sector remained stable.

Bank Negara Malaysia (BNM) had its overnight policy rate increased to 3.25% in January 2018, domestic banking system remains resilient and outstanding loans to the private sector expanded at a slower rate in 2017’s fourth quartile. A net inflow in Malaysia’s financial account was observed to be due to portfolio investments and FDI inflows.

The ringgit was seen to appreciate against US Dollar and regional currencies at a base year of January 2017. Fiscal consolidation remains on track with fiscal deficit being forecasted to steadily narrow to -2.8% of GDP in 2018 and the Federal Government debt as a share of GDP has lowered to 51.1% of GDP as of 2017’s third quartile.

However, reductions in Malaysia’s fiscal deficit will require deeper reforms. Shakira mentions that the implementation of the GST taxation as well the removal of subsidies has helped government revenue as a share of GDP to moderate further which, accompanied by continued reductions of operating expenditure, will further reduce fiscal deficits.

Malaysia’s growth was forecasted to remain strong into 2018 at 5.2%, driven by robust domestic and external demand. According to Shakira, Malaysia’s goal of achieving a high-income nation status was projected to be successful by the approximation of the years 2020 to 2024.

She continued by saying that achieving a high-income status goes beyond just numbers, as the status should be comprehensive of many factors that make a high-income nation. Shakira pressed that besides focusing on Malaysia’s economic growth, it is just as important to work towards eliminating economic disparities and to make sure that Malaysia’s growth is inclusive as well as having equal opportunities provided to all Malaysians.

Open Development Initiative

The second part of her talk is on the Open Development Initiative by the World Bank Group. The World Bank has its two twin goals which are to end extreme poverty and boost shared prosperity which Shakira explained is to ensure everyone “gets a slice of the cake”.

In the case of the first goal, World Bank categorizes by people in extreme poverty as those who are living below US$ 1.80 a day. World Bank wishes to bring down the percentage to 3% by 2030. Currently, it is at 10% with most of the affected located in South Africa and South Asia. Malaysia’s poverty level as of 2016/2017, is one of the lowest in South East Asia, which was impressively brought down from 40% to 0.6% in one generation. However, as Shakira mentioned in her talk, Malaysia still has pockets of extreme poverty with one fifth and one third being in the state of Sabah and in the peninsular Malaysia respectively.

World Bank’s second goal, which is to boost shared prosperity, wants everyone to live comfortably going forward. World Bank’s role in the picture comes in two different ways; to provide financial aid and to overcome the knowledge barrier. World bank has special loans given out into areas such as education, water, energy, agriculture, and services industry. As countries become more developed, the want to gain insight on how to develop certain sectors and how to address challenges faced in their economy would grow. World Bank would be able to share the different experiences of the economies of different countries in their successes.

Closer to home, Shakira mentioned the World Bank Group Research Hub located in Malaysia. The hub has its three pillars of work; the sharing the Malaysia experience with the world, the learning together for global solutions, and the supporting Malaysia’s goal of becoming a high-income economy.


Think Tanks and Public Policy

In Ali Salman’s portion of the event, he shared his insight on the process of policymaking as well as its obstacles in the Malaysian context. Ali started off by introducing IDEAS and its fundamentals then moving on to the topic of Think Tanks and Public Policy. The Institute for Democracy and Economic Affairs (IDEAS), was established in the year 2010 by Wan Saiful Wan Jan and his associates. Their basic motivation was to contribute to a debate in Malaysia around democracy, governance, and economic policies.

IDEAS as a think tank holds itself to be an independent and transparent non-profit research institute and has four basic values which drive their work in terms of policy research and advocacy includes the rule of law, limited government intervention, the free market, and personal liberty. The organizations’ annual report includes all funders of their research to maintain transparency.

Areas in which papers are published for, included economy and business, democracy and governance, and social policy. Some of their policy papers included are “Strengthening the Royal Malaysia Police by Enhancing Accountability”, “Upgrading Democracy: Soft Laws and The Ombudsman”, “A Critical Look into The Whistleblower Protection Act 2010”, and “Water Provision in Malaysia Privatize or Nationalize?”.

Ali then moved on to discuss the role of a think tank. According to Ali, think tanks are independent public policy research organizations with the purpose to analyse public policy, to educate the public and to work with policy makers or the media. He continued by saying that think tanks work under systematic and coherent set of biasness.

On behalf of IDEAS, Ali said they do not claim academic impartiality as think tanks stances on matters were normally attributed to its founders and the world of policy was biased to their own personal opinions. Ali gave an example on how one of IDEAS four values was the free market which does not represent a unanimous view of the people. As such, the research papers published reflects those values.

On how IDEAS operate, Ali said that it is mainly with the links to experts and researches who understand the actual policy problems as in they know insightfully what financial and central banks are considering in their policy making.

As a think tank that does not align with any organizations, it is expected that IDEAS would have their share of public disapproval. On such an instance, IDEAS had published a critique on the crisis of unaffordable housing despite the government having deployed twenty property agencies dedicated to providing those houses to the market. The government had a large role to play in it and IDEAS had pointed the matter out. A governor of BNM then disputed such claims, but Ali said that if top government officials are responding to what IDEAS have to say then their role as think tank has been fulfilled.

Challenges as a Think Tank Organisation

IDEAS were constantly questioned on whose agenda were they working for. One of their main criticisms was the motion of agenda setting. Ali explained that there may be two interests that push for the publication of different research papers. First, there is an alignment in the self-interest of the think tank itself and its worldviews. Then there was the donor interest, pushed by firms that may feel personally attacked by a regulation. An example Ali gave was the recent law of antiprofiteering. IDEAS own take on it was of a disapproving tone as based on their personal views, the government should not have the right to constrict profit and set price for businesses as it results in misallocation of resources and disincentivized work.

However, Ali said that out of the many that they have published there are few stories of their research papers made a positive impact. But Ali said that he believes that what IDEAS has successfully done was to create spaces for debate on the many matters affecting Malaysia’s governance and policies.

A question that was addressed to Ali by a student was that if he would be fine in catching attention from political organizations as a think tank organisation. Ali answered that he hoped not, although he would happy if organizations such as BNM or Khazanah would remark upon IDEAS especially regarding technical issues. Nevertheless, as IDEAS is independent and unaligned to any political parties, Ali preferred to not attract criticism from political entities.

With a short closing speech made by an NES committee, the evening moved on to the gifting ceremony. Dr Teo Wing Leong, as the head of Nottingham’s’ School of Economics, held the honor of gifting the two guests with a bag of UNMC memorabilia each. Speakers and attendees were then ushered to enjoy light refreshments outside the venue.


Written by Allisya Rezuriff

"They say that great minds think alike, but also fools seldom differ"

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