It does not come as a surprise when the recently announced Malaysia’s economic stimulus plan is strewn with more nationalization and protectionism elements. In an expected manner, Wall Street Journal roundly criticized it and labeled the country as not being supportive of market reform. But which country is not doing whatever it takes to protect local economy at this moment? It is really a matter of threading carefully along protectionist measures without blocking global effort in recovery or violating free market practices that benefit all. Malaysian government, without a question, has introduced some controversial provisions that include raising tax on foreign labor recruitment and revoking working visas for Bangladeshi labor. ‘Locals come first’ mentality prevails under public pressure without any feasible study or tangible proof that jobs for foreigners can be efficiently filled up by the locals.
Looming economic slowdown can yield opportunities for reform, but Malaysian government chose to yield greater control and the safest routes which never seem favorable to recovery. Some of the most popular and unsubstantiated rhetoric include:
Buy Made in Malaysia
Support local products. Local companies happily join in the chorus with politicians to show nationalist sentiment. Simplistic as it sounds, will it improve local economy? Malaysian government does not consider the simple fact that the country exists along side with other international trading partners in interconnected global economy. When their export revenue suffers, they will reduce import volume from Malaysia. Do not forget local importers, franchise partners as well as companies that export parts and import final products will also suffer. Unbelievably as it may sound, the reverse of trade is called upon at domestic level instead of urging local companies to be more competitive and efficient in offering better values to consumers at optimized costs.
Do not be selective about jobs
It is hard to believe the highest leadership in the country urged people to do whatever comes their way at this moment, disregard that inefficient allocation of manpower will backfire when economy gradually recovers. Disappointingly, there is no highlight on diversifying and moving quick enough to create high-value and service based economy, which will generate better long-term job options and stability. Short term measures like re-skilling or training retrenched manufacturing workers can only provide temporary relief. They are still stuck in low-end manual jobs.
Dismiss foreigners first
This is directive from Malaysian government along with doubling the tax of foreign labor recruitment. It is a step too far in meddling operational efficiency and a short sighted approach which does not achieve much positive except pleasing local constituents. Who will bear the additional costs? Local companies and consumers when demand is already slowing.
So what market reform? I can not help but to wonder if all these measures reflect political cynicism or make economic sense. As far as I can tell, individuals, please brace for drastic changes. Companies, please confine to new regulations. Government? Please do not expect anything transformational for now.