Anticipate problems and fix them, don’t just describe them

TK Chua, FMT

Macroeconomic management is about anticipating and managing imbalances as they arise. It is not confined to just describing and telling us the problems after they have become acute.

This is my take on the story by Bank Negara Malaysia of its recent narrative on affordable housing in Malaysia.

Why tell us now that there is a mismatch of demand and supply in affordable housing? Why tell us now that household income growth has not been able to keep pace with the escalation in prices of homes? Why tell us now that the developers have been focusing too much on high-end houses? And why tell us now that efforts by agencies set up to provide affordable housing have been too disorganised?

May I ask how long the imbalances mentioned above have been around? As far as I know, some of these problems have been in existence for decades. What were we doing during those years?

What the authorities did in the past was not to correct the imbalances. Instead, they often took measures to make the situation worse. Whenever the housing market experienced a slowdown, interest rates were lowered and loan eligibilities were relaxed to encourage more imbalances. After many years, of course the problems have become acute as manifested today.

The preoccupation of our macroeconomic management is growth and political expediency, nothing else. We do not care about the quality of growth or its sustainability. We do not care that the imbalances will eventually sink us.

Right now, I can think of a few more imbalances which we have been talking about, but nothing much has been done to correct them. I guess, again, we must wait for the problems to become acute before the authorities concerned take notice of them.

The first is the inundation of foreign workers into almost every facet of our economy. No one is saying much or doing anything about it because it is just too lucrative for some. Not to worry; we will eventually see the interest, income and productivity of ordinary Malaysians severely affected before anything worthwhile is done.

The second imbalance is the size, the salaries and the pensions of public servants, including the perks and multiple pensions of ministers and elected officials. If we have compared income growth with prices of homes, I think it is time to do the same analysis on salaries and pensions.

Why don’t we compare salary and pension growth with the annual budget, salary and pension with revenue growth, salary and pension as the percentage of operating expenditure, and salary and pension growth with GDP/income growth? Try this out and see whether the trend is sustainable over time.

The third is water resource management. We read of trees in catchment areas being cut down. We hear of frequent water contamination in rivers and water bodies. We hear of climate change with prolonged rainy seasons and droughts. Do we wait for this problem to become acute first?

I hope those in authority will take notice. It is useless to tell us the problems. Please anticipate and do something about it now.