How do we measure the progress of a nation? I propose to measure our progress by an increase in the job opportunities available to ourselves and our children, as well as an increase in our incomes in terms of the quantity and quality of things that we can buy for our families.
In other words, household incomes in addition to corporate profits. We want our companies to make more profits so that they can reinvest and create better jobs and pay better. We do not want companies to make more profits so that the executives can pay themselves better while suppressing wage increases down the corporate ladder.
We started as a commodity-producing country, as in primary commodities. Do we continue to be a commodity-producing country, even as we embark on the industrial development with MNCs providing jobs for our people, as in electronic assembly? In other words, do we continue to produce goods and services where prices are determined by the world markets and not by the quality of our products?
If the prices of our products are dictated by the global commodity markets, then to stay competitive, we have to keep our nominal wages low and the ringgit weak. There are then only two ways by which corporate profits can be increased:
(i) Increase in production volume - two or three shifts
(ii) Fortuitous increase in global commodity prices.
Nominal wages per head stay relatively unchanged. If there is an increase in the trade surplus because of (i) and/or (ii), to keep the ringgit unchanged, the central bank increases the supply of ringgit in the domestic economy which will then be translated in higher domestic prices. Wages per head after adjusting for inflation then decline and the welfare of the people is reduced.
If, in trying to increase their profits, companies pitch local workers against desperate foreign workers on the grounds that foreign workers can work harder and longer for less, and if the government condones such a policy, then the nation is commoditising the unskilled local labour market. In such a situation, our people become displaced in their homeland and become unemployed. Herein lies a potential social problem which can have long-term detrimental impact on our society.
The reason why such a policy should not be condoned is that, in order for the nation to progress and for real wages per head to rise, there must be an increase in productivity gains. There must be corporate and economic structural change which can be initiated by allowing the ringgit to appreciate naturally in the face of the trade surplus. The trade surplus may become less as a result, but companies have already made their profits and therefore there should be pressure for them to invest in other businesses such as by going into downstream industries where there is higher value-add. Corporate profits are then fruitfully spent in upgrading technology and in ensuring productivity gains rather than paying fat dividends to shareholders.
Plantation companies may not wish to reinvest here and may instead wish to venture into the same industries in neighbouring countries (because of similarity of climate). Electronic-assembly companies may wish to move to other low-cost countries (because of similarity in labour laws). Certainly, any change in the key parameters of the country - ringgit and wages - will bring about the dynamics of change and change for the better is called national progress.
Such national progress in the use of more advanced technology and the improvement of productivity gains in the country - in consonance with the aspiration of having more literate and educated children and young generations who can think and innovate and a better life outside of plantations in air-conditioned executive office suites - must be the result of a systemic and consistent government plan and policy that encourages all and sundry among the citizenry and friends of the nation to participate and contribute.
We have to realise that the strategy of encouraging FDI in providing jobs for unskilled and semi-skilled labour is anachronistic to the aspirations of our children.
In moving forward, therefore, we should not get stuck in the policy traffic jam of a national car policy and APs and highways which unjustifiably drains the resources of the young just to be mobile in town. We should be building infrastructure for the application of ICT in order that our young can participate in the global supply chain that links our nation, with the region, the West and the markets. Instead of creating jobs for our young at home, corporates are leaving home to invest in nearby markets to invest.
It may be hard for a nation of traders to invest in technology on a long-term basis. While we are finding our own feet in basic research (which we have), we also need groups of young people to commercialise existing technology (which we have), to find venture capital (which we have), and to find new market (which we may or may not have). We should a set up a network that can cater to investments systematically in more technology as well as traditional technology in downstream activities of old industries.
Whether going for the service industries is the right answer or not is a big subject in itself.