By Dr Teck-Yong Eng
2. Have ordinary citizens benefited from the period of economic boom or growth from the mid to late 1990s? If not, what went wrong and what lessons can be drawn to prevent such recurrence?
Unfortunately, only a minority of people reaped the rewards of the long gone boom period in the Asia region. Again, most would argue that this is due to deeply entrenched corruption, nepotism and cronyism in awarding projects, siphoning state resources, and misusing funds and abusing of power. I would refrain from the topic of corruption and clean governance to focus on economic and wealth distribution.
In a buoyant economic climate, one would expect the government to reinvest revenue growth and savings, improve national and foreign reserves, upgrade strategic infrastructure, and distribute economic benefits taking a long-term view. To a large extent, these key foundations for improving the standard of living and average national income of the population had not been exploited for the majority of ordinary Malaysians. First, can the government account for specific economic wealth distributed across Malaysian states and communities? If so, who have been the beneficiaries? Have the people who live in villages, small businesses and blue-collar workers benefited? It is true that there have been growth in the construction and property sectors. But they are exclusive to several developers with privilege government approvals. Importantly, real estate development derives from natural resources (lands) and employs foreign cheap labours. There is no creation of sustainable value in terms of human capital development. There are also questions on the effective use of natural resources, quality of developments and sustainability of townships in terms of the effects on the environment. Of particular concern is that the people in low-income groups have been sidelined and they remain impoverished in the share of economic wealth. Second, the government had the opportunity to bolster the country’s national and foreign reserves. Yet, it is questionable that the Bank Negara and policy makers had used domestic and export growth to maintain a healthy currency-money ratio without risky exposure to credit expansion and retirement of bank notes, as evident in capital control measures in the aftermath of Asia financial crises. In addition, the monetary base had not appeared to be in balance, as growth in foreign reserves from trade surplus were not exploited to counter monetary effects and purchase of foreign assets. This could have stabilised our currency and balance trade liabilities but the Malaysian Ringgit depreciated unfavourably. To the laypeople, had the government implemented appropriate fiscal measures, the cost of goods would not be exposed to unhealthy inflationary pressures (e.g., wages had not increased as rapidly as prices of goods) and the people would have a higher purchasing power and hence raise their standard of living. Third, due to haste and poor planning (perhaps also self-interest or personal gains) major infrastructure projects (highways, skyscrapers, airports, etc.) had not been appropriately funded. The treasury could have channelled revenues from major corporations (e.g., tax windfalls) and natural resources (e.g., oil) to finance basic infrastructure such as highways instead of passing on the ever increasing and eternal costs (e.g., toll fees) to the people. Although privatisation of certain national assets may improve service quality, there is lack of competition in government projects as well as complicated bureaucracy serving further barriers for the functioning of perfect markets. Furthermore, some mega projects were excessively expensive (I omitted names) and fully funded by the government, as opposed to funding basic infrastructure for the people especially in the context of a developing country. Most importantly, for the ordinary people, there has been too much window dressing at the national and state level when residential roads and associated public services (from clearance of rubbish to uneven roads with pot holes) remain mostly unattended. Again, most infrastructure development comes at a high price without proper planning, affecting local communities financially, socially and environmentally.
3. How competitive is our public services and infrastructure in attracting FDI?
The creation and distribution of economic wealth are influenced by the performance of public services, government aids and infrastructure. Substantial inroads have been made to promote efficient and high quality public services to the people as well as potential investors. But much more remains to be done especially public transport services, health care services and local council services. If the public complained about the standard of such services, it would be questionable that the standard is competitive for attracting foreign investors. One instance is the poorly planned LRT system without sensible forethought of current and future requirements, e.g., short platform, limited and/or fixed capacity, flawed urban and traffic reduction strategy. This is clearly hampering the capital’s competitiveness and discouraging the public from using our LRT system in the city. On this note, I strongly advise the present coalition (Pakatan Rakyat) to avoid benchmarking the KL system and carry out its own feasibility study. Not to mention, we have all heard of irresponsible bus companies rendering transportation services. The implications are not only far-reaching in terms of attracting investors and tourists but also dire, as public safety is unduly compromised. Another area where improvement is long overdue is the provision of efficient banking and financial services. Whilst the banking industry has consolidated in recent years, the standard of service particularly to local businesses is variable and inconsistent (if not substandard by international ratings). For example, there is shortage of trained personnel in providing financial advice on both basic and complex financial instruments and customers usually need to queue for hours to be seen. This is counter productive to the economy, which would defeat all the efforts put into attracting foreign businesses. There is a need for more competition, compliance to an acceptable level of service set by financial services authorities and government support in competitive measures. The government have been making many headlines about investment in public services and positive inflows of FDI. But to many observers, there are gaping concerns with the competitiveness of our public services. In a nutshell, the government and relevant authorities need to address and improve public services and implement visible improvements. Obviously, one would argue that there have been improvements but as long as our public services remain below par compared to rival nations, the government have not yet delivered for the people. In the context of economic and wealth distribution to the poor and marginalised, basic amenities and public services are the backbone for facilitating entrepreneurial pursuit – whereby Malaysians can be more progressive and competitive through efficient support of basic public services.
4. What forms of support and incentives that the government provide for SMEs (if so, have such incentives been accessible to ordinary Malaysians)?
Small and medium-sized businesses are the foundations of thriving local economies and with the right policy the people would not only benefit but also create stability and value in the economy. For example, are there effective measures in improving the agricultural and farming industries in terms of quality and productivity? This could help alleviate shortage of basic commodities such as rice and flour (at least in the short to medium term) and underline domestic economy stability. Malaysia is a fortunate country endowed with the abundance of natural resources, tropical climate suitable for agricultural activities, and surrounded by the ocean with huge potential marine lives export. But years of neglect, lack of strategic vision and under investment meant that the resource-based of a nation’s competitive advantage had been overlooked. Did the government consider the associated opportunity costs when finalising the successive IMP 1, 2 and 3? Even, if there had been investments in the agricultural sectors, they were lacking in economic convictions and competitiveness measures. The federal government have been too preoccupied with industrialisation (see no. 1) and loose sight of the varied nature of economic resources particularly in building on existing resources in the East Malaysia. We could only look back the years of loss opportunity for the people across different states (not necessarily in the capital) to improve their living standard through investment in technology, production techniques, sustainable agricultural activities and business skills for SMEs – benchmark against regional and international standards. The government only recognised this in the Ninth Malaysia Plan and tried to reposition the agricultural and agro-based industry. One could also argue that this is a reactive response, as the country’s reliance on manufacturing competitiveness is dwindling without substantial technical and knowledge transfer strategy in the early years of IMP 1 and 2. In terms of strategic and economic planning, the implications are costly due to scale effects and diseconomies (e.g., playing catch up in the regional market, network barriers, marginal costs) and the Ninth Malaysia Plan can be criticised for the absence of clear strategies to circumvent these negative effects.
Furthermore, piecemeal solutions, sheer planning without strategic vision and poor implementation have negative social and economic implications. For example, what are the complementary economic effects of activities related to industrialisation, agriculture, financial and professional services, tourism, and ICT and knowledge-based services? Evidently, the tourism development (re: the Visit Malaysia Year Campaign) has been poorly coordinated with various substandard ancillary services, e.g., see some of the letters of dissatisfied tourists published in The Star. Many sectors of local businesses are ill prepared and the government campaign falls short of providing relevant aids (e.g., service training, international marketing) to enable small businesses to share the benefit of invisible income from tourism activities. Most critically, the negative word-of-mouth affects future business and competitiveness of this industry – dampening efforts to create economic wealth for many businesses.
In the effort of driving the agricultural industry, there are also underlying social and economic issues mainly due to conflicting resource demands particularly for skilled and trained labour markets. For example, the constant labour/population migration to the capital and industrial states, and perceived economic disincentives in the agriculture-based sectors is creating a myriad of social and cultural problems. There is no clearly visible government action in managing and balancing these demands at the state and national levels through its economic and human resource strategy. This affects the movement of labour and skills development with long-term consequences for the people’s social and economic wellbeing.
(to be continued)
[Dr. Teck-Yong Eng is Senior Lecturer, King’s College London, University of London, School of Social Science & Public Policy. Email: teck.eng@kcl.ac.uk. Blog : http://strategisingmalaysia.blogspot.com/)