Prof Yeah Kim Leng.
KUALA LUMPUR: Malaysia will have a first-mover advantage in joining BRICS because the country will be on the side of the majority, says an economist.
BRICS is an inter-governmental organisation comprising nine countries – Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia and the United Arab Emirates.
Economist Prof Yeah Kim Leng told StarBiz the participation would mean Malaysia had first-hand knowledge of any planning taking place under BRICS, such as new currencies or new payment systems.
“Malaysia will basically be part of one of the largest blocs both in terms of an economic club and population sciences.
“So, these are very key advantages to Malaysia being a neutral country with the aim of expanding its trade ties with all other countries,” he said during the Malaysian Investment Development Authority-Malaysian Institute of Economic Research Budget Insights Forum: Moving Towards 2025 here yesterday.
A first-mover advantage is the competitive advantage gained by the initial significant occupant of a market segment.
According to Yeah, support in case of a crisis is also a solid reason why Malaysia has chosen to be part of BRICS.
“This is in the case of an event like a dollar currency crisis, or maybe a breakdown in the current US dollar banking financial system.
“While it is not in the interest of BRICS to replace it with a new system overnight, there will be some kind of alternative like a back-up plan,” he said.
On the flip side, Yeah said punitive action from the United States on BRICS members may be a possibility, including tariffs.
He said in terms of remaining neutral between China and the United States, Malaysia has a balancing act to do, as the government continues making pragmatic policies and decisions.
“It will be insurance against any disruptive or disorderly transition from the United States being the sole power, especially when it becomes too isolationist, which means the United States turning inwards.
“So, if the United States turns inwards, there will need to be a new leadership role and BRICS is one that is based on a collective leadership,” he said.
He added that under the Barack Obama administration, there was a pivot to Asean, which made it dangerous because there was a concentration of military assets within the region.
As for the Joe Biden regime, Yeah said the world recorded the start of the China Plus One strategy, with many companies and multinationals adopting it subsequently.
“China shifted some of its production facilities overseas. While Vietnam was one of the main beneficiaries, Malaysia too was impacted positively.
“That’s why Malaysia’s surge in foreign direct investment coincided with Biden’s continuing sanctions and policies, as well as anti-China policies that triggered the reaction from private corporations and multinationals,” he said.
Kenanga Investment Bank Bhd
head of economic research Wan Suhaimie Wan Mohd Saidie said Malaysia’s association with China, Russia and even Iran is a risky one.
“One of the issues that is current is the notion of de-dollarisation. I do not see the demise of the dollar anytime soon, or even in the medium term. More than 60% of global trade is conducted in the dollar, and the same goes for many investments,” he said.
Wan Suhaimie noted it is an issue that the United States itself realises, as it faces huge fiscal debts.
“When a country has a weak fiscal position, this is what happens. They start selling bonds, the US equity market is also going up and bitcoin has been proposed as a strategic fund. It is rather radical but the United States is desperate to fix its economy,” he said.
Meanwhile, Yeah also said that US tariff threats are not only towards China but other nations as well, and are likely to intensify when President-elect Trump takes office.
“With Trump’s threats of higher tariffs made during his campaign speeches, Malaysia will need to prepare for a more uncertain and turbulent global trade environment in the coming years.
“Besides de-risking its supply chains, Malaysia could leverage on free trade agreements such as the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to mitigate any adverse impact on its economy should a new round of US-China trade war materialises.”
