Malaysia Launches Crowd Funding Campaign to Pay for National Debt

The emerging economy of Malaysia has suddenly found out that it is drowning in national debt. This discovery has come after the government and the leader changed. It had now been ascertained that the previous government had been massaging numbers and lying about the debt situation. The previous government claimed that the national debt of Malaysia was about 50% of the nation’s GDP. However, as per revelations made by the new government, the national debt now stands at 80% of the national GDP. Hence, the national debt has almost doubled overnight leaving many Malaysians flabbergasted.

Amidst, the hue and cry, one Malaysian citizen took to the internet in order to raise funds via a crowdfunding campaign on GoGetFunding.com. The national government took a cue from this initiative and launched a crowdfunding campaign of its own. In this article, we will have a closer look at the details of this crowdfunding campaign. But more importantly, we will understand more about Malaysia’s debt problem.

The Crowd Funding Campaign

The crowdfunding campaign launched by the government has not been launched online. Instead, the government has provided a bank account number and other details to the public so that they can make their contributions. The government will only accept donations made in local currency. The account cannot accept donations denominated in foreign currencies. Also, the government has vowed to ensure that there will not be any corruption with regards to this crowdfunding campaign. The list of funds and the debt repayments done with the funds will be listed online maintaining full transparency.

The Malaysian government has so far been moderately successful in raising funds. The government has managed to raise more than $2 million. However, this move has not gone down with several Malaysians. They believe that the national pride is being harmed since the official government is pleading strangers to give it money. The belief is that this will scare away investors who will interpret the government’s actions in a very negative manner. Hence, the government will end up doing more harm than good. It is said that the foreign investors are already abandoning ship. They have already withdrawn more than $225 from Malaysia is the recent few weeks.

However, the Malaysian government does not believe it depends upon charity to pay the bills. Instead, it says that it depends upon the benevolence and patriotism of its population who want to help their motherland in this hour of need. For now, the fundraising campaign is likely to continue unabated despite concerns from the opposition.

Why Did Malaysia Fall Into The Debt Trap?

The current Malaysian government is simply blaming the previous government for the current debt situation. According to the government, a majority of the money was embezzled via an entity called 1MDB or One Malaysia Development Bank. It is said that police have followed the money trail and have recovered a small amount of $700 from the former leader’s account. However, the former leader is defending himself by saying that the money recovered has no link to 1MDB but instead is a gift received from the Saudi royal family. It seems like rampant corruption undertaken by the previous government in the name of development projects is the root cause of the Malaysian debt trouble.

Effects of Malaysia’s Debt Woes:

The current Malaysian government is undertaking cost-cutting strategies in order to fight off the debt woes from the previous government. Some of the radical measures taken by the current Malaysian government are as follows.

• Malaysia is backing out of the Malaysia Singapore high-speed rail transit agreement. Both countries had signed a binding agreement in 2016 that they will build a fast rail line between the cities of Kuala Lumpur and Singapore. This was expected to cut down the travel time from four hours now to ninety minutes. However, now since Malaysia has so much debt, this rail line does not seem like a priority. Hence, this deal is likely to be canceled. The Malaysian government is of the opinion that undertaking this project would lead them to take even more debt which they are not keen on doing right now. Since Singapore has already acquired private land to build a terminus for this rail line, the Malaysian government may have to incur some loss and compensate Singapore for the expenses which have already been incurred.
• The previous government had signed a lot of agreements with China to develop maritime routes in Malaysia’s rural east. The Malaysian government has borrowed heavily from Chinese banks to execute these projects. These deals are now likely to be renegotiated in the light of recent revelations. There are high chances that some of these deals will be scrapped.

The current Malaysian government is taking aggressive steps in order to pay off the national debt. It is also taking populist measures like scrapping the goods and service tax. Hence the idea is that the financial woes of the majority should be eased. The debt reduction is being done mainly by pulling out of projects which the country does not deem to be necessary as of now.

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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.