Posted on 04 Dec 2015
“The real challenge for Malaysia is to let new companies grow and let existing companies that can’t drive the growth fail. That’s the way you allocate resources to make your economy more productive. That’s the reform Malaysia has to do,” said executive vice president, chief economist and chief strategy officer Bart Van Ark (pix) during a talk on the global economic outlook 2016 here yesterday.
Malaysia saw its gross domestic product (GDP) expand 4.7% in Q3, supported by private sector demand, bringing year-to-date GDP to 5.1%.
As growth of the working-age population slows down, Van Ark said that productivity growth should come to the rescue.
However, he added that there had been a significant slowdown in
productivity growth from 2007 to 2014, and that it is even being pushed
into negative territory currently.
Therefore, he said that Malaysia needs to adopt innovation and
technological change in order to gain competition for its economy.
He added that it is important for Malaysia’s investment agenda to be
driven by higher returns and faster productivity growth, suggesting that
“very high intensive” private sector collaboration has to take place.
Van Ark viewed that Southeast Asia, including Malaysia, is still one of the promising growth regions for the rest of the decade, despite the challenges in the global economy, US interest rate hike and depreciating currencies.
“Southeast Asia remains strongly competitive and a global production hub,” he said.
With a strong build up of a consumer base on the back of integration in product markets across Asean economies, Van Ark said it can release substantially large consumer purchasing power.
Given an expected growth of over 4% for the next decade, he said Southeast Asia will see a high growth in investments to satisfy its infrastructure needs.
On the currency front, Van Ark said the impact of the US rate hike on the ringgit has largely been factored in and absorbed by the economy.
“But ultimately, it (the ringgit) also depends on emerging markets generally, not just Malaysia, whether they will stabilise next year,” he added.
Van Ark went on to say that if there is a pause in the decline of real economic growth, the chance of the ringgit stabilising will be quite substantial.
