Economic growth could have been only within the 2%-3%

By Ramon Navaratnam

Bank Negara Governor Zeti Akhtar Abdul Aziz did well to give an uncharacteristic press conference on our economic performance based on data from the Fourth Quarter of 2014. She said she was addressing "the misconceptions surrounding the impact of the fall in oil prices and the significance of the oil and gas industries to the Malaysian economy."

She agreed that we are adversely affected by the drop in oil prices, but said our economic growth could have been only within the 2%-3% range had we not diversified our economy. This raises the question of whether we have diversified enough and taken enough measures to face the challenges of these critical times.

Minister in the Prime Minister's Department Idris Jala said much the same thing in an interview with The Economist. He said it was a "big misconception" that "Malaysia will suffer the brunt of the oil price slide because we are a major oil exporter." Malaysia, he stressed, is not a major oil exporter.

Actually, Malaysians generally refer to our oil and gas earnings together and recognise the major impact the industry has on our growth prospects. After all, as Idris has carefully pointed out, the "oil, gas and energy sector" constitutes 17% of the Gross Domestic Product (GDP). That is a large chunk of our economy. There will definitely be a major impact on our economy if oil and gas prices remain low and slide further. So we must appreciate the deep concern of Malaysians over the falls in oil and gas prices. We cannot afford to play down the problems or ignore concerns about our future.

When we hear talk of "diversifying our economy", we ask how successful economic diversification has been. The residual "Other Industries" constitute 30% of our GDP. Education and Health make up only 1% of the GDP. The rest of the sectors, like Tourism , Electronics, Agriculture and Financial Services, constitute only 5% to 7 % of the GDP each.

Couldn't we have done better after 58 years of Merdeka? Couldn't we have pursued wider diversification and gone into much greater value-added productivity?

Sluggishness

We may not be in crisis now, but I dare say that we are facing critical times ahead. The major world economies are generally slowly recovering or are still struggling to recover. Malaysia has done better, with its 6% growth registered for last year. But how long can this high growth last in this sluggish world economy?