By Dr Teck-Yong Eng
5. What measures have the government put in place to explore and exploit Malaysia’s strategic and cultural position of two major growing economies in Asia, India and China?
Malaysia’s foreign economic policy with regards to India and China remains relatively under tapped from a strategic viewpoint. Despite our geographical proximity, advantage of language and cultural similarity, and established networks with commonwealth countries (serve as potential economic and business conduits), there is no evidence of systematic economic initiatives in helping Malaysian businesses to see the bigger picture of economic rewards and how Malaysia could leverage its economic position.
In particular, what did the government do to promote Proton in China and India? This would not be restricted to selling our national cars but extend to the exchange of technology and knowledge development, e.g., in parts and components manufacturing, joint ventures and strategic alliances. In effect, we could create and add value to related local manufacturers and suppliers, and spur domestic economy. As both India and China are experiencing tremendous growth in the motor vehicle industry the government need to be proactive and implement market-driven strategy (Day, 1994) to form business partnerships and attract potential investors. There are also ample business opportunities in other industries such as construction and real estate. What did the government do to help our construction companies to compete with overseas rivals? For example, the Korean construction industry is benefiting from the growth in China with knowledge of relationship development and marketing strategy (Eng and Wong, 2006; Eng and Spickett-Jones, 2007; Eng et al., 2008) despite not having the language advantage. The tourism industry would also benefit from the increasing wealth of these countries. But various government agencies in the tourism sector are lackadaisical, overlooking obvious provision of basic leisure services for these markets, e.g., language assistance at airports and major tourist attractions.
Government policy could help small and medium-sized business entrepreneurs explore and develop their business in China and India. The representatives from the MCA and MIC could support local business entrepreneurs and build economic ties using the advantage of language and culture such as through specific foreign business missions and conventions. There are also benefits for the halal food industry in targeting Muslim population in China. As a nation of multicultural society, this advantage is readily accessible to ordinary Malaysians and can be leveraged through informed business and marketing strategy. Despite our experience from the success of organising the Commonwealth games (albeit in a smaller scale), the government could have been bold and competitive in helping local businesses to bid for potential projects of the Beijing Olympic Games. The rapid pace of growth in China and India also creates opportunities for our petroleum and chemical business in terms of energy consumption of consumers and industrial markets. The focus of government foreign economic policy on these emerging economic powers would generate a far more pronounced economic effect with longer term economic growth compared to investment in other markets.
Clearly, scarce human and economic resources of our country need to be allocated to the most effective use in maximising return-on-investment. The government need to be selective in developing its portfolio of foreign economic ties and strategic in creating economic benefits especially in addressing wealth inequalities. While the Ninth Malaysia Plan noted the importance of moving the economy up the value chain, it is hard to find any specific action plans at local levels, and metrics for performance and control of strategy in the published document. In brief, value creation on the global commodity chain is progressive and highly influenced by marketing skills such as branding (Gereffi, 1999; Humphrey, 2004; Cheng et al., 2005; Eng et al., 2007, 2008). Information technology application alone would not result in higher value-added services but the stock and combination of intellectual and human capital assets as well as knowledge of resource development are essential for successful upgrading on the value creation chain (Helfat and Peteraf, 2003). Furthermore, economic conditions would moderate this economic aspiration, e.g., the scope and intensity of competition could stimulate innovation (Porter, 1980). This depends on the functioning of an efficient market (e.g., transparent and competitive rather than based on quotas) with appropriate mechanisms to deregulate and privatise major industries. A highly bureaucratic business environment would only serve to jeopardise efforts of eradicating economic equalities in the long-term. This is simply because markets are dynamic (Teece et al., 1997) and at a minimum, protective measures would limit exposure to competitive knowledge.
6. Is the current economic development parallel with human capital investment and/or education policy? In other words, is the country over relying on both spectrum of the labour market (skilled and unskilled) as well as experiencing high levels of brain drain?
As discussed above (no. 1), the pace of human capital development is lagging behind industrialisation (re: first-class infrastructure third-class mentality quoted in the Ninth Malaysia Plan). The economy is also over-relying on cheap labour and suffering from high levels of brain drain. The implications are not only resulting in the increased of socio-economic inequalities but also negative consequences for knowledge transfer and acquisition at both ends of the labour-market spectrum, i.e., government policy would not be motivated to upgrade foreign-labour skills and knowledge development is transient without continuity at the higher level. Unskilled and poor people would be left in doldrums to fend for themselves whereas the rich entrepreneurs would hit stagnation in terms of business development opportunity (e.g., a typical family business/ownership aspiration).
The government education policy is non-competitive in terms of awarding scholarships and university places. At the very least, this cultivates complacency at all levels of the national education system and at worst, this produces incompetent graduates affecting wellbeing of future generations. Although more Malaysians have obtained tertiary and higher education degrees, foreign multinationals seemed prefer to recruit non-government sponsored graduates or foreign personnel. In a u-turn strategy of sponsoring students abroad, the government encourage Malaysians to study at local universities by setting up many new universities and/or granting university status to many former local colleges. But many Malaysians questioned the standard of our universities against other international institutions (e.g., against Singapore’s universities) especially after our recent poor performance in the world university rankings. Some universities attempted to fix this problem by rotating senior management rather than instigating a systematic investigation to enhance higher education standards. Unsurprisingly, the government admitted to the widening inequality of income in the Ninth Malaysia Plan despite the increased levels of education across the board. If the country’s education standard had not been on par with overseas institutions, the majority of students that graduate from local institutions would be at a disadvantage in competitive job markets. Put simply, for future generations (managers, engineers, doctors etc.) to survive successfully in the changing environment the government should not compromise or cut corners when it comes to investment in education. The people who are most vulnerable or to lose are those in low income groups. It is time for the government to take actions – not be hesitant or intimidated by certain self-interest individuals. Furthermore, academic resources are not strictly immobile and they are tradeable in competitive markets (Black and Boal, 1994).
The above questions are not exhaustive and merely scratching the surface of basic economic issues in the functioning of markets and distribution of economic wealth. The government’s past economic records and current economic policies are in tatters. I urge stronger and more informed opposition from the Pakatan Rakyat, and the current government to listen to the people. One has to examine methodically across industry sectors using relevant indicators and analytical tools for the context of our country. The interrelated nature of policy formulation and decision-making in public sectors means that economic performance is not bound to standard economic measures but include cultural and behavioural phenomenon. To fellow Malaysians, I hope that the extent to which we assess changes and judge the government and the coalition (opposition) would be on tangible outputs rather than policy per se. And to the Malaysian media, I extend my support for greater information and press freedom where reporting would be independent, timely and accurate, so that, the people are informed and empowered to drive democratic changes from the elected and relevant government representatives.
Bibliography
Black, J.A. & Boal, K.B.(1994) Strategic resources: Traits, configurations and paths to sustainable competitive advantage, Strategic Management Journal, 15, 131-148.
Cheng, J.M.S., Blankson, C., Wu, Paul C.S. & Chen, Somy S.M. (2005) A stage model of international brand development: the perspectives of manufacturers from two newly industrialized economies – South Korea and Taiwan. Industrial Marketing Management, 34(5), 504-514.
Day, G.S. (1994) The capabilities of market-driven organizations. Journal of Marketing, 58, October, 37-51.
Eng, T.Y., Tu, Y., Fu, G. 2008. Brand development of manufacturing companies in technology related products: The case of China. Global Marketing Conference, Shanghai, Jiao Tong University, Korean Academy of Marketing Science 20-23 March.
Eng, T.Y. & Wong, V. (2006) Governance mechanisms and relationship productivity in vertical coordination for new product development. Technovation, 26(7), 761-769.
Eng, T.Y. 2007. Relationship value of firms in alliance capitalism and implications for FDI. International Journal of Business Studies, Vol. 9(1), June, 43-68.
Eng, T.Y. and Spickett-Jones, J-G. 2007. Marketing capabilities of global manufacturing firms in China and Hong Kong. China Marketing Association Universities Conference, Harbin City, Harbin University, 26 – 29 July.
Eng, T.Y., Rufo, M. and Spickett-Jones, J-G. 2006 Exploring Network Structure and Content for Leveraging Network Resources in Entrepreneurial Marketing. The European Marketing Academy Conference, Athens 35th Conference, 23-26 May 2006.
Gereffi, G. (1999) International trade and industrial upgrading in the apparel commodity chain. Journal of International Economics, 48, pp. 37-70.
Gulati, R., Nohria, N. and Zaheer, A. (2000) Strategic networks. Strategic Management Journal, 21, 203-215.
Helfat, C.E. & Peteraf, M.A. (2003) The dynamic resource-based view: capability lifecycles. Strategic Management Journal, 24, 997-1010.
Humphrey, J. (2004) Upgrading in global value chains. ILO Policy Integration Department, Working paper 28, ILO.
Porter, M.E. (1980) The Competitive Advantages of Nations, London: Macmillan.
Teece, D.J., Pisano, G. & Shuen, A. (1997) Dynamic capabilities and strategic management. Strategic Management Journal, 21, Special Issue, 1147-1161.
[Dr. Teck-Yong Eng is Senior Lecturer, King’s College London, University of London, School of Social Science & Public Policy.
Email: [email protected]. Blog : http://strategisingmalaysia.blogspot.com/)
In short,
Malaysia is stuck between an economic rock and a hard place.
It has not been attracting incoming FDI, petroleum reserves are running down and will result in the country in becoming a net oil importer in a few years’ time and the ruling administration will NOT renege on its decades-old patronage system which is bleeding the country dry.
My suggestion – get out while you can.
“Are you asking ME? Are you asking ME?” AAB.
The growth over the past 2 years has been through commodities – rubber, palm oil, timber, petroleum. Everywhere else, growth has stagnated – high-tech industries, garments, even tourism. Does the Minister of Finance know what is going on ? Before the elections, he called himself “Big Ears”. Now, he is telling everybody he is “Two Ears”.
Even for tourism, Visit Malaysia Year 2007 has been a dismal failure. They came up with all sorts of hare-brained schemes like the RM 5 million grant for any business overseas set up by Malaysians to promote tourism. How many batik boutiques opened up in the UK, Australia and NZ to take advantage of this grant ? How many Malaysian restaurants opened in these countries to take the grants, only to close 6 months later ?
Can the Finance Minister confirm if his own brother’s nasi kandar restaurant in Perth availed itself to this RM 5 million grant ?
Why wasn’t the former Deputy CM of Penang called in by the police for questioning when he led a demo near Komtar?
http://themalaysianinsider.com/mni/4-pkr-leaders-summoned-by-police-party-issues-statement.html
///The government education policy is non-competitive in terms of awarding scholarships and university places. At the very least, this cultivates complacency at all levels of the national education system and at worst, this produces incompetent graduates affecting wellbeing of future generations. ///
This the the root cause of all problems. The push effects made students who had to study overseas on parent scholarship to remain there, firstly to repay the investment, and then to continue with living in an environment of equal opportunity.
When human resources available for knowledge based economy do not match the demands, the government can get the best foreign consultants to plan, they will only remain good on paper.
The government still considers competition within the national boundary among the various ethnic groups more important that competition against the outside world. They are doing well in the consumption side of the economy distributing subsidies.
what planning are we talking about? like the PKFZ? PTP? Westport?
the naval vessels at Lumut? the submarines? and what else?
just go into the details of all these projects then you will find the truth. Up to now, no one can understand the stance taken by AAB in the face of cessless attacks by TDM. Open the can man! let’s get all the worms out of the whole system. this the ALL Malaysians will turn round and say Here is the MAN who walks the talk!
Or did you walk the same walk as your predecessor and hence any can you want to open will be the same? And you still allow the same bunch to decide justice for the nation? Why?why? Why??
We indeed fell for your talk in ’04, and yet at this moment of your Career[?] you still fire BLANKS!!!!
The more one thinks of this issue, one can only conclude that the karma of this nation is indeed on a one-way ticket down the hill.
Malaysian government has been presenting the deficit budget for almost ten year continously. It will bring a lot of problems to Malaysia in the future,as Malaysian government will have to borrow more.
What will happen if Malaysia can no more produce crude oil in the future(2010)?
I failed to understand why AAB is preoccupied iin tabling deficit budget, just to make Malaysians happier and more satisfied with BN government?
I believe that one cannot address all the issues and questions raised by Dr Teck-Yong Eng in isolation of the key fundamental issue of corruption and clean government.
Personal interests – those of the politicians, corruptions and cronyism is the basis upon which most, if not all, economic policies in this country are formulated. If this is the basis, then, how on earth can proper policies be formed for the efficient allocation of scarce resources.
Our policies promotes inefficiencies and waste resources. Even more crucially, accelerates brain drain. So, the first critical issue we need to address is corruption and clean government. This would level the playing field and promotes competition and meritocracy. Only then can market forces kick in to allocate scarce resources efficiently. This allocation may not be perfect but at least much better than where we are now. At the very least, Malaysia can compete competitively in the global market.
We are gifted with many resources but unfortunately, our policies in the past threw all these advantages away. We now need a very integrated economic policy tapping into our strengths that plans for the next 10-20 years.
I agree with the author, SMEs is one area we have not really exploited. Ironically, this is one sector that the US recognized as one of its engine of economic growth. Then we have natural environments that is a magnet for the tourism industry. Also, not to mention our natural resources and human resources.
Our policies in the past also gave birth to a generation of people who wants to make fast bucks in the least amount of time, if possible within 5 minutes. So, how then can we compete globally. No wonder we lag behind.
I believe we really need to clean up the government first, and then formulate long term integrated economic policies to get us back on track. Only then can the whole society prosper and progress together. Only then can we prevent occurences like Hindraf.
I am sorry, I don’t know why so many words are needed. If we factor out the abuse of NEP, rent seeking complexes and corruption, didn’t Malaysian economic policies are just about right in almost every aspect. I believe Malaysia’s economic policies, if carried out objectively and prudently, are capable of accomplishing economic goals widely accepted in any economy. I don’t find most the policies at tangent with economic growth, employment generation, economic efficiency, price stability, economic freedom, equitable income distribution, economic security etc. Some goals may be complementary, some may be in conflict. So, there are always the needs to set priorities. The biggest culprit is all these policies are hijacked by vested interest groups and corruption which rendered the policies totally impotent and useless.
In summary, all these problems were basically due to in-equality in Malaysia!!! without equality among the people of this land, people who are capable are marginalised due to govn policies and implementation where all decisions made were purely based on race and religion!!! when there’s no capable people at the top of the country, the country is run by substandard people who created all the problems listed by Dr. Teck-Yong Eng (I believe one of the reasons why he is teaching in London instead of Malaysia is becoz his talent is not being utilised or appreciated!!!).
Malaysia needs the best to run the country and every organisation!!! e.g. without the best, the police cant catch hold of those who committed crimes who are smarter than them!!! these apply across the society of Malaysia!!!
firstly,it takes time to digest Dr.Teck Yong Eng’s comments and questions raised,the present Pakatan Rakyat has the responsibility to look into these and work out some [ if not all ] probable solution,being new in the administration of states,they can’t afford mistakes but should make all efforts to create a society we Malaysians crave for ,i would suggest the Pakatans to continously improve themselves,by whatever good means and available resources .Uncle Kit’s blog would be much more rewarding venue to discuss issues pertaining to economics rather than a virtual boxing ring, for time is so precious.