Cover article: Let 12 MP be Malaysia’s exit

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MALAYSIA was supposed to be the fifth Asian tiger economy in the 1990s, around the time it first crossed the threshold of upper middle-income countries in 1992 and whose ambitious Super Multimedia Corridor (MSC) – at the very least – has won the country. global attention from a well-publicized 1998 visit by Bill Gates in the aftermath of the Asian financial crisis. It was also during this same decade (in 1991) that Malaysia, when tabling the sixth Malaysian plan (1991-1995), set itself the ambitious goal of becoming a high-income developed country in all countries. meaning of the term by 2020.

Today, nine months after missing that 2020 deadline, Malaysia will present on September 27 Malaysia’s 12th plan (2021-2025) – the first five-year development plan in the post-Covid-19 world, a plan that must put the country on a more steadfast and sustainable growth path towards that desired high income status, and make it worthy of being called the Asian Tiger Economy again alongside Singapore, Taiwan, Hong Kong and Korea from South.

The timing of the 12MP unveiling is probably better than the original filing date of August 6, 2020, during which even developed countries had not started their mass vaccination campaigns. The historic bipartite deal signed between Prime Minister Datuk Seri Ismail Sabri Yaakob and the main opposition Pakatan Harapan on September 13 – which would mean parliament would not be dissolved until August 1, 2022 – is touted as providing the necessary stability to advance the reforms needed to defeat the pandemic and revive the economy.

Whether the high income threshold can finally be crossed as early as 2024, as the World Bank predicted in March, or whether it remains elusive even after 2028, the Covid-19 pandemic has shown that a number of structural reforms are needed to keep Malaysia relevant in the new normal.

In fact, a number of these key reforms to achieve higher quality growth – including the need to improve the quality of human capital, reform key sectors, and align incentives to strengthen research and development in order to improve the quality of human capital. to move up the value chain and become innovators rather than simple users of technology, create better paying jobs, enhance the quality of local institutions and improve the delivery of public services, strengthen the revenue generation capacity of government and the efficiency of budget spending, and promoting inclusive and equitable growth for all citizens – are strategic areas discussed since at least the 8MP (2001-2005) and continued to be highlighted in the 9MP (2006-2010). ), 10MP (2011-2015) and 11MP (2016-2020).

Non-homogeneous society

Renowned Cambridge University development economist Professor Ha-Joon Chang explains it to execution when asked to comment on Malaysia’s developmental mistakes compared to Asian tigers like Korea South, whose gross domestic product per capita of US $ 1,715 in 1980 was just below Malaysia’s US $ 1,775, but had risen by 2000 to US $ 12,357, or three times the 4,044 Malaysian US $.

“You need a good plan, but you also need to work on it… Malaysia’s execution has not been as good, relatively speaking,” Chang said in an interview before the Covid-19 hit.

Asked about the additional development challenge of having a multiracial society that is not homogeneous compared to the Asian Tigers, Chang noted that racial tensions and other similar cleavages exist in many countries.

“It even exists in South Korea,” he told The Edge, referring to regionalism or “jiyeog gamjeong,” the emotionally charged divide that exists between regions. Judging by how far South Korea has come in its development, the feud has not completely halted the country’s economic advancement, although there continues to be discussions about it when it s it is about predicting the outcome of support for presidential candidates.

Chang – who is from South Korea – agreed, however, that Malaysia could have grown its economy much faster had it been a homogeneous society, and the racial divide may well be one of the biggest challenges facing the country. country must overcome to move forward.

At a recent forum on the new race-based economic policy (NEP), other thinkers including Datuk Seri Nazir Razak, chairman of Bank Pembangunan Malaysia and former chairman of the CIMB group, as well as Tan Sri Mohd Sheriff Mohd Kassim , former Secretary of the Treasury-General and founding member of the G25 group of former senior officials, had urged the 12MP to recast government aid from aid that favors Malaysians to aid to all Malaysians, regardless of race or religion.

No Apple without Uncle Sam?

Malaysia has lost ground, but the fact that it still has a large manufacturing base and a relatively young workforce means that all is not lost.

Here, Chang emphasizes that the role of the state in planning and executing development is crucial in determining a country’s growth trajectory. Like it or not, the government can determine the end of the game with the direction of development spending.

“An airport would be better for fruit or flower exporters, but not so good for steelmakers who need other means of transporting their goods … other means of boosting investment in R&D is necessary for [the pace of] innovation. “And it’s not just about infrastructure and industry linkages, but also about making sure there is enough of a talent pool.” When South Korea decided to to get into electronics, enough investment has been made to develop engineering faculties in universities. Everything is linked, ”he says.

Citing the research of Italian-American economist Mariana Mazzucato, Chang notes that many technological innovations today – from computers and microprocessors to the Internet and to GPS (global positioning system) – are only possible thanks to government investments. American in military intelligence. Tim Harford, author of Fifty Things That Made the Modern Economy, said the world should also thank the US government for the iconic Apple iPhone, because “Siri” and touchscreens are also among the key technologies being developed. was heavily supported by the US government.

A lot of product innovations, Chang says, come from R&D and the state plays a much bigger role than most people realize, although entrepreneurs and private sector investment are important in building the ecosystem. .

For the author of 23 Things They Don’t Tell You About Capitalism and Globalization, Economic Development and the Role of the State, the formula for success and economics comes down to “common sense.”

And competitive advantage doesn’t have to come just from manufacturing, not high-profile consumer products. Even if it is the humble oil palm or durian, what is important is the added value that goes into the final product and the exclusive knowledge and skills. “It could be an important part that goes into a bigger end product… It’s part of the value chain that only you, or you and a few others in the world, occupy. The fewer people who can do it, the higher the value.

“Being a small economy, Malaysia needs to think about the export market to achieve economies of scale. Whatever you decide to do, the third national car or whatever, you have to remember that consumers all over the world have high expectations. “

It’s not just about being good at math and science. As the soft power wielded by the Korean wave shows, competitive advantage can also come from investments in the creative arts sector. The competitive advantage is more about nurturing talent to nurture sectors that can generate better and more sustainable income for investors and citizens – which also broadens the tax base to fuel national coffers – rather than simply having many people with paper qualifications with no real skills that can command better pay.

Here Malaysia would do well to figure out what it has, what it does not have and what it can do better than most countries in the world, and build on these competitive capabilities and advantages.

Ghana’s recent refusal to ship raw cocoa to Switzerland, where higher-value chocolate is made, for example, may be in line with what former Prime Minister Tun Dr Mahathir Mohamed previously told The Edge. – that Malaysia has chosen the easier route by exporting sand as a raw material rather than investing in the capacity to manufacture higher value added products like crystal articles, which can generate much higher margins.

Whatever path it takes, Malaysia’s policymakers need to be clear about its development agenda to get everyone on board. Malaysia cannot afford to lose more than it already has on the development path. If done right, 12MP could be Malaysia’s way out of the middle income trap.

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