DEBT DANGER FOR MALAYSIA

By : SELVARAJA SOMIAH

CONSIDER the issue that now captures financial market attention: public debt. The experience in Greece, Spain, Portugal and elsewhere suggests that finance capital is increasingly ‘intolerant’ of what is perceived as excessive public debt.

Governments seem increasingly incapable of meeting their debt service commitments. Sovereign default threatens investor solvency. We see this now triggering protest and social disruption all around the world, from Wall Street in New York to Australia and now has spread even to Tokyo. It is a crisis. The young are getting desperate because of the contraction of employment and incomes.

Malaysia also seems to have lost its bearings.

Look at the analysis above, the analysis suggests that Malaysia’s gross public debt to GDP ratio increased from 42.7 per cent to 55.1 per cent between 2007 and 2011, it is among the highest in the region.

Malaysia’s 55.1 per cent level compares with Pakistan’s 54.1, Philippines’ 47, Thailand’s 43.7, Indonesia’s 25.4 and China’s 16.5. This is shocking as we have more debts than Indonesia and even Philippines.

Our government is excessively indebted, and we are in the firing line. Really!

Remember, Malaysia has never been an economic wizard. Never in our history since 1963, we find, any original thinker on economy and hence we lack an economic model which we may call as our own.

We never cared to evolve an economic model which cared for the needs of our country and sought to utilize our own resources in our way according to our own needs and aspirations, Najib calls it ‘MY WAY’, my foot lah! We borrow ideas – economic and political – from others and when the idea suppliers fail, we rue and indulge in illusions as Najib Tun Razak and his team are doing today.

From our experience we know that whenever our Prime Minister – Najib Tun Razak – tell us not to worry , they mean nothing and we have to actually start to worry. The Rakyat are the real victims. Prices are skyrocketing from ‘roti canai’ to ‘teh tarik’ to ‘kon lo mein’ and even ‘nasi lemak’, all are going up up up. We cannot talk of Rakyat because they never had any significance for our Malaysian shining politicians. They are of no consequence and, hence, can not be counted or considered, and this is how the masses feel.

At the rate we are going we are surely heading towards an economic collapse.

In Bank Negara Malaysia’s latest report issued on Oct 14, our country’s national debt currently stood at RM437 billion (as of June 30, 2011), with domestic debt amounting to RM421 billion and foreign debt at RM16 billion.

Malaysia is in a very very vulnerable position. Many economists say that 90% of GDP Debt is point of no return. Malaysia’s exports primarily petroleum and oil palm are heavily dependent on India and China for its trading. Malaysia must resolve its debt problems and sober up, it has to cut its spending, increase taxes and prepare for more than a lost decade or it can just print money.

Either case Malaysia will either face severe deflation, real estate collapses, stock market collapses, low demand leading to joblessness and more Bersih style protest given the youth population of the country. 75% debt is really intolerable for any developing economy. What is happening is in the name of social schemes the government is literally putting the country in debt and eating the money through corruption.

My economist friend from University Malaya tells me Malaysia has insufficient funds to finance the 2011 expenditure, there is RM46 billion deficit and this will be funded by further debts. Truly, it frightens me!