Tuesday, June 17, 2008


Fuel prices hike a REAL threat to economic growth: Najib


The increase in fuel prices is posing a real threat to economic growth globally and could destabilize major sectors like aviation, land and sea transportations and other industries. Deputy Prime Minister Datuk Seri Najib Tun Razak in saying this yesterday said the recent breach of US$130 per barrel for oil might even derail efforts to improve some already weakened economies, thus forcing Governments to go into raising budget deficits amidst soaring inflation. “Globally, the fuel crisis has already had destabilising effects on major sectors such as aviation, land and sea transportations, fisheries and industries as well as the consumers. “It has forced airlines to cut flights and lay off workers, fishermen to go on strike, angry bus drivers to force public transportation to a halt, motorists to do panic buying as well as countless demonstrations against governments,” he said. Delivering his keynote address, read by the Second Finance Minister Tan Sri Mohamad Nor Yakcop, at the opening of the Second International CEOs Conference 2008 here, he said the world economy is currently facing an extended period of high food prices with its consequent effects on inflation. He urged world leaders to come up with rescue packages to tide over the present food crisis affecting countries in the region, adding that Japan had already pledged to do so to ease the current crisis. Najib said it is imperative to take a new sense of urgency to reposition the Malaysia’s economy to not only support growth, but also improve its quality, stressing that in embracing globalisation, the key strategies towards achieving greater success requires a renewed focus on building competitive niches integrated into the global economy. Today, the country’s economy is the 29th largest in the world, while its volume of trade is twice the size of its economy, which again is the highest in the world. “Over the last 50 years, the Malaysian economy has grown rapidly, achieving an average Growth Domestic Product (GDP) rate of 6.3 per cent per annum. Income per capita of Malaysians has also increased by over 20 times from RM1,132 in 1970 to RM23,114 in 2007,” he said, adding that in terms of purchasing power parity, it has increased by almost 12 folds from US$1,247 in 1970 to US$14,483 last year, which reflects real income and improvements in the standards of living of Malaysians. Najib stressed that the nation’s development has also been holistic which includes capacity building with heavy investments on social infrastructure, education and basic needs. “Equally important, the Government has always been conscious of the need to ensure a socio-economic environment where all Malaysians from all walks of life would benefit from the rapid expansion of the economy,” he said. This, he added, is evidence with the decrease of poverty incidence in Malaysia from over 50 per cent in 1970, to 5.7 per cent in 2004 and progressively to 3.6 per cent last year. The fast growth of East Asian economies, including Malaysia’s, was punctuated by the severe 1997-98 Asian financial crisis which brought many countries to harsh realities of an acute financial crisis, capital flights, bankruptcies, workers retrenchment and social disruption. “Malaysia had overcome the financial crisis with its own homemade measures. We have fully recovered from the crisis and since then, we have been constantly improving our ranking in international competitiveness. “Our efforts have proven positive when we improved our ranking from 23rd position in 2007 to 19th this year in World Competitiveness Yearbook. We knew all along that our economic security depends on our ability to compete internationally as our economy has always been integrated with the global economy, even well before globalisation became the fad it is today,” Najib said. He further said Malaysia is now in the second phase of its national mission to achieve a fully developed nation by 2020 with focus on moving up the value chain in the economy. The Government is committed to improve its delivery system so as to facilitate private sector initiatives in contributing to the Nation’s growth, according to him. “Today, we face new challenges in a more globalised world, in which the competitive landscape has changed combined with unrivaled mobility of both financial and human capital. “First, the global competitive landscape has indeed changed with the emergence of China and India, as the new juggernauts of the 21st century. Then, there are countries such as Vietnam which have begun to emerge strongly and now attracting FDI (foreign direct investment) in large amounts, providing competition to Malaysia for lower value-added products. “Singapore and Dubai have also decided to be very open economies, focusing on speed of delivery,” he added. As such, Malaysia has to figure out how to position itself in this new and changing economic landscape, Najib said. He stressed that globalisation requires globalised outlook and strategy but he is confident the nations have the capacity and passion to continue transforming to stay ahead.