Wednesday, 24 July 2024 – In this webinar, Mr Charles Santiago and Datuk William Ng reviewed the Madani Economy at the one-year mark.
MALAYSIA STUDIES PROGRAMME WEBINAR
In July 2023, Prime Minister Anwar Ibrahim launched the Madani Economy framework, themed “empowering the people”. Speakers Mr Charles Santiago and Datuk William Ng reviewed the Madani Economy at the one-year mark. Charles Santiago is the current Chairperson of the National Water Services Commission Malaysia, Co-chair of the ASEAN Parliamentarians for Human Rights, and Member of Parliament for the Klang constituency in Selangor from March 2008 to November 2022. Datuk William Ng is National President of the Small and Medium Enterprises Association (Samenta).
Moderator Dr Lee Hwok Aun started by asking Mr Charles Santiago if the Madani Economy pays more attention to poverty and inequality, given that Anwar Ibrahim has constantly championed the cause of helping the poor and marginalised. He also asked about how Anwar’s administration balances between helping the B40 and M40 while managing government finances given the inherited fiscal constraints and social conditions while tackling structural challenges like subsidy rationalisation.
Mr Santiago said that the Covid-19 pandemic has posed a challenge to the B40, where a significant number has slipped further into poverty. Mr Santiago noted that the Madani government has done a lot to target inequality. However, while money is flowing into subsidies for chicken and eggs, the cooking oil stabilisation scheme, rice and fertilisers, these efforts are not felt on the ground and do not address critical issues and meet the needs of people. He suggested that efforts need to target real wages, social protection, and cash assistance for vulnerable communities, else the whole reform agenda comes into question. Mr Santiago made two main suggestions: firstly, revive the breakfast programme for children. This effort can be supported by GLCs, which can cater food at local schools and create jobs, entrepreneurship, and spur local demand for vegetables, generating a multiplier effect in the local economy. He highlighted that such an effort will allow people to feel that the government provides jobs, entrepreneurship and protection, which people do not see now. Having nutritious food also allows people to save on healthcare in the long run. Secondly, regarding the progressive wage policy, he said that the design excludes part-time and informal workers which constitutes a large part of the population and requires attention as this factor faces low wages below minimum wages and no social protection. He suggested that the government and the private sector can co-fund payment of minimum wages and support for EPF. Overall, he said that Madani is in the right direction, but implementation has to change, and there is a need to rethink the model going forward as many are being excluded and feeling victims of the process, creating anger against the government.
Dr Lee then asked Datuk William Ng about how much the government engaged with Samenta in the formulation of Madani and New Industrial Master Plan (NIMP) and if the priorities reflect SME priorities and needs. He also asked if the Unity Government is any different in its credibility and effectiveness of SME policy.
Datuk Ng said that this government engages openly with stakeholders and Samenta is often called in on issues relating to SMEs. He outlined three priorities for SMEs: firstly, the middle-income trap where SMEs are strong domestic players but lack the capability to be regional or international players, becoming stagnant at a certain level. The New Industrial Master Plan (NIMP) seeks to address this issue by proposing more SMEs to be plugged into the global supply chain and expand their range of offerings to move up the value chain. While the intention is good, he said that SMEs’ capability and orientation cannot be changed overnight. Behavioural change needs to be driven by incentives and help needs to be given to SMEs see opportunities in moving up the value chain. Secondly, a vast majority of SMEs are in the service sector which face the challenge of rise in cost of doing business in recent years. For example, hawkers noted that the economy is growing but they do not feel it. Business and revenue are going up but there is a serious margin compression. A problem with the Madani Economy is that it does not address SMEs in the service sector. He said that there is a disconnect between the reality of Malaysia moving away from a manufacturing hub to focus on being a regional services hub. He attributes this disconnect to the difficulties of mapping the potential of Malaysia in the creative economy as compared to mapping out an entire supply chain in the manufacturing sector. Thirdly, the talent issue. The Madani Economy and NIMP focus on creating high paying jobs and policy levers like the progressive wage policy and multi-tier levy mechanism. Beyond wages, however, Datuk Ng said that Malaysia is not producing enough technical workers, having a large pool of unskilled workers and underemployed graduates.
Further elaborating on wage stagnation, Datuk Ng said that the median salary in 2010 was RM1,500. By 2023, this number jumped to RM2,600. However, proximity to Singapore and the weakening of ringgit resulted in a mere 20 per cent cumulative increment in Singapore dollars even though the industry has steadily increased pay by 73 per cent. He summed up by saying that there are two obvious changes despite not being spelt out in documents: firstly, downsizing and removing certain agencies. For example, MIDA is now the single window for investments as opposed to regional authorities and state agencies which could provide approval and incentives for investments. Secondly, a renewed focus on deregulation, with impact analysis being compulsory when regulation is put out and a 5-year shelf life for regulations.
Dr Lee then asked Mr Santiago about what he sees as progress and shortcoming in sustainable development. Mr Santiago said this government has a larger focus on climate change including a push for domestic use of solar panels. For example, Sime Darby has a property at Elmina where solar panels provide electricity to all the homes including malls. He said that this project should be replicated in local homes and rural areas, having an impact on local communities. Using solar allows people to save money on payments and make money by selling to the grid. Calling this a “just transition” and “energy democracy”, Mr Santiago said that growth must be distributed and felt by everybody, not just the rich. He also drew attention to the new poverty involving people over 60 years old. He suggested a payment or compensation scheme that can be funded by the Kumpulan Wang Persaraan (KWAP), which can create a multiplier effect. Sustainable development, he said, needs to be examined holistically which includes addressing poverty. He also suggested that Technical and Vocational Education and Training (TVET) should be implemented earlier and be more attractive to keep people in school.
Dr Lee then asked Datuk Ng if competitiveness and corruption rankings matter for SMEs, what SMEs look out for in terms of governance and how true is it that SMEs are less capable or willing to take the necessary changes like raising wages, training workers, and upgrading technology. Datuk Ng said that the rankings directly impact the business environment. SMEs want more transparency and consistent regulation where the Madani government is concerned. The government today is continuing past efforts like reducing the cost of doing business and promoting the ease of doing business via platforms like PEMUDAH. Dealing with high profile cases of corruption has also been helpful in trying to get the market to strive towards better integrity. Datuk Ng said that there must be a gradual easing of the affirmative action policy as it impacts businesses significantly. He said that SMEs face resource constraints but can overcome challenges. An issue not limited to Malaysia is that policymakers see SMEs in a linear way, assuming that they require different interventions at each growth stage. However, businesses do not behave in a linear manner. Furthermore, ministries and agencies are defined along the lines of industries and sectors. This narrow policy lens thus results in substantial disconnect.
The webinar proceeded to a Q&A session. Both speakers fielded questions including mindsets on profit-wage distribution, brain drain, the current state of sectoral regulations and regulatory reforms. Malaysia Studies Programme Co-coordinator Dr Lee Hwok Aun moderated this webinar, which was attended by the policy, business and academic communities.