At the end of any party, one often finds a mess — both with the venue as well as with the party goers. The extent of the chaos is often directly proportional to the excesses of the party. The bigger and longer the celebration, the larger the hangover.

And we Malaysians have had a good party.

Like children with over-indulgent parents, we are protected from the vagaries of the real world. Consider this: our petrol pump prices are among the cheapest in the world, cheaper even than Somalia’s. This and many other items (deemed essential) have been subsidised by the government. The total subsidy bill comes up to some RM70 billion per year. This is more than 10% of our GDP. Yet, in a country of nearly 28 million people (with 10 million employed), only one million of us are paying taxes. Most of our government’s revenues — which they use to fund these subsidies — come from Petronas.

Children will never complain if they are getting candy all the time, and I suspect neither would citizens. In fact, the converse is true, take away the candy, and they will wail.

But how sustainable is this? Already Malaysia has been running on a budget deficit (that is, our government spends more than it earns in the year) for over a decade now. Last year, the budget deficit was 7% of our GDP. Much of this money comes from the few taxpayers we have, and on top of that we borrow some more. The government’s total debt in 2009 was RM360 billion, or more than 53% of our GDP last year.

Greece, as we all know, is now crumbing under the weight of its debt: the government debt is 115% of GDP and it ran on a budget deficit of over 13%. Interestingly, our numbers suggest we are halfway there. The truth is we don’t need to go halfway around the world to understand the implications of such excesses.

Just three hours away are the islands of the Philippines. When we gained our independence, they too were liberated. At that point, we were poor cousins compared to the Filipinos whose fertile land made them one of the world’s largest sugar producers, and whose white sandy beaches made them a favourite global tourist destination. Their GDP in 1960 of US$6.7 billion was nearly three times ours of US$2.4 billion. Its people are gentle and fluently schooled in two major languages of the world, English and Spanish, on top of their native Tagalog.

Yet in just 30 years, they became the basket case of Asia. By 1990, our GDPs were both at US$44 billion and today, our GDP is 1.5 times theirs. The Philippines did not decline because it was over-subsidised, but rather because it was mismanaged.

And in today’s fast-paced world, with our competitors looking to out-advantage us, falling behind takes a matter of years rather than decades. Lest we forget, our stock market capitalisation in 1996 (just before the Asian financial crisis) was US$320 billion (the second largest in Asia behind Japan, and Singapore’s stock market capitalisation was a whopping US$100 billion less). Now, a dozen years later, our market cap is US$300 billion whilst SGX’s is US$500 billion. 

So, we must urge our leaders to do the right thing, painful though it is for this generation. Once we falter, it will be a while before we get back on our feet, and the pain will be felt not just in this generation, but likely for generations to come.

Painful measures, however, often yield more effective results. Contrast the awakening of two superpowers in Asia: China and India. Both reformed their economies from the 1980’s. India today is a third of China’s GDP (on a purchasing power parity basis) and it has merely a fifth of China’s foreign trade. The reason for this is not because Indian leaders are less insightful about how to reform the economy, but rather, the efforts they took were more superficial, hence, the transformation they wrought was also less deep and pervasive.

China is already a world leader in more ways than one. It is not only its economic numbers that look good. The Beijing Olympics celebrated its ability to flawlessly host the world and also showcased its own sporting prowess. The World Expo, now being held in Shanghai will announce yet another facet of the arrival of China on the world stage. 

Beyond undertaking deep fundamental changes, the biggest thing we can learn from the Chinese is the belief that tomorrow will be better. Sounds simple? Well, then contrast that with a mentality of “let’s take as much now to live more comfortably today”.  This mentality is what drives our citizens’ continued dependency on subsidies, and in the process distorts our consumption behaviour and erodes our competitive spirit.

So, how will this party end?. With history as our teacher, I hope we will withdraw the candies and start administering tonics. We can then project the country onto the right path. Spend where we really need to, and cut back on programmes that would ultimately cripple our nation.

I don’t think we will be the Philippines, nor Greece. We do know we need to become more competitive, more innovative, earn higher income. Our leaders have a plan. They do, however, need to make the tough calls needed to execute this plan. Indeed, I’d go so far as to say that history remembers leaders thus: it’s not the popularity they had when they held power but what the leaders have done to build a system that works and endures way beyond themselves.

That’s why we remember Lincoln and Roosevelt, and have forgotten about Clinton; that’s why history remembers Thatcher differently from Blair, however popular these new-left leaders were during their tenure. I really hope, for all of us and our children, that our leadership will be remembered for putting Malaysia back onto the right trajectory.

Time will tell.

With this, Vincent Chin will conclude his 42 column. He will return occasionally next year to comment on the latest developments in management and leadership.His previous columns in Management@Work can be found under the Management section at www.theedgemalaysia.com

This article appeared in Manager@work, the monthly management pullout of The Edge Malaysia, Issue 804, May 3-9, 2010.