Malaysia must promote new investment areas, says Jomo

KUALA LUMPUR: Economist KS Jomo has advised authorities to take proactive measures to promote new areas of investment and production amid the escalating global trade conflict instead of simply signing trade agreements which do not benefit the country.

He said the global economy would likely see a period of protracted trade tension which has developed due to the US’ focus on bilateral conflicts.

“As you know, there has been little trade growth in over a decade. It is also important to recognise that when there are trade problems, different governments react in different ways and there is a tendency to be inward-looking,” he added.

He was speaking to reporters ahead of the release of the United Nations Conference on Trade and Development’s “Trade and Development Report 2018: Power, Platforms and the Free Trade Delusion” here yesterday.

According to the report, the world economy remained on shaky ground a decade after the 2008 financial crisis, with trade wars becoming a symptom of a deeper malaise.

While the global economy had picked up since early 2017, the report said growth remained spasmodic with many countries operating below potential. It added that this year was unlikely to see a change of gear.

The report said any serious escalation of trade tension could, through heightened uncertainty and reduced investment, bring about more damaging consequences in the medium term which could be particularly serious for countries already facing financial distress.

Jomo said many emerging markets would experience a great deal of stress due to the change in international monetary policy, particularly with fund outflows to the US as it raised interest rates.

The US Federal Reserve has raised interest rates twice this year and is likely to do so for the third time during the Federal Open Market Committee meeting from Sept 25 to 26.

“The emerging markets will be much more vulnerable to the financial crisis, especially in areas with asset price bubbles such as property bubbles which are financed by debts. So the authorities have to be prudent, and perhaps unpopular, to reduce our vulnerability to such crises,” said Jomo.

He also stressed the need for prudence to avoid the possibility of heading towards a recession.

“The likelihood of a financial crisis, probably due to external origins, will be greater. When you are reckless with your economic management, you are more vulnerable,” he said.

He also noted the need for Malaysia to think thoroughly and formulate appropriate policies to benefit from the digital economy.

“We think that we are getting good deals by giving up precious data for free in exchange for services by big digital monopolists. This data has been used to enhance the profits of the big players.

“We should learn from recent restrictions imposed by the European Union on Google and how they may be relevant to economies such as Malaysia,” he said.

Source: FreeMalaysiaToday