KUALA LUMPUR: A think tank yesterday stressed the need for the government to engage the private sector before introducing new policies to create a conducive and stable ecosystem for businesses, especially during challenging times.
The Socio-Economic Research Center (SERC) said avoiding flip-flopping policies was important to encourage domestic and foreign investment, restoring confidence and addressing the growing public trust deficit.
“Confidence is also the key to stem the ringgit’s slide although there are other external factors that cause the ringgit to remain volatile,” said SERC executive director Lee Heng Guie.
Speaking to reporters at SERC’s economy tracker briefing, Lee said increased transparency and enhanced communication were essential to effectively implement policies.
“Recent developments also show that some issues really have an impact on businesses, including those related to foreign workers and anti-profiteering mechanism. These are issues where we want some clarity, consistency and effective communication. At a time when the economy is under trying conditions, we need to facilitate businesses and not add more administrative burdens,” he said.
Last week, following a public outcry, Malaysia postponed to 2018 its new ruling requiring employers to pay the foreign worker levy instead of deducting it from the wages of their employees. This came after the government held back a sizeable hike in foreign worker levy in February last year following protests from employer groups. The hike was later trimmed after getting industry feedback.
On another matter, Lee, a former CIMB Investment Bank Bhd chief economist, said Malaysia’s gross domestic product (GDP) outlook for this year was positive but not too exciting.
“In view of heightening external uncertainty and near-term pressure, we expect the Malaysian economy to continue growing at 4.3% in 2017 and 4.6% in 2018,” he said. For 2016,SERC’s estimated Malaysia GDP growth was at 4.2%.
“We remain cautious about the strength of private consumption on weaker consumer sentiment and the spillover effects from prolonged weakness of ringgit, ongoing subsidy rationalisation amid moderate income growth,” said Lee.
SERC, which was initiated by the Associated Chinese Chambers of Commerce and Industry of Malaysia, expects private consumption to grow at 5.3% in 2017, compared with an estimated growth of 5.9% in 2016. Between 2011 and 2015, private consumption grew at an average of 7.1% per annum.
Meanwhile, private investment is expected to grow at 5.2% compared with an estimated growth of 4.2% in 2016.
Lee said the effects of the measures undertaken by Bank Negara Malaysia (BNM) to stabilise the ringgit would be seen in the first half of this year.
He said BNM’s assertive measures to contain the influence of non-deliverable forward market on the ringgit, deepen the onshore ringgit market and cap the retention of export proceeds in foreign currency account would help enhance the demand for ringgit.
Lee expects the ringgit to trade at 4.2000 to 4.4000 against the US dollar by the end of 2017. “The ringgit will continue to remain under pressure as influenced by capital outflow volatility, expectation of higher US interest rates, BNM interest rate policy and inflation,” he said.