The document discusses recent global economic trends that pose threats to Malaysian prospects. It notes that market access has declined for open economies due to fewer trade agreements and sanctions being used as economic weapons in a new Cold War. Supply disruptions from COVID-19, war, and sanctions are contributing to cost-push inflation. Interest rate hikes by Western central banks will likely slow global growth. OECD and NATO policies are largely contractionary and regressive worldwide, risking stagnation, depression, or a protracted period of slow growth for developing countries.

1. Recent World Trends:
New Threats to Malaysian Prospects
KRI-LSE Malaysia Futures Conference
31 May 2023

2. Market access over for open economies?
•WTO single commitment: ‘one size fits all’
•GATT development flexibilities gone from 1995
•Bhagwati: plurilateral FTAs as termites
•From TPP to IPEF: no more market access
•Modest trade growth since GFC even before C19
•Effective US WTO veto, e.g., dispute settlement
•No C-19 waiver X TRIPS public health exception
•Financial liberalization different from trade

3. Cold War, sanctions vs globalization
•Sanctions economic warfare weapons contractionary
•Economic warfare in 2nd Cold War on many fronts:
Trade, investment, technology, finance
•Less, not more market access, even FDI
•Investment sanctions: reshoring  friend-shoring, etc
•Technology war: TRIPS, Huawei, TSMC, Samsung
•SWIFT, other financial transactions curbed
•C-19, war, sanctions: supply-side ‘cost-push’ inflation

4. War inflation: Fuel, food, fertilizer prices up
•Climate, Covid-19 & conflict-induced supply disruptions
•Indexed commodity speculation not price-smoothening
•Ukraine, Russia, Belarus exporters of wheat, fuel, fertilizers
•Fuel, food, fertilizer supplies cut  protracted higher prices
•Energy, food price inflation  insecurity, multiple crises
•Austerity, global warming, resource conflicts  billions hit
•Food insecurity declining slowly, but faster since 2016
•Declining, politicized aid, financing more commercial
•More debt crises: larger, more commercial, more non-bank

5. Interest rate hikes slow world economy
•2008 GFC  ‘unconventional’ QE  share buybacks, etc.
•Supply disruptions: C-19, sanctions: ‘cost-push’ inflation
•Inflation not accelerating; wage-price inflation spiral unlikely
•Arbitrary redefinition of acceptable moderate inflation
•Inflation targeting fetish: Fed, world emulating NZ’s 2%
•Rate hikes blunt tool, also inappropriate
 reduce spending demand, recovery, development
•Interest rate hikes not apt, unnecessary  concerted rises
•1980, 2022 rate hikes deliberate, contractionary, class-biased

6. OECD-NATO policies slowing growth
Domestic and international economic and hegemonic
policies largely contractionary, regressive worldwide:
•Trade liberalization reversed since WTO, TRIPS in 1995
•Investment restricted: ‘Friend-shoring’, sanctions, etc
•Technology: TRIPS, Huawei, C19 waiver, TSMC, Samsung
•US Fed interest rate hikes  concerted increases worldwide
•US fiscal deficit financing  K outflows, esp. from South
•OECD IF tax deal minimal rate due to G7: bad for South
•US geopolitics: military spending; forget SD, global ‘heating’

7. Inducing (world) stagnation/depression
•Developing countries: limited policy, fiscal space to cope
•‘Unconventional’ QE  share buybacks, etc., not growth
•Market, financial pressures for fiscal austerity
•C19, war, sanctions  supply-side ‘cost-push’ inflation
•Fed interest rate hikes  concerted rises  stagnation
•Geopolitical priorities, less for economy, SD, climate
•US exorbitant privilege. Others limited policy, fiscal space
•Major debt crises: larger, more commercial, non-bank debt

8. US policies causing depression
Domestic and international economic and hegemonic
policies contractionary, regressive worldwide:
•Trade: Covid-19, war, sanctions  supply disruptions
•Also, less, not more market access
•Investment restricted: TPP, ‘friend-shoring’, sanctions, etc.
•Technology: TRIPS, Huawei, C19 waiver, TSMC, Samsung
•US Fed interest rate hikes  concerted increases worldwide
•US fiscal deficit financing  K outflows, esp. from South
•US geopolitics: war spending; forget SD, global ‘heating’

9. Protracted stagnation since GFC
•2008-9 global financial crisis  Great Recession
 ‘unconventional’ QE, more financialization, debt
•Market, financial pressures for fiscal austerity
•Fiscal austerity cuts govt spending, investments
•‘Global heating’ effects worse in tropics
•Some commodity prices, exports, incomes up
•Stagflation Contraction, but inflation decelerating

10. Deepening stagnation
•2014: commodity prices, exports, incomes collapse
•Sanctions as economic weapons in 2nd Cold War
•Investment, technology, finance, e.g., SWIFT
•Supply disruptions: ‘cost-push’ inflation
•Climate, C-19, conflict-, sanctions-induced inflation
•Interest rate hikes contractionary, inappropriate
•Greater indebtedness, more market, not bank
borrowing, from commercial, not govt sources

11. Cold War: NATO, CENTO, SEATO, etc.
1955: Bandung: Afro-Asia, new emerging forces
1956: Suez Canal: US vs European colonial powers
1961: Belgrade: non-alignment
1967: ASEAN: ZOPFAN
1979: WHO smallpox eradication
Gorbachev end of first Cold War, USSR: Yeltsin
1960s-80s Non-Aligned Movement now irrelevant?
New non-alignment needed now

12. New Cold War?
• Fukuyama: End of history? Liberal capitalism?
• Capitalism’s triumph? Capitalism v capitalism
• US sovereigntism  Wolfowitz doctrine, G8  G7
• NATO expansion: Crimea, Ukraine from 2014
• Obama ‘Pivot to Asia’ broadened to new Cold War
• Cold War 2 responses: Non-alignment? Pacifism?
• Trump, Abe: reshoring, friend-shoring investments

13. West versus the Rest?
War offers nothing to the peoples of the global South in
their pursuit of peace & sustainable development.
European Union High Representative/EC VP Josep Borrell
“Europe is a garden. The rest of the world is a jungle. And
the jungle could invade the garden…In order to protect
the garden, the gardeners have to go to the jungle…
Otherwise, the rest of the world will invade us.”
@JosepBorrellF pic.twitter.com/eFbbb9LxGl
No Cold War (@NoColdWar) October 15, 2022

14. Cold War 2? Russia, China; Pivot to Asia  TPP
Putin: NATO, Crimea, Ukraine from 2014
Trump, Abe: reshoring, ‘friend-shoring’, AUKUS, IPS
New non-alignment for new circumstances?
Global South: Pacifist, developmental non-alignment?
WEF Davos elite set global norms for corporate interests
Rule of law: property, contract rights; WTO, TRIPS
Countries’ government, civil society responses?
Non-alignment 2.0?

15. Source: Federation of Banks, Malaysia.
1589
1,413
1200
1300
1400
1500
1600
1700
1800
Sep-18 Sep-19 Sep-20 Sep-21 Sep-22
FBM KLCI Index
Kuala Lumpur composite index, 2018-22

16. RMk12 (2021-2025) targeted average annual growth of 4.5-5.5%
Source: Noor Azlan Ghazali. (2022). Advancing the Nation Post-Covid 19 Beyond Recovery. MINDA-UKM APM Guest Lecture Series.
* Expected growth for 2022 is the mid-point of growth range (BNM March 2022: 5.3% - 6.3%).
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
GDP Growth (% per annum)
RMk6 & RMk7
Avg (1991-2000): 7.2%
RMk8 & RMk9
Avg (2001-2010): 4.6%
RMk10 & RMk10
Avg (2011-2020): 4.0%
(2021-2022)
Exp Avg: 4.5%*
Average (1991-2020): 5.3%
17
Malaysian annual GDP growth, 1991-2022

17. 310
320
330
340
350
360
370
380
2016 2017 2018 2019 2020 2021 2022
Billion
(USD$)
$315
$333 bil
$349 bil
$365 bil
$344 bil
$ 355 bil
$376 bil
Source: Noor Azlan Ghazali. (2022). Advancing the Nation Post-Covid 19 Beyond Recovery. MINDA-UKM APM Guest Lecture Series.
5.9%
4.8%
4.4% -5.6%
3.1%
5.8%
CAGR 1%
Contraction due
to Covid 19 crisis
Size of economy
end of 2021
Size by end 2022 with
5.8% growth *
**mid-point projection of Budget *estimate
Budget 2018
5.4%
Budget 2019
4.8%
Budget 2020
4.8%**
Budget 2021
5.6%**
Budget 2022
6%**
More Malaysian growth setbacks, 2016-22

18. Source: Noor Azlan Ghazali. (2022). Advancing the Nation Post-Covid 19 Beyond Recovery. MINDA-UKM APM Guest Lecture Series.
Malaysian trade growth, 2012-2023

19. Singapore, 15.2
China , 12.7
USA , 10.0
EU , 8.1
Hong Kong
, 6.4
Japan , 5.8
Thailand , 4.7
Indonesia , 3.9
Taiwan , 3.6
India, 3.5
OTHER, 26.2
Exports Destinations: Top 5 (52%) and Top 10 (74%)
1
2
3
4
5
6
7
8
9
10
Source: Noor Azlan Ghazali. (2022). Advancing the Nation Post-Covid 19 Beyond Recovery. MINDA-UKM APM Guest Lecture Series.
Large (3%)
20
MY export destinations, 1990-2020

20. Source: DOSM: CPI July 2022
122
128
1.0
4.7
-4
-2
0
2
4
6
110
115
120
125
130
Aug-18 Aug-19 Aug-20 Aug-21 Aug-22
CPI
Index (2010=100) % YoY (RHS)
Malaysian consumer price index 2018-22

21. 517
621
3.3
3.7
3
4
5
6
500
550
600
650
700
750
800
850
Jul-18 Jul-19 Jul-20 Jul-21 Jul-22
Unemployment
Unemployed Persons (thousands) Unemploymnet Rate (%, RHS)
Source: Noor Azlan Ghazali. (2022). Advancing the Nation Post-Covid 19 Beyond Recovery. MINDA-UKM APM Guest Lecture Series.
Malaysian unemployment, 2018-22

22. Thank you
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