The economic policies are no longer enough to keep Malaysia competitive. The NEAC has drafted the New Economic Model to outline a drastic transformation plan.
THE list of what ails the Malaysian economy is no state secret. Opinions on the matter, both verbally and in print, are long and detailed.
A tally of what is wrong would point to a poor education system, corruption, and policies that encourage patronage and rent-seeking, among others. Those grouses, along with a litany of other issues, highlight what has been counterproductive for the Malaysian economy and its people in general.
That has put the authorities in a quandary. Do they upset the status quo or should something be done to shake the cobwebs from Malaysia’s social and economic structure?
The answer, even before reading the outline proposals contained in the New Economic Model (NEM) drafted by the National Economic Advisory Council (NEAC), suggests that radical action is needed immediately. And the draft spells out just why radical changes are needed.
“Malaysia has reached a defining moment in its development path. It risks being left behind or worse still, suffering a reversal in living standards, unless it implements far reaching and comprehensive reforms,’’ says the NEAC in presenting its initial blueprint for changes that need to take place within the country.
The report adds that the economic policies to date are no longer keeping Malaysia competitive enough, regionally and globally, to generate sufficient growth.
“Fundamental reform is long overdue and decisive actions are needed to speed up economic transformation. The NEM report provided a critical review of the deficiencies that preventing Malaysia from moving forward, which we concur,’’ says CIMB Research in its note on the NEM.
“Malaysia is in urgent need of an overhaul as it runs the risk of a downward spiral and also the painful possibility of stagnation if it fails to reinvent itself.’’
The proposals contained in the NEM are the seeds of government policies that will be needed to lift GNP (gross national product) per capita from the current US$7,600 to US$17,700 by increasing growth rates to an average of 6.5% per annum until 2020.
Those bold measures seeks unlock investment, drive labour productivity and boost efficiency while changing the way business has been done over the past decades.
Private sector back to the fore
“Anything that makes Malaysia more competitive is good. More opportunities to grow businesses are deemed good. Otherwise more businesses will leave Malaysia,’’ says Top Glove Corp Bhd executive director Lim Cheong Guan.
“In the past, we used to say that Malaysia would be able to compete with Taiwan or Singapore to be among the best. Right now, we are behind them and we are talking about competing with Thailand or Indonesia. If we don’t start something new in the future we may have to compete with Cambodia or the Philippines.”
The proposals from the NEAC are numerous but essentially they seek to have the private sector take over the driver’s seat of the economy.
That change is crucial as the Government is painfully aware that the decline in private investments in the country needs to be halted and reversed should Malaysia stand any chance of moving up the economic ladder.
The drop in total investments for much of the decade after the Asian financial crisis was cushioned by increased government spending, but no matter how much money the Government was pumping into the economy, it could not make up for the money that the private sector is not investing.
Total investments in the economy has about halved since the crisis and growth has been supported by consumption.
That increase in public investment was done by using Malaysia’s bountiful natural resources but that is unsustainable, given that these are depleting resources, particularly oil. Furthermore, pump-priming the economy has come at the expense of the Government’s own finances.
“It’s timely as we move towards that change. It’s important for Malaysia to move into the new phase to retain and attract talent. And to do that, we need that change,’’ says Spirit AeroSystems Malaysia Sdn Bhd managing director Francis Hiew.
The NEM wants to see the private sector regain its role as the driver of growth and to accomplish that, sweeping liberalisation and pro-market policy changes will be implemented to drive productivity and efficiency.
The NEAC has forecast the services sector to drive growth, followed by the manufacturing sector.
Skilled workers
The report points out that apart from setting the right market-centric policies and incentives, human capital development is of great importance to get the country up towards high income status.
It’s not to say the country does not have the building blocks to pull that off.
The problem of the migration of skilled workers, which has been increasing to an alarming rate, is an indication that the country does possess the necessary skill levels for higher valued added industries. It is just that greener pastures lie outside the country.
More private investments in higher technology and value-added industries is one crucial way of keeping those valuable employees in the country. To achieve that, policies stressing inclusiveness will be championed.
One example of the latent potential of the economy and its people, and the Government’s ability to attract higher value added industries is the decision by Spirit AeroSystems to set up shop in the country more than a year ago.
Spirit AeroSystems is one of the largest tier-1 suppliers to Boeing and Airbus. Malaysia was picked mainly because of its trainable people. Only 8% of its employees are high school graduates; the rest have at least diplomas.
“You talk about growing with the rest of the world. Yes, we are, as we are doing something (as in designing components for the A350) that is not there yet,’’ he says.
Still, there are constraints in Hiew’s operation. For one, he employs 21 engineers but would like to have 60. To overcome that, the company is bringing a training programme to universities in order to get their skill requirement.
Having such programmes is a cost to Spirit AeroSystems and other companies too, and businesses are going straight to the source to get their labour needs.
“Quantity is there but it is not easy to get them. We are also going to the universities directly. The Government should also do things to keep our brightest in Malaysia,’’ says Lim of Top Glove.
He adds that because there is demand for such skilled people from other companies, competition for top students in universities has intensified.
In the process of moving up the value chain, companies too are envisaged to increasingly move away from hiring unskilled or low-wage labour in favour of automation.
Top Glove hires about 5,000 foreign workers and Lim says their presence in the economy is not as bad as it is made out to be.
Such workers create demand for other products and services, and by having them to do more menial work in factories, it allows companies in Malaysia to hire Malaysians to fill managerial or skilled positions.
“If we cannot operate from Malaysia, then those jobs will go elsewhere,’’ Lim points out.
He also counters that it would be unwise for companies to differentiate pay scales between Malaysian and foreign workers, saying that the decisive factor in any of such argument is productivity.
Nonetheless, the shift in processes towards more automation is a gradual and inevitable progression.
“A decade ago, our production line may require 10 workers but today it is 3.5 workers per production line. Every expansion, we need more engineers and chemists and that means we need more graduates every year. And we do hire more than a 100 of them every year,’’ he says.
“Direction-wise, we will be heading towards automation as foreign workers are becoming an issue.’’
Benefits of a high income economy
Moving up the economic value chain calls for more investments into more productive way of doing things.
Investing in new technologies and automation helps open up new avenues of business opportunity while presenting companies with new streams of revenue and profit.
One industry that somewhat encapsulates such a progress may well be the telecommunications industry.
From providing basic call services, telecommunication companies have evolved and grown their scope and influence almost exponentially, whereby new devices and delivery channels such as the Internet have seen hundreds of smaller companies hiring skilled workers churn out the services and packages that would utilise such diverse channels.
Maxis Communications Bhd chief operating officer Jean-Pascal van Overbeke said Maxis, which started out as a cellular company, is today seeing 40% of its revenue from the data business.
“This requires all our people to grow with the industry and learn a new business and changing the business at the same time. This is about learning a new skill,’’ he says.
One of the drivers of growth in the NEM is broadband penetration. As more households and businesses start adopting broadband services, it would be valuable to just not the economy where such services are known to increase economic activity but also for the companies that provide and support such services.
“Part of our business and future is not only to provide ways to allow people to speak with each other. The phone is not a phone anymore but a device which allows us to access a lot of things,’’ he says.
The evolution of the phone and its applications is also creating demand for new skills within companies.
Companies that have a workforce that are used to doing things the old way would have to find the means to adapt.
“In a few years more than 50% of our revenue will be from the Internet and in some ways we will become an Internet company. But 90% of the people employed today have been employed to do the mobile business,’’ says van Overbeke.
Implementation is key
The next step in getting acceptance for the NEAC proposals would come from the public. And to secure the mandate for such a game-changing policy might be a difficult and tedious process.
Revamps to affirmative action policies could strike a nerve with some quarters, and changes that would nudge people off their comfort zones could be viewed with suspicion.
“A lot of it will, however, depend on implementation. The important thing is for everyone to have the opportunity to compete and do away with inefficiency and corruption, and make the government machinery more efficient so as to encourage people to stay here,’’ says Top Glove’s Lim.
To meet the short timeframe to achieve high income status, a lot of the proposals have to be accepted quickly by the public and adopted immediately by the Government.
But for businesses that will be called on for their money and patience, time is a luxury most entrepreneurs will not have.
“If the Malaysian government makes the conditions as competitive as those of other countries, there is no reason why Malaysian businessmen would leave,’’ Lim argues. “Businessmen are not static. They will go to where the best opportunities are offered.”
No comments:
Post a Comment