Poland and Slovakia among many other countries currently are dubbed as high income nations, where these countries have made significant economic reforms after being stagnant in the early years. South Korea for instance, has amazing economic growth within a short period of time, where it was once a devastating nation due to the Korean war and had managed to transform to becoming one of the wealthiest nation in the world.
Challenges for Malaysia, are of short term and long term, where the next general election is in 2018, and until then there are key areas that the current government administration is tasked to do. In this case few economic matters are of concern, which are reducing the government debt, implementation of GST, strengthening of ringgit and reducing the debt-GDP ratio. Now there are two things that are also of concern in my opinion, in terms of our corruption and competitiveness indexes. We are still far from achieving corruption-free state and our competitiveness index is at the unsatisfactory level (24th out of 148 countries).
A reform can simply be defined as a major policy change. In economical sense, this could mean a positive improvement to the society, such as in reducing the country’s fiscal deficit. A successful reform could also mean by spreading the burden of the adjustment of government expenditures and revenues across income classes and income sources.
Some suggested economic reforms:
– Enhancing the role of private sector in the society and limiting government’s involvement in infrastructure projects, which in turns would lessen the contingent liabilities for the government.
-To increase government’s revenue (to achieve >25% of GDP) via more efficient tax collection system and to move away from oil and gas revenues stream.
– Eliminating price controls, deregulating capital markets and lowering trade barriers. As for capital market point of view, to limit foreign holdings in the stock market, to limit GLC participation by way of encouraging the GLCs to sell down their ownership in stocks as well as to ease companies participation in the ACE market and also their movement from ACE market to Main market of Bursa Malaysia.
– Limiting the subsidies and handouts. Though BR1M is a measure of targeted form of subsidy, it is still bearing the characteristics of featherbedding, which discourages and limits self development in the society.
– Allowing media freedom
-Encourage self reliance in food production, which means promoting and supporting the agriculture industry.
All these economic reforms in transforming the country’s political economy should start from the grass roots level, and that includes individual, household and the society at large. Educating the rakyat on the necessities of reforms and difficult government decision such as subsidy rationalisation should be a priority. Any policy reform is indeed painful at the beginning, which largely due to people receptive of changes, thus it is important for the government to disseminate the right information.