In The Global Economy in Turbulent Times, economist and former central banker Tan Sri Lin See-Yan presents his observations and analysis on the most pressing issues facing the world’s financial future. In this excerpt, he looks at what Malaysia needs to do to compete on the global stage.
MALAYSIA is a small nation. We need to run faster than most to preserve our place in the sun. Today, Northeast Asia and India are changing so fast; what a difference a year makes. Today, geography is history!
What’s at stake is our ability to compete and grow in a sustainable way to raise living standards. Clearly, we need to realise the following:
1. Time is not on our side — we must be able to move at a pace that meets stressed (not soft) targets.
2. The world (especially Asia) moves on, whether we like it or not — it waits for no one.
3. The window of opportunity (to move up the value chain) is still open, but we are already late — if not taken, we’ll be left behind.
4. For inward foreign direct investment from the US, eurozone and Japan, Malaysia is beginning to be off the radar screen — we have to work real hard to really get back in.
5. Our best bet is to aggressively build on our long-standing relationship within the region and with China and India; to really succeed we need to be small-and-medium-enterprise (SME) focused and innovation-based.
6. We must be seen to be real “hungry” — be prepared to compete and fight for our niche-space.
7. Only private initiative and enterprise can make us efficient and sufficiently competitive to bring out the “animal spirits” so critical for success in entrepreneurial endeavours.
NEM is pivotal
That’s why the New Economic Model is so pivotal; it’s the change that it brings to bear on our society. For the NEM to work, the innovation-based economic engine functions best within an ecosystem that fosters its own incubation — an environment that: (1) promotes the rule of law and a clear sense of security; (2) builds unity in the face of diversity; (3) embraces family values and a sense of community; (4) practises transparent democratic politics; (5) inculcates a fair and open society; (6) fights corruption; and (7) prioritises education. It grows, draws and retains talent, especially in science and technology. Indeed, we need to work much harder at creating a more hospitable ecosystem.
But, this is just a necessary but not sufficient condition for the NEM’s success. The new 1Malaysia drive helps. We will need to do better in practice. Sure, it is an ongoing process. For without it, even the best of economic models will be suboptimal. But, it is important we get this right. The US experience has shown that given the right environment, innovation has driven more than one-half of its productivity growth over the past 50 years. As I see it, innovation simply means fresh approaches that create value and societal well-being. While easier said than done, innovative value-added has to permeate every facet of our economic life — from responsible politics to government policies and procedures, to business methods and organisation, and to household practices and systems.
Finally, there is always the issue of focus — on new growth areas. These not only lend support to the innovative-based economy but, equally important, provide a new source of strength to capitalise on new opportunities to expand both the gross domestic product and gross national product. It must involve a sharper shift to expand the services sector, where the real stimuli are expected to emanate from vibrant entrepreneurial SMEs — the very essence of middle-class progression.
There are four major services pillars of support:
1. Health (wellness) and life sciences
3. Education and human resource management
4. Renewal energy and the environment (green growth)
Education remains our first and last defence — the acquisition and management of knowledge capital remains key in building a pool of global-savvy talent and niche skills.
The Nasi Lemak Principle
The centrepiece of the NEM is to drive innovation. This is particularly timely. History teaches that the promotion of and spending on innovation must be sustained through tough times in order to better compete when the new cycle of growth emerges. I see this being done by private enterprise in Japan, China, India, South Korea and Taiwan, where research and development spending remained aggressive despite recession. To think about it, innovation is really rather simple, for the mark of true innovation is not the grand gesture but the simple things done well. I call this the “nasi lemak” (a popular fragrant rice dish served with fish or meat that is commonly consumed by Malaysians) principle. It has done well for the folksy nasi lemak. It will do well for the NEM.
What, then, are we to do?
There are no quick fixes. Building strong fundamentals helps. But they are not enough. Sure, we have lots of problems. So do others. What’s important is to make continuing progress: The trick is to make sure today is better than yesterday, and tomorrow, better than today. The direction is vital. In no time, we can be on our way. Similarly, leadership is important. But it is not enough. Leaders have to make serious political commitments to build unity out of diversity, and to use a lot of political capital to bring about real change. It is important that change is made clearly transparent and highly visible. That change is seen in everything we do — applying the nasi lemak principle in processes and procedures, systems and regulations, organisations and methods. This is the only effective way to deliver. And, we need to deliver with a great sense of purpose and passion!
Concommitedly, two traditions need to be immediately revived and actively inculcated:
1. A tradition of predictability in public policy, consistency in its application and transparency on the ground. This builds credibility.
2. A tradition of integrity, strong work ethic, hard work and, always, value-added service. This strengthens credibility.
In the final analysis, the NEM works only if the ecosystem — within its bosom the model is conceived and in turn reinforced — is soundly grounded in innovation and creativity and solidly anchored in private enterprise.
* Reproduced with the permission of John Wiley & Sons
** This story first appeared in our new digital publication Wealth, a section within the new digitalEdge weekly. Click here to subscribe to our digital products for the next three months.