Thursday, October 22, 2015

Economic Transformation: Right Way, Wrong Way

We are being told that transformation is the way for our nation to get out of the middle-income trap and progress. I am afraid that transformation is just a nice word. Yes, we need transformation but not of the kind you are taking about. The current transformation is bogging down the whole nation.

1. Reducing the budget deficit to a manageable size is good. But going for a balanced budget is not so clever.

2. Reducing the budget deficit by reducing mega projects is good, but reducing the budget deficit by taxing the general public more is no good as it bogs down the private sector.

3. Reducing the budget deficit is good but increasing the cost of living and doing business by the removal of subsidies and imposition of more taxes is no good because it burdens the general public and the private sector.

4. Enhancing rural development is a good transformation for the rural areas, but it will not enhance economic growth and transformation.

5. Putting in a public transportation system is good although belated but it is good only for KL and not the rest of the nation and it by itself will not transform the economy. It only solves a perennial problem in hindsight but forward looking into the future.

6. Assisting low income households is good for low income households which exist because of deterioration in productivity growth, increase in the cost of living, and bad economic planning which is unable to create good paying jobs. It is not going to transform the economy into fast growing.

My apologies for yet another negative post. This is my long winded way of saying that we need better policies than the ones we are having if we want this nation to have a good economic future. Our policy makers have no good ideas. We are only doing the management of the economy by treating symptoms we can see, but not inspiring our young people and old businessmen to fight in the frontier of the technological war in the international market.


1. To keep the GST, you must abolish personal income tax but keep corporate income tax.

2. To impose tax on stock market transactions because it is no more transfer payments but a money making industry on its own.

3. To increase the levy on foreign workers who are using the public transport system and other public services for free.

4. The government to divest itself out of business areas and introduce more competition to create more business opportunities in services and to reduce the cost of living. Why do I have to pay more for my internet connection while access to the line has deteriorated.

5. The banks to start recovery action on default loans especially on commercial and residential properties in order to bring the market price of properties to affordable levels instead of waiting for another boost of liquidity to inflate asset prices.

6. To get banks to allocate at least 40% of their loans on commerce and businesses, excluding property purchases.

7. To bring savings interest rate to 5% pa, and limit the mark-up by banks to 4% pa, so that the maximum loan interest rate is 9% pa for businesses.

8. To limit the loans for buying cars.

9. Not to protect the plantation businesses by pursuing a low currency policy, since subsidies have been removed for the general public and the pursuit is higher productivity growth.

10. To make English the national language of business so as to empower more young people to have the world as their oyster.

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