Thesun 2008-12-24 Page16 Complacency Comes At A Price

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Complacency comes at a price comment by Charles Santiago

THE Malaysian Institute for Economic Research (MIER) has indicated that unemployment will increase from 3.5% this year to 4.5% next year. These figures are historically high and could potentially be much higher as the full extent of the economic crisis kicks in. Even the normally cautious MIER pundits reckon that the country is quite likely to experience a real recession next year. International Trade and Industry Minister Tan Sri Muhyiddin Yassin was reported as saying in early November that exports to the US decreased by 9.3% between January and September. The crucial electrical and electronic sector alone registered a 14.6% drop, the largest fall of any export sector to the US. The deeper implications for the wider economy should be equally apparent. The

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industry accounts for some 43% of total employment in the manufacturing sector and contributes 62% of total manufactured exports. Electronics companies, especially US-owned factories such as Intel and Motorola are reducing overtime work and are planning production shutdowns in the coming weeks. Unisem, the country’s second-largest listed semiconductor assembler, posted a second quarter profit decline. A drop in global demand for electrical and electronics goods, and a deep-seated crisis of profitability, have negative consequences for employment, the survival of small and medium industries and the health of the economy as a whole. It also exposes the level of vulnerability of the economy – especially manufacturing – to foreign demand. Even primary commodities are not immune to the economic

malaise. Palm oil sales decreased in the same period while exports dropped for the first time in 15 months. The dramatic downturn in global oil prices will have a deleterious knock-on effect on government revenues. But as in any crisis there are opportunities to look afresh at what can be done to turn things around. In the face of such widespread devastation governments and central banks have been forced to act, sometimes admitting (against their instincts) that market solutions are not always best. For example, as part of a much larger package the Australian government distributed about A$8.7 billion (RM18.9 billion) in cash to families and pensioners. Japan announced a US$43.8 billion (RM152 billion) raft of emergency measures for its already recessionary economy. Last month, China proposed to inject US$586

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billion (RM2 trillion) in a massive effort to avert a more serious slowdown in its economy. However, such responses – which at least demonstrate a willingness to grasp the enormity of what is happening to the global economy – are not going to avert disaster by themselves. As a recent World Bank report warned, the kinds of stimulus packages proposed by Australia, Japan and even China will have only the limited impact. They can only cushion these economies against the full impact of the crisis but cannot compensate for the collapse in external demand. Specifically, the fiscal and monetary stimulus measures announced so far cannot be expected to compensate fully for lost output as exports have collapsed, along with domestic investment and consumption in many economies. Much more needs to be done. Certainly the challenge for Malaysia going into 2009 is critical. Primary resources will no longer fetch high prices. Domestic demand growth will drop. New investment by local and foreign firms will be limited. That much is clear. Recession or not, a serious downturn is in the making. The question for Malaysia (as for other countries) is how to reduce the severity and reduce the length of the crisis. How do we cushion the economy from the full impact of the global crisis? But more than this, do we have the foresight and political leadership to initiate longterm structural changes that are most definitely needed to recreate sustainable development? To be blunt about it, the government’s response to

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the crisis has been both slow and lacklustre. One example illustrates the point. In October, Human Resources Minister Datuk Dr S. Subramaniam told Parliament that his ministry was studying the setting up of a retrenchment fund. The study would take another six months after which a decision would be made. By the end of November the minister was forced to admit that the fund would not be set up in time to face the “human resource crisis” that is now inevitable. What is abundantly clear as the country enters tough times is that, the government lacks a coherent policy to mitigate

people at large. Just as importantly, the retrenchment fund would alleviate human suffering. Among other things, it could provide or expand unemployment benefits including food stamps or vouchers to neutralise the income losses of unemployed workers and vulnerable groups. By putting money into the hands of these groups, retrenched workers would still be able to pay their mortgages and rents and keep their homes, continue buying consumer goods, boosting demand in the sector and subsequently in the capital goods sector. A workers’ retraining programme should be part of the package. As an urgent priority This is a win-win situation for all the government should stakeholders. commit to a RM3 billion Instead the people retrenchment fund ...” have been subjected to a policy that is the loss of jobs, livelihoods simply too little and too and human suffering. late. The timing of the There are no social safety government’s RM7 billion nets to protect workers stimulus package scheduled – whether in the service for implementation early or manufacturing sectors. next year clearly does not Still less is there a system seem to reflect the required of social protection for urgency. other vulnerable and More worrying still is marginalised groups. It is the government’s apparent obvious that those who complacency. Second already face poverty (or live Finance Minister Tan Sri on the edge of it) will be hit Nor Mohamed Yakcop extraordinarily hard. suggests that the package With this social safety net is “adequate to sustain seriously compromised, we economic growth during can expect a rapid and deep the current economic process of impoverishment situation”. In reality, the to take effect as the RM7 billion should merely downturn unfolds. be the first step in a much Some drastic steps need larger and imaginative set to be taken. As an urgent of policies to deal with the priority the government enormity of the problem should commit to a RM3 facing the people and the billion retrenchment economy. What is needed fund as an immediate is a bold new vision to initiative to mitigate the take the country through negative multiplier effect the hard times and build a of job losses. This would at sustainable future. least create a modicum of confidence in the business Charles Santiago is Member community, workers and of Parliament for Klang.

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Don’t overlook Industrial Courts I REFER to the recent announcement by the Human Resources Minister concerning reference of dismissal cases to the Industrial Court. I congratulate him for taking over the functions of the Industrial Court in a decisive manner by reducing referrals from 3,500 cases to a mere 500 cases. Employers would be relieved by the announcement. The moot question now is, do we need Industrial Courts or most of them if our minister continues to wield the big stick in not referring most cases to the court. My only concern is that the Industrial Relations Act is an essential piece of social legislation to maintain and buttress industrial peace and harmony in the workplace in particular and the country as a whole. It acts as a social valve to prevent violent acts by aggrieved employees who seek justice and fairness from our Industrial Court. If such an avenue is denied then the possibility may arise where the aggrieved employee may take the law into his own hands in which event a purely industrial dispute may end up being the precursor for civil disturbance

and societal chaos. The government should treat with extreme caution matters affecting the livelihood and welfare of our workforce. The said livelihood is enshrined and protected in our constitution, ie the law of the land. The issue of too many cases being referred should be dealt with differently by legislative or regulatory process. For instance, no probationer should be allowed recourse to the court. Similarly, no employee with less than two years of service with the same employer should be allowed reference to the court. However, both the aforesaid categories could either seek remedies in the labour court or in civil courts as the situation may warrant. The aforesaid restriction would certainly reduce referrals to the court by at least 30%. The minister should avoid the danger of micro-managing dismissal cases which ultimately may fly in his own face. The action undertaken by the minister would be tantamount to the home minister doing away with the Penal Code which of course is not the case.

The minister may be forgiven for being not able to understand the history of our labour legislation which hitherto by and large kept industrial peace in the country. The very basis of our labour legislation is to enable the “weak” workman to stand up to the “mighty” employer. Dismissal of whatever form should be adjudicated for which we have competent courts. My long years of observation of the local labour scene has convinced me that the course of action undertaken by the minister would not only be injurious to the country’s larger interest but also to the image of Barisan Nasional. How could any leader in the country claim that the government is looking after the welfare of the people when this particular minister is throwing the spanner into the wheel of social harmony and social justice. It is time that better counsel and wisdom prevail over misguided short-term measures to overcome issues related to one’s very livelihood. Concerned Citizen Petaling Jaya