(Petaling Jaya, Monday): Up to now, the Government has not explained why it had failed to prepare the people for the bad economic results of the first quarter of 1998, when the Malaysian gross domestic product shrank by 1.8 per cent, as compared to an expansion of 6.9% posted in the fourth quarter of 1997 and 7.8% posted for all of last year.
With the gross domestic product shrinking 1.8 per cent in the first quarter, economists said Malaysia is now expected to head into recession this year -- technically with at least two consecutive quarters of negative growth.
The biggest economic question today is whether Malaysia is heading towards a recession even worse than the 1980s, when the 1985 GDP contracted to -1 per cent.
The saddest part of the shock announcement of the totally unexpected negative 1.8 per cent growth in the gross domestic product for the first quarter is that the authorities concerned, whether the government or Bank Negara, have learnt nothing about crisis management or the supreme importance of gaining confidence.
The "denial syndrome" of the goverment is so ingrained that it only wanted to paint a very rosy picture - with Ministers competing with each other in their declaration as to how fast the economic recovery would come about - while hiding the bad news from the people.
Economists, analysts and the Malaysian public have discounted for such a government "denial syndrome", which is the reason why there is the crisis of information deficit leading to the greater crisis of confidence, but what they had not expected is that their worst fears have proved to be too conservative.
The worst economic data for the first quarter which the market
had anticipated was between minus one per cent and plus 2 per cent --
but the result turned out to be the disastrous -1.8 per cent.
The market has learnt not to trust the government and is expecting bad news, but it never expected such bad news!
At 5 p.m., the Kuala Lumpur Stock Exchange Composite Index fell by 17.29 points to close at 520.95 points while the Malaysian ringgit plunged to 3.9374 against the US dollar.
These are market reactions not only to the bad news of -1.8 per cent contraction of the GDP in the first quarter, but a clear signal of market loss of confidence in the crisis management by the government of the worst economic crisis faced by Malaysia.
Former Deputy Prime Minister Tan Sri Musa Hitam had probably described Malaysia’s economic crisis management in his closing address to the Harvard Project for Asian and International Relations Conference yesterday, when he said that Asia’s previous economic success, which was dubbed the Asian Miracle, had bred arrogance, corruption, decadence and failures.
He said countries in the region had reacted with an acceptance of responsibility for the problem and taken remedial action immediately.
"There are some countries that indulge in the denial syndrome…yet are forced to take remedial action grudgingly.
"There are those who deal with the problem with cool acceptance of the reality of the situation, adopting a no-nonsense approach towards remedial action and getting on with the job at hand to put their act together."
Why are the Prime Minister, Datuk Seri Dr. Mahathir Mohamad and Malaysia the prime examples of "denial syndrome" remaining in the region almost one year after the Asian economic crisis - refusing to adopt a no-nonsense approach by carrying out wide-ranging political, economic and financial reforms and declare an all out war against corruption and cronyism?