KUALA LUMPUR: Proactive measures must be enhanced to handle a possible protracted trade conflicts, as it would have “very serious” implications on open economies including Malaysia, according to former senior United Nations official and economist Professor Jomo Kwame Sundaram.
Jomo, who presented the findings of the new United Nations Conference on Trade and Development 2018 report today, cited three main issues pointed by the annual report, namely the likelihood of prolonged trade conflicts, possible financial crisis and to gain from the new digital technologies.
“Malaysia has to prepare for this (trade conflicts) not by simply signing up for trade agreements which do not give us much advantage but instead take proactive measures to promote new areas of investment and try to take advantage of the manner in which this trade conflict are being developed.
“This is because the focus of the US administration is on bilateral (trade relations) and we are not involved in those bilateral relations. So there are opportunities for us,” he said.
The report stated that, whether or not they amount to a trade war, the recent rounds of tariff hikes would disrupt a trading system drawn increasingly around value chains, although trade growth this year is likely to be similar to 2017.
However, the consequences of any serious escalation could, through heightened uncertainty and reduced investment, bring more damaging impacts in the medium term, and these could be particularly serious for countries already facing financial distress.
“With the change in international monetary policies, particularly the flow of funds going into the US because interest rates are going up, many emerging markets will be under a great deal of stress and will be much more vulnerable to financial crisis, especially in the areas where there is asset price bubble, such as property bubble which is financed by debt,” Jomo added.
Therefore, he said the government and authorities need to be prudent and continue imposing unpopular decisions to reduce the country’s vulnerability to such crisis.
Asked whether there are indications that Malaysia is headed towards a recession, Jomo said he did not think so but the country will be more vulnerable if it did not manage its economy cautiously.
“If we were not more careful or more prudent, the likelihood of a financial crisis probably due to external origins would be greater,” he added.
On digitalisation, Jomo stressed that the government needs to come out with “appropriate policies” to benefit from the further development of digital economy.
“We cannot just expect that the development of the digital economy will benefit all of us because the recent trends have indicated otherwise. We should learn from the recent EU restrictions on Google and how they may be relevant to economy.
“We also think that we are getting a good deal by giving up precious data for free in exchange for services of the big digital monopolies… (most do not know that) these data is being used to enhance profits for the already big players mainly in the US – also in the East,” he added.
Source: The Sun Daily