Gelam Tree And The Malaysian Economy
By M.Saraswathi
KUALA LUMPUR, July 29 (Bernama) -- Bank Negara Malaysia's annual Sasana Symposium took on a refreshingly different tone this year, with Governor Datuk Seri Abdul Rasheed Ghaffour departing from convention in his central bank address.
Rather than opening with economic jargon, charts and statistics - staples of policymaking speeches that do not always resonate beyond financial circles - he began with an unlikely protagonist - the humble Gelam tree (Melaleuca Cajuputi) that grows along Malaysia's east coast.
It does not look particularly “glam” or striking as a tree, he noted, but what makes the tree remarkable is its ability to thrive in harsh conditions – acidic peat, stagnant water and even wildfires. Rather than resisting its external environment, it adapts to it, he said, adding that “it does so by continually shedding its bark, keeping itself in a constant state of renewal.”
“Structural reforms play a similar role. They enable renewal, peeling away outdated practices and inefficiencies so that the economy remains resilient in a changing world,” said the governor.
The Gelam tree emerged as the unlikely hero at the symposium not only as a focal point of reference in almost all the sessions, but also challenged by the “fame” it got; exactly how policies and reforms should be made - challenged, fine-tuned and agreed on in what fits the country right.
But whether it is the “Gelam” or “Api-Api” tree (mangrove tree) that was cited to be a better protagonist due to its apparent ability to reinvent itself, the crux of any economy remains its financial and monetary stability.
“Without monetary stability and financial stability, the real economy cannot function if the financial sector cannot operate to allocate and mobilise capital efficiently,” said former Deputy Governor of Bank Negara Malaysia (BNM) and former chairman of OCBC Bank Singapore, Datuk Ooi Sang Kuang.
He said the stability seen today was not built overnight but through a prolonged period of slowly building the various foundations for growth, with the financial sector being an important factor in the economy that put in place greater resilience, especially post Asian Financial Crisis.
“How did it happen? Of course, with a lot of guidance from Bank Negara Malaysia, but equally important was the willingness and the participation of the financial institutions to collaborate and work together,” he said at the plenary session entitled: “Resilience: Implications for Policy and Practice.”
Stress testing
Those efforts have proven their worth. When subsequent crises struck, from the global financial crisis to the pandemic, the financial system remained a key pillar of strength. It continued to finance households and businesses, helping the economy absorb the shocks and recover more quickly.
Ooi recalled that there were constant reviews to identify not only new growth opportunities in the economy and financial sector, but also the risks.
“What is also important is that, in addition to identifying the risks, is to do regular tests, stress testing. And I think BNM has done a wonderful job in creating a very strong supervisory framework, which includes testing your balance sheet, testing difficult assumptions, and seeing how you emerge from them,” he said.
Such efforts are not a one-off. Continuously identifying risk and measures to mitigate it, whether through policies or reforms, is a must.
And both involve equally strong political will and tradeoffs, according to Khazanah Research Institute chairman Dr Nungsari Ahmad Radhi. “Reforms are difficult because it is done in the political market, which is separate from the capital and financial market. There are sunk costs to reforms, and firms and households bear sunk costs,” he told the same plenary session as Ooi’s.
“Our policy decisions, which we know we have to do for the better, require some level of pain on the other side. You cannot have the cake and eat it too,” he said.
Better education. Stronger healthcare. Modern infrastructure. Climate resilience. Effective social protection. None of these is possible without the fiscal capacity to support them.
“This required difficult but necessary decisions. Across the last few years, measures such as targeted diesel subsidies, broader subsidy reforms and selected tax adjustments were phased in, giving households and businesses time to adapt,” Abdul Rasheed recalled.
“Today, we have the means to build on that progress. Growth remains steady, and inflation is within expectations. We can afford to take the long view. As the country’s central bank, we continue to maintain a stable macroeconomic environment and resilient financial system. These are necessary precursors for reforms to progress,” he added.
Reverting back to the Gelam tree analogy, Abdul Rasheed said for generations Malay shipbuilders used the bark to navigate uncertain seas. Fitted between wooden planks, it allowed ships to flex with the force of the waves rather than break against them. “That is what resilience looks like. Not resisting change but adapting to it without losing our bearings.”
“In many ways Malaysia’s development story has been built on that same principle. Each generation has faced its own challenges. Each generation has had to make choices about how to respond to a changing world,” he added.
The reforms of recent years are part of Malaysia’s ongoing story, and all stakeholders must be part of not only crafting the necessary policies and reforms but also adapting them to support the economy and build greater resilience. Because without it all, even the best ideas will remain unrealised.
-- BERNAMA