(Penang, Friday): The National Economic Action Council (NEAC) which had its first meeting yesterday would formulate policies and strategies to restore confidence and ensure that the country does not enter into a recession as a result of the current economic problems.
The inaugural meeting of NEAC had been held in a rather ominous setting, when the Kuala Lumpur Stock Exchange Composite Index yesterday plunged by nearly 25 points in intra-day trading, closing 15.35 points lower at 575.31 as compared to close of Wednesday’s trading, while the Malaysian ringgit again crashed to 4.5050 against the US dollar, dragged down by the precipitous plunge of the Indonesian rupiah which plunged to 17,000 to the US dollar at one stage.
The NEAC, whose central task must be confidence-restoration, has not made a very good start for two other reasons:
Firstly, its formation and composition should be a confidence-booster by itself, which is not the case as seen by the negative market sentiments - although primarily caused by the deepening Indonesian economic crisis.
Secondly, the two-month-long delay between the first announcement of the NEAC and its inaugural meeting yesterday. The NEAC is to have emergency powers to deal with the economic crisis without the proclamation of an emergency. But if the NEAC’s establishment and functioning could be delayed by more than two months, its credibility and effectiveness is immediately raised.
After the inaugural meeting of NEAC yesterday, the Economic Planninng Unit (EPU) in the Prime Minister’s Department, which is acting as the secretariat for NEAC, issued a four-point terms of reference for the NEAC, namely:
The first two terms of reference are not controversial unlike the third and fourth terms.
The third term of reference provides for the NEAC to supersede the Cabinet in policy decision-making as well as executive powers in the important area of economic and financial management, which raises the question of its legality and constitutionality.
The EPU has explained that the NEAC will comprise an executive council, a working committee and a secretariat.
The executive council, which will ensure that the current economic problems can be resolved expeditiously and decisions of the NEAC implemented effectively, will be represented by the Prime Minister, Deputy Prime Minister and Finance Minister, executive director and two members to be appointed by the Prime Minister later.
As executive director, Tun Daim Zainuddin is empowered to co-ordinate all activities of the relevant authorities in reviving the national economy,formulate and implement strategies to ensure that objectives of the NEAC are attained as well as chair the working committee on aspects critical to reviving investor confidence and strengthening the national economy.
The working committee, chaired by Daim, will assist the executive council and will study issues closely linked to the economy such as Direct Foreign Investment, banking and finance, capital market, currency, current account deficit, development of key economic sectors including Petronas as well as social issues caused by the current economic problems.
The NEAC will discuss, scrutinise and decide on proposals that have been submitted, monitor the implementation of the decisions and make amendments if necessary. The NEAC will submit to the Cabinet all its important decisions.
From the above organisation structure plan of the NEAC, the following conclusions can be drawn:
Many Malaysians are legitimately concerned as to whether the NEAC is the proper mechanism to address the national economic crisis without undermining the important principles of Cabinet responsibility and parliamentary democracy.
The fourth term of reference of the NEAC "to strengthen the economic base of the country so as to achieve a developed nation status through rapid and sustainable economic growth" concerns long-term economic management strategies and raises a very fundamental question. When Mahathir first announced the proposed NEAC, he said its mandate is to deal with the economic crisis and to put the Malaysian economy back on track in the wake of the fall in the value of the ringgit and the stock exchange. If this is the case, then its concern should be with short and even medium-term strategies, and not with long-term strategies. What is the rationale of granting the NEAC such wide and long-range economic policy decision-making powers, superseding the Cabinet altogether.
Be that as it may, despite considerable reservations by large sections of the people, Malaysians should give the NEAC a chance to prove itself that it is the best mechanism in the circumstances to resolve the national economic crisis - although the NEAC does not have a lot of time to do so.
The NEAC must be fully conscious that as from now onwards, it must bear responsibility for any action or measure in the country which undermines public and investor confidence, and its paramount duty is to ensure that the country embarks on the path of confidence-restoration without any more self-inflicted injuries.
The NEAC should involve the Malaysian society and public in the confidence-restoration exercise.
As a start, NEAC should conduct public hearings to invite Malaysians from all walks of life to give their views and proposals as to how confidence could be restored quickly to enable the country to get on with economic recovery. Let this be a major step in bringing about a national consensus where the government, society and people can respond as one unit to tide the country through the economic crisis in as short a period as possible and with the minimum of avoidable hardship, pain and suffering to the people.