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Malaysian economic resilience is a must in the age of Sino-US trade war

  • Malaysian economic resilience is a must in the age of Sino-US trade war.

By Rais Hussin

"The Winter Is Coming," was once used by President Joko Widodo at the height of his electoral campaign against his opponent Prabowo Subianto. When President Jokowi used it, he created a major storm in Indonesia.

All the Indonesians went wild: the President actually likes the "Game of Thrones". That phrase (the winter is coming) was a warning by President Jokowi earlier this year that if Indonesia , which is already a trillion US dollar GDP, does not buck up with reforms and more reforms, the country would be affected by the wintry conditions of global economy due to a combination of Sino-US trade war and disruptive economic turbulence.

So is the "winter" coming to Malaysia too ? Yes. The global economic situation will affect Malaysia in four ways. One, to the extent the Sino US trade war continue to fluctuate, creating a pattern of peaks and valleys in the stock markets, consequently around the world, new digital start ups will find themselves difficult to raise the necessary level of funds through their Initial Public Purchases (IPO). When there are less and less start ups, or, access to capital that can spur the creation of a digital economy, Malaysia will lose out from the lack of such connectivity, whose prime goal is to reduce cost of any redunddant economic activities. Malaysia, in this sense, will be affected by the Sino-US trade war and its impact on the 4th industrial revolution.

Two, if the global economy is not conducive to higher growth, as driven by digitization and Sino US deregulation, but is now susceptible to a structural cycle of booms and burst in Sino US trade, then Malaysia will not have the right external stimulus from these two countries primarily to become a high income nation.

Third, while Chinese factories can, and will relocate to Malaysia, largely to avoid the onerous tax burdens imposed by the United States on them, this is not something that can happen over night. Even if the Chinese factories are in Malaysia, the high end manufacturing of these products can still be subject to higher Western and US scrutiny too. Therefore, while Malaysia is considered by World Bank as one of the four countries that can gain from the Sino-US trade war, the other being Vietnam, Chile and Argentina, the gains will be short term. There is no telling when will the benefits of China accrue, or, when will they end. Malaysia itself has to buck up.

Fourth, China has insulated itself from the global economic turbulence by relying on domestic consumption; of up to 72.8 per cent. Now, while Chinese consumers still have a craving for Western products, increasingly Chinese are shopping online, too, to get their own high end hand sets, cellphones, clothes, food and the works all Made in China. In order to benefit from the affluence of Chinese consumers, Malaysia has to make Chinese feel welcome; at least sufficiently attracted to the Malaysia As A Destiny of Choice for Investments Programme to want to be a top investor here.

Indeed, Malaysia can only avoid the global economic winter triggered by Sino US trade war, if the country itself is focused on four things too.

First, the students must be trained in robotics and automation without fail, as this is a wave of the future that cannot be avoided. Even if new Chinese factories are relocated to Malaysia, robotics or automation remains increasingly critical in the original engineering of all manufacturing.

Second, Malaysians from all walks of life have to take artificial intelligence seriously at school. Malaysians must have basic understanding of the supply chain of new knowledge .

Artificial intelligence is now a part of this supply chain, which no what no one can do without.

Third, while algorithms have been covered in the secondary syllabus of Malaysian education system since the 1980s, students have to understand the concept of algorithms from their commercial stand point or usage. Without this understanding, Malaysian economy will not be able to make it to the top.

Thus, students must know how are algorithms applied in the real world, consequently, to sustain and create the Internet commerce in various "apps" or "applications".

Lastly, Malaysians have to get ready for the revolution of data science or curtly known as big data. The latter comes in different varieties, volumes, veracities and velocities. Not unless all Malaysians understand the importance of 4 Vs, Malaysia would indeed be facing the full impact of the global economic recession in future; as and when Sino-US trade war continues it's patterns of starts and restarts.

As of now, the global economic recession in 2020 is not a certainty yet. This is due to the collective response that has been taken. 30 central banks across the world, for example, have lowered their interest rates.

As it is, the People of China's Central Bank has reduced the bank reserves of all banks in China by a basis point of 0.50; which can allow all commercial banks in China to borrow and lend more than US$160 billion to shore up the Chinese economy.

Yet, such monetary measures cannot last indefinitely. Malaysia needs to be always sturdy and ready economically to brace for more Sino US economc friction.

(Datuk Wira Dr. Rais Hussin Mohamed Ariff is PPBM Supreme Council Member.)

 

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