The economic situation in the country is dire, and there is an urgent need for intervention, even if it is deemed contrary to the principles of the free market.
The ringgit has been heading south, and the descent has been quite sharp after it fell to the lowest since the Asian financial crisis in 1998. With the continuous free fall, one expects a repeat of the dire consequences of the financial crisis in 1998.
There is a need now for the establishment of an emergency economic committee that would look at all aspects of the economy and prescribe immediate solutions to the problems, as opposed to presenting it to the cabinet to be mulled over by non-economic experts.
A dedicated team of economic experts would be a good start to building confidence in the economy. The terms of reference of the economic committee can be set up like the emergency committee of the National Operations Council in 1969, and they would need to come up with a solution swiftly and decisively plaguing the economy.
The organisation must be given the same powers and authority as those given to the National Operation Council in the 1969–1971 Emergency. It should be funded by the government, civil servants, and various experts in the field to be drawn into the committee.
Among the notable members of the committee would be the likes of Tan Sri Kamal Salleh, former executive chairman of MIER, Datuk Dr. R. Thillainathan, director at Genting, Tan Sri Andrew Shang, former central banker and regulator in Asia and Tan Sri Sheriff Kassim, former secretary general at the Ministry of Finance.
A cursory examination of some vital statistics would suggest that we are heading towards hitting an economic iceberg that must be averted by firm action that must be taken now.
For the 2023 full year, the current account surplus narrowed sharply to RM22.78 million from RM55.10 billion in 2022, a 58.6 per cent decrease in the current account surplus. In the fourth quarter of 2023, the current account surplus declined to RM0.25 billion from RM27.51 billion in the same period the previous year.
The primary income deficit, which consists of the net flow of profits, interest, and dividends from investments, increased to RM20.86 billion in the 4th quarter of 2023 from RM11.56 billion. in the same period previously.
The ringgit is only a whisker away from reaching 4.885 per US dollar, a level last seen in 1998 when the Asian financial crisis ravaged the region's currencies.
The newly-formed economic committee would need to identify why there was a massive outflow of funds from the country in the shortest period and put in place remedial measures.
Considering the interests of the nation are of utmost importance, politicians from both sides of the divide must put aside their differences and work together to support the committee to resolve the economic crisis.
The committee must consider all options for resolving the economic problem, such as, if necessary, pegging the ringgit, to ensure certainty for exporters and importers and avert escalating costs of living due to the sinking ringgit.
While some allude to the fact that it is contrary to the principles of the free market, the dire situation requires urgent and swift measures to contain the deleterious effects of sinking ringgit.
It must also look to bolster consumption and domestic investment, as the external headwinds and tepid demand for exports do not bode well for international trade.
To achieve this, increasing food production should be made a priority, and it needs to bolster food production to avert over-dependence on imports, which currently amount to RM80 billion. The committee must also deal robustly with food cartels that can impede all other efforts to bring down food prices.
Subsidy rationalisation and the resultant increase in prices can dampen consumption, something that the government cannot afford to do now, and as such, it must defer the implementation of the rationalisation to sometime in the future.
It must reintroduce the goods and services tax (GST) to shore up the government's revenue, which will increase by about RM20 billion. It needs to ensure that this time the administration and collection of GST are more efficient. It must ensure that there are no backlogs in refunds.
In addition, it needs to ensure that there is sound enforcement from enforcement officers to ensure that there is no excessive increase in prices and that the existing prices are per the standard price of goods and services.
With efforts to bring down the prices of essential goods, domestic consumption would rise, and domestic investments should also be encouraged.
The need to do so now is crucial since our main exporter, China, is in a slump and Malaysia needs to bolster domestic activity to offset the external headwinds.
The committee must also work towards diversifying our investment and export markets away from the traditional markets to new markets to insulate itself against volatility.
Above all, the semblance of political stability must be felt and experienced by foreign investors before they can come and invest in the country.
*The writer was formerly attached to a think tank. The views expressed in this article are the author's own and do not necessarily reflect those of Business Times.