Malaysia 'a success story'

Business Times, March 2, 2013
By Roziana Hamsawi

WORLD-RENOWNED economist Nouriel Roubini, who famously predicted the 2008 financial crisis, has called Malaysia "a success story", spurred by a well-diversified economy and a vibrant democracy.

With a sound gross domestic product (GDP) growth of 5.6 per cent last year, he said he was impressed by not just the country's economy but also by its stability, both politically and socially.

"A country's success is not purely measured by its economic growth but also by the development in its political and social matters, too. These are all important," he said in his speech at the Datum Economic Forum themed "Building Communities and Enriching Lives", here, yesterday.

Roubini said Malaysia has a lot going on for it along with other emerging economies in Asia. "Your inflation is low, below two per cent, strong current account surplus, sound and well-capitalised financial institutions with ample liquidity. "Your economy is very diversified and supported by a vibrant democracy. This is very important and should not be underestimated," he said.

He added that with the impending 13th general election, the new government to be elected must ensure that there is continued institutional stability and clarity in economic policies. Speaking to reporters later, Roubini said as Malaysia moves into the high-income nation status, it is imperative that the type of economic policies implemented must ensure productivity is increased and do not lose sight on developing the private sector.

"As the world becomes increasingly competitive, the challenge for any country that is moving from middle income to higher income is the investment in human capital," he said. He said at this stage of economic development, innovation and technological change must take centre stage and this demanded heavy investment in developing the knowledge-economy.

Asked if the development in Europe and the US will impair the progress of emerging economies, especially in Asia, Roubini said he believed that the "decoupling of Asia from shocks in the US and Europe is even more so (true) now" than it ever was. He said while the average global growth rate is about three per cent, the US, Europe and Japan contributed very mediocre growth.

"The emerging markets grew at about five per cent while markets from Asian grew up to six per cent. With the US and Europe combined, their growth are less than one per cent or barely growing and this implies no significant deterrent to the growth of Asian economies," he said. Roubini noted that in light of the situation in Europe and the US, domestic demand in Asian countries have become more important.

"If before, the trade links used to be South-North, now it is South-South. Within Asean itself, there is robust trade integration supported by strong financial and global chain and this should be further strengthened in the years to come," he said.