Never in our history we have to endure so many crises at the same time; constitutional, political, economic and health. Our failure to manage these fallouts and coupled with protracted lockdown will eventually lead to social, educational and financial crises. We cannot lock people forever and continue with cash transfer and moratorium. Eventually, government will reach a level where they will not have any more tools to grant assistance to rakyat or people of Malaysia. Even now, the policy responses are not adequate reflecting the constraints and some would say stop-gap measures.
This pandemic is a systemic risk. Malaysia is not the only country in the world which had to endure this pain and hardship. However, the pattern of Malaysia’s recovery is quite interesting. When the world struggled, we were able to coordinate a structured responses and minimise the impact of Covid-19. We had one of the lowest mortality rates and in fact, managed to open our economy after several weeks of lockdown. However, our complacency led to our own downfall, instead of tightening any loose-ends, we let our guard down. Since then, we are just breaking every possible record, unfortunately records that we are not proud of. The latest ranking by the Economist and Bloomberg are a few anecdotal evidence of our systemic failure to defeat or even to manage this pandemic.
I quote “This pandemic does not break the system but it exposes a broken system”. As much as we want to admit, this pandemic is unprecedented but our continual failure to protect the well-being of our citizen reflects our fallibility and gaps in policy coordination. Despite spending billions and proclaiming Emergency, we are yet to bring the number of cases under control. Perplexingly, we are continuing with the same approach and it seems bizarre that we are expecting a different outcome by continuing to do so.
We believe this pandemic has exposed many things. Rampant corruption and abuse of power, but the worse of all is the incompetency of our elected leaders. We have leadership who are willing to do things that are beyond human imaginations, like closing down the Parliament when it is supposed to be used as platform to discuss solutions. Flip-flop in setting up SOPs and delayed vaccinations are just a few to highlight why the people of Malaysia are simply fed up and frustrated.
Nevertheless, this is not the purpose of our article, we are not here to repeat the known problems but instead, as concerned citizens, we want to be part of the solutions and charting a better future for Malaysia. We believe that we have to come together as a nation to reform this broken system. For that, we are planning to publish a series of articles to voice out our opinions and thoughts. We want to be part of reform agenda and contribute to nation building.
In this edition, we want to focus on economic issues. We segmentize our analysis in two parts, first on the structural issues and second on our suggestions and recommendations. A quick glance at our condition shows that despite years of economic development, Malaysia remains as an upper-middle income nation. It seems our GDP per capita is stagnating and hitting a plateau even though our overall GDP is increasing. Meaning, the growth is mainly generated from population growth rather than improvement in productivity. In fact, according to World Bank recent report, Malaysia total factor productivity is even lower compared to our regional peers. Our efforts are also lacking in term of embracing innovative economy. We are not able to move up to higher value chain and remains as a nation that depends on commodity prices. To contextualize our argument, we compare our economic position and GDP per capita with Taiwan and South Korea.
So, where do we go wrong? From our observations, we found several structural problems. First, our economic structure and the way we mobilise our financial capital. We establish many Governments Linked Investment Companies (GLIC) and Government Linked Companies (GLC) to balance the private capital which are in the hands of rich individuals. By right, all these GLICs and GLCs have responsibilities to create values by improving productivity and creating jobs for masses. Massive support and protection were given to support GLC, so they become competitive and able to position themselves as global players. In fact, the value created by the GLCs in the past were the main reason behind the success of PNB, Tabung Haji, EPF and many more. Unfortunately, of late, we notice self-interest and individualism behavioura. Many individuals, particularly political figures are exploiting the values created by GLCs. Furthermore, appointment of incompetent board members is jeopardizing the potential of GLICs and GLCs. By right, the good performance of these companies should be distributed to the people who have invested their savings. Instead, from our observation, the CEOs of some companies are well rewarded when the holding companys are merely paying dividends below inflation rate. This is puzzling when the objective of any investment companies should focus on increasing the wealth of investors. The question is how we can do that when we are paying return below inflation rate.
The second structural issue is our high-dependency on cheap foreign labour. Since the supply our foreign labour seems to be endless due to our favourable policy, the desire to automate and innovate were muted or lacking. It is true that we were able to keep our cost down and compete in terms of pricing but we were not able to push our manufacturings and other industries to embrace high-impact economy. Thus, we continue to depend on FDI for technology and now, we have to compete with countries such as Indonesia and Vietnam or even Cambodia. Instead on moving up the ladder and start swimming in a bigger pool, we are now drowning in the same pool. What we are really afraid of is due to our small population, we will never be able to compete with our neighbours.
Third structural issue is related to our human capital. Despite spending billions of ringgits and producing a plenty of graduates, we are not able to create an ecosystem where our graduates can thrive. Just look at our scientific achievements, where are we in terms of quantum computing, nano and biotechnology. Let’s not discuss about space exploration and defence technology in the same breath. We are indeed weak and not funnelling enough resources towards creating a vibrant ecosystem. Only, when we embrace high-impact economy, we can create jobs with good pay. Eventually, strong and resilient workers and professionals just like what we have achieved in the past.
Having argued some on the issues that are becoming impediments to our growth, as concerned citizens, we would like to propose a few recommendations. First, value creations should be inclusive and need to break free from feudalism. Our utmost priority is to create more opportunities to all Malaysians. The young generation of this country must feel that they can excel and thrive in a conducive ecosystem. For a start, we can start with our GLICs and GLCs. We need to revive the concept of empathy and social consciousness. Moreover, reform in our governance structure is crucial and pertinent to our economic reform.
Second, we should be really worried on some of the deep structural issues that will impede Malaysia’s growth and competitiveness. We need big and adventurous ideas and more importantly, spend big on infrastructures to create a vibrant and dynamic ecosystem. As such, we need holistic tax reform to ensure government has enough buffers to create greater opportunities for all Malaysians. We need to spend more on public healthcare and improve social safety net.
There is so much that we can do and we must do. We need to find common purpose to save this nation. This is the time that every single one of us must step forward to contribute to this nation. We need to put our political interest aside and think what is best for the rakyat. Of course, there are many possible solutions but a plenty of options are available. We may want to consider creating a small but dedicated team to chart our way out of this pandemic and restore the credibility of our government and institutions. This should be our utmost priority. We need to address the structural problems now so that we can minimise the residual damage of this pandemic. We must avoid at any cost the permanent scarring to our economy. We should not reach a level where the damage is irreversible. Every crisis presents a great opportunity for a reset. Reform starts from us and collectively we can make our beloved nation better. It is now or never Malaysia.
Assoc Prof Dr. Mohamed Eskandar Shah Mohd. Rasid
Associate Dean School of Graduate and Professional Studies (INCEIF)
This article represent the voice of Jaringan Profesional Malaysia (JPM)