Monday, 13 July 2020

Rebooting Malaysia?

Lee Heng Guie (Executive Director, SERC) on July 3, 2020 made a contribution to Focus Malaysia regarding the above. He describes the Covid-19 pandemic crisis as an opportune time to review our economic, social systems. That assumes political stability for macro-economic growth.

The “new normal” may have trade tensions, policy uncertainties, unstable commodity prices, high unemployment and low consumption. Structural changes/reforms are needed.

Good sense, political will must reset the national agenda on a needs-based approach over “vested interest”. Digitalisation of marketplace, quality investments and innovation to upgrade sectors with competitive advantage are other areas for a reset.

There are at least seven issues/initiatives that require attention and these may not reflect Lee Heng Guie’s views:

(i)    The affirmative action policy in its current form is “a drag” on the economy. The vulnerable ones are left behind, regardless of race. A new needs-based approach, with targeted minimum income for all has to be designed.

         According to World Bank’s Poverty and Shared Prosperity 2016 Report, Malaysia’s Gini coefficient index is at 46.2, slightly better than China (46.5). The U.S. is at 45 and Singapore at 45.9. Australia, Germany and Sweden have their indices below 30. In other words, they have better income distribution and are less prone to social upheavals.
           
          According to the Department of Statistics Malaysia, The Gini coefficient was at 40.7 in 2019. A slight increase from 39.9 recorded in 2016.

(ii)     Upgrade skill sets for the future. The digital/disruptive technologies will change our workflow and processes – it is time to embrace it and move forward. We not only need STEM and TVET but agility, innovation and thinking skills for the workplace.

(iii)       Digital infrastructure has to be upgraded. For too long, one Government agency with monopoly has set the standard. Based on data from Ookla, Singapore has the fastest broadband download speed (153.85Mbps). This is double that of the U.S. (75.94 Mbps). According to Seasia, in 2018 Malaysia was ranked number 30 with internet average speed of 23.86 Mbps for 5GB download. Taiwan was listed as number 1 with 85.02 Mbps and Singapore was second (70.86 Mbps). We have some way to go!

(iv)    Government bureaucracy needs a revamp. MAMPU and others may have done some work but a lot more needs to be done. The E-Government Development Index which measures readiness and capacity to use ICTs to deliver public services showed that Malaysia was ranked 48th, again behind Singapore (7th) and Japan (10th). The Land Office is a great example of how slow subdivision, amalgamation or issuance of strata titles are. There are many other examples. It is a mindset for daily improvements that is required.

         There  is also much room to improve the ease of doing business. We were ranked 12th in 2020. Who is number 1? New Zealand. And number 2? You guessed it – Singapore!

The index is based on an average of 10 sub-indices that covers:
·    Procedures to start a business;
·    Dealing with permits;
·    Securing utilities;
·    Registering property;
·    Getting credit;
·    Protecting investors;
·    Paying taxes;
·    Trading across borders;
·    Enforcing contracts; and
·    Resolving insolvency

(v)        Competitiveness – we are ranked No. 27 in the world. The World Economic Forum has a yearly report, which showed our ranking dropped in 2019. And who is No. 1? Singapore! And the U.S. is No. 2.

               Weak private investment (prior to Covid-19) was a major concern and it still is. Challenges are always there. Unless we learn to be sensitive to prospects and improve public-private partnerships, quality investments will not happen.

(vi)       Global spending on R&D reached USD1.7 trillion in 2018. About 10 countries account for 80% of the spending. This data is from UNESCO Institute for Statistics. South Korea is ranked the highest with the rest as follows:

R&D Spending by Countries
The circles show the amounts countries are spending on R&D in PPP$. Countries farther to the right are spending relatively more in terms of their GDP. Those closer to the top have higher numbers of researchers per 1 million inhabitants.


   What do top 15 countries have in common? Strong spending by business is an underlying factor for success. Many countries also set targets for R&D spending as a share of GDP.

     If you promote STEM, then you have the ability to form R&D clusters linked to private sector and/or universities. Companies in certain sectors contribute to a cess fund for R&D. That applies to rubber, oil palm and construction sectors in Malaysia. More needs to be done and more researchers in healthcare, automotive, petro-chemical, renewable energy and digital networks will help.

(vii)   A merit-based reward system. For a nation to rise it needs people with integrity, accountability, authority and responsibility. A merit-based system delivers that!

It is also good to examine the Nordic corporatist economic model – competitive capitalism with large public sector work force (30%). Low levels of inequality, generous welfare state and reduced concentration of top income are the features.

So, do we want a better future? Or, more of the same and blame someone else (like Trump) for our problems?


References:
1. Rebooting Malaysia, Lee Heng Guie, Focus Malaysia, July 3, 20202
2. Singapore Overtakes the U.S. to Become World’s Most Competitive Country, WEF say, Chloe Taylor, Oct 8, 2019 (www.cnbc.com)
3. Income Inequality in Malaysia Widened Even While Median Household Income Rose to RM5,873 in 2019, According to Latest Statistics, Ida Lim, The Malay Mail, 10 Jul 2020

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