Much is being done to make sure M'sia can compete with the best on the world
BY now, most people would have heard of the term middle-income trap.
This describes a situation where a nation makes rapid progress in terms of economic growth and in increasing incomes from a low base, but is unable to make that final leap to becoming a high-income nation.
Why this happens is often not clear but economists theorise that once the economic factors of production such as land, labour and capital have been sufficiently harnessed, it needs real gains in productivity to further increase income.
Put in another way, there is only so much land, labour and capital. Once you have made optimum use of these, the next stage is simply to ensure that you use these much more efficiently, and that there is a further increase in productivity.
Are we stuck in a middle-income trap?
It’s too early to answer the question. If we don’t reach high-income status by our target date of 2020, then perhaps we are.
But let me tell you we are doing everything possible to get to high income.
In a nutshell, competitiveness is crucial for high income. We simply must do things better than before and more efficiently.
We need a technological and knowledge leap, and to foster an environment which breeds and encourages competitiveness.
To become a high-income country, we have to be globally competitive, and focus on areas where we can bring our competitiveness to bear with the highest impact in terms of economic contributions and earnings.
Often, we hear the New Economic Model or NEM which is aimed at moving us into a high income country, is dead and is replaced by the Government and Economic Transformation Programmes. Nothing can be further from the truth and I am keen to dispel this transformation blues.
The moves we are taking to transform arise from the NEM - we are NOT replacing it.
We are implementing the NEM as best as we can through measures aimed at making major changes to our operating environment.
The Strategic Reform Initiatives have been put in place as an enabling process.
The National Economic Advisory Council (NEAC) recommended in the NEM, 51 broad and cross cutting policy measures to enable us to realise our goal of transforming our nation into a high income, sustainable and inclusive economy. We are implementing, albeit at different stages, all the 51 strategic reform initiatives.
There are six areas in which we are making major changes:
·Competition, standards and liberalisation
·Improving public finance
·Better public service delivery
·Defining and reducing the Government’s role in business
·Human capital development
· Narrowing disparities
Like charity, competition begins at home.
We introduced the Competition Act, which is being enforced this year so that all anti-competitive behaviour among Malaysian industries can be removed and there will be free and fair competition.
This is a major milestone and our adoption of this, despite powerful vested interests, demonstrates our commitment towards a competitive economy.
We have made amendments to the Standards of Malaysia Act 1996, approved in Dec 2011, to accelerate the development of standards.
This includes reducing the period of adoption of international standards from a year previously to nine months.
These are key requirements for an industry to be internationally competitive.
In the last Budget, 17 sub-sectors were announced for liberalisation, with up to 100% foreign equity participation.
Nine sectors have been fully liberalised while the remaining will be liberalised in stages by end-2012.
For changes to take place we need a healthy fiscal position.
We have made progressive improvements in tax collection, and collected additional RM25bil through improved efficiencies in 2011.
We have other measures in the pipeline to be disclosed in due course.
In terms of public service delivery we are re-engineering business processes. 395 licences will be eliminated by year end, which is estimated to reduce RM729mil in business licence compliance costs.
We are exploring open recruitment between the private sector and the civil service, and introducing real time performance monitoring.
We have introduced a minimum wage to force industry to become more competitive and various other initiatives to improve skills and upgrade the workforce.
Concurrently, we are modernising labour laws, providing a labour safety net, recognising talented women, strengthening human resource management and providing labour market analysis.
In making Malaysians more employable in the ICT industry and addressing the industry’s talent supply issue, the MyProCert programme does its part in upskilling Malaysians with international certification standards on programmes such as iOS Mobile Development and Oracle Certified Professional Programmes.
We are limiting the Government’s role in business to four areas – national infrastructure such as public transport; businesses that need to be owned locally such as defence; specialised industries which require large growth, catalytic or new technology; and situations where the private sector needs co-investors. There is a programme to pare down Government investments.
Last year, 80 companies participated in TERAS – a programme that aims to develop high performing bumiputra SMEs by enabling them to scale up and accelerate their growth, thus making them more competitive in the open market.
In line with the NEM, we are using the principles of being market friendly, merit-based, need-based and transparent in implementing these measures.
So far 50 more companies have qualified under this programme this year.
We are committed to encouraging competition and entrepreneurship.
The Government’s role is to set the conditions for competitiveness, enabling the private sector to take the lead and rise to the challenge. We know if we don’t successfully transform here, we will lose the battle to become a high-income nation.
But we are already taking the measures by putting in place enablers to make the economy more competitive and taking specific measures in a cross-section of areas to achieve the income we need to make us a developed country.
We will get there.
Datuk Seri Idris Jala is CEO of the Performance Management and Delivery Unit and Minister in the Prime Minister’s Department. Fair and reasonable comments are most welcome at email@example.com