If we think as a layman, high income is more cash.
Implicitly, this means that the income of an individual is high. That individual is also assumed to be an employee. For an employee to earn a high income, he must have the requisite education and technical skills as well as soft skills in dealing and working with people and even playing office politics well.
In exceptional cases, which are probably rampant in a certain type of environment, it is even possible for individuals without the requisite education and technical skills to earn very high incomes compared with the incomes of highly trained individuals simply by just playing politics, though I would also add stealing ideas from the technically trained. In such a case, the environment degenerates to stagnation (and wallows itself in the so-called "middle-income trap") as the technical workers become demotivated and refused to come up with new and better ideas, and the ideas thieves in order to keep themselves in afloat in their own pool will resort to lies and half-truths as well as mouthing motherhood statements and advertising themselves ceaselessly of their half-baked ideas. This is a mud pool which will suck everybody in contact with it in.
When we think of ways of generating high income for individuals, we think of the educational system as well as the type of investments that are being encouraged in the economy. By definition, investments from low-tech industries generate low-income jobs and investments from high-tech industries high-income jobs. When promoting investment, the job is simply to switch the emphasis from low-tech to high-tech industries. This is no sharp thinking, although it is techically correct.
But when we think about how to create a high-income economy, it is an entirely different thinking process from that of an individual. Afterall, an economy is a system that is dynamic and alive and will either grow or shrink depending on whether certain parameters (such as with regard to optimism) are higher or lower than others (such as the propensity to consume and not invest).
It is not enough just to promote massive foreign investments in order to achieve the target of a high-income economy. While it will create high-income jobs if certain types of investments are encouraged, the problem is the acute dependency on foreign investments which are nothing but foreign savings looking for lucrative environments to make huge profits to pay high dividends to their investors many of which would be houshold savings. In a high saving economy with clever managers of money and investments, it is possible to generate a high-income economy where people living comfortably at home in their own natural environment enjoying life with their families and friends because they save and invest well.
They leave the dirty work to the young strong and educated people of third world countries which ideally should be in the lower middle income, for the children of poor third world are not ideal places for growth of profits. The lower middle income countries do nothing but spend their time talking to foreign investors (and not their own domestic investors), and educate their children to be inward and traditional with a smattering of English in order for them to get by in receiving instructions from their supervisors (when they are given no opportunity to wantonly disobey).
The lowering of the educational standard, or rather the systematic removal of the courage to think aloud and share new ideas, no matter how strange, and at the same time able to conduct decent conversations that do not necesssarily be on topics fashionable in the media at that time, is a sad destruction of the growing environment that is a real obstacle to the growth of a high-income economy. High income does not come from copying and stealing; it comes from original thoughts and ideas.
A high-income economy therefore is not created by investments in high-tech industries where government officials collude with multinationals to use their productive generation purely for the purpose of making profits.
A high-income economy is the product of national economic system that encourages the constant destruction of the old and the constant creation of the new as an essential element of the dynamics of a healthy growing environment which what counts the most is the creation of the new frontier of a growing and living entity. It is this building of the new frontier that is, in boring economic terms, called investment and this investment must intrinsically be undertaking by the citizens of that national economy in order that the growth be of a character that is in line with the spirit of the people. To accomplish this, the people must work hard to learn how to think clearly, discern the old from the new, communicate and share, and collaborate and produce new frontiers, save resources for the future, and keep reinventing themselves.
Then we can see a new dawn.
Thursday, April 22, 2010
Tuesday, April 13, 2010
1Malaysia in Washington
Why would Malaysia promote its national unity in Washington?
I have always thought promoting 1Malaysia in our home ground is fine, even if it is called the Faces of 1Malaysia, although I would even argue that having to promote it means that we do not have it in the first place.
I fear the great monotony ravaging our nation. It seems that the only idea or concept that best describe our nation today is 1Malaysia - whether it is a wish, an idea or a reality. We have no way of distinguishing one from the other.
Somebody should be doing some real work if this country is going to go anywhere at all. It will be sad that the signal for a good economy is some stirring in the stock market.
I have always thought promoting 1Malaysia in our home ground is fine, even if it is called the Faces of 1Malaysia, although I would even argue that having to promote it means that we do not have it in the first place.
I fear the great monotony ravaging our nation. It seems that the only idea or concept that best describe our nation today is 1Malaysia - whether it is a wish, an idea or a reality. We have no way of distinguishing one from the other.
Somebody should be doing some real work if this country is going to go anywhere at all. It will be sad that the signal for a good economy is some stirring in the stock market.
Thursday, April 8, 2010
NEM: Subsidies & FTZs
How do subsidies and free trade zones fit into the New Economic Model that we are trying to create for the new Malaysian economy?
In the NEM, what we are trying to do is to create an efficient economy.
Efficiency
But efficiency is NOT a natural state of affairs for an economy. Efficiency is an ideal cooked up by the Enlightenment European gentlemen of the eighteenth century. It is an ideal which I share as an economist.
In other words, efficiency is an ideal that we have to work at in order to ensure its existence. Otherwise, we are likely to find the economy crumbling into chaos and anarchy. Which means free market and free enterprise are not necessarily the path to the economic prosperity that we all dream of - but they may create a world where some would be more equal than others.
Subsidies
Subsidies enter into the economic picture when the world is seen to be unfair to a section of society, usually the poor.
Bear in mind that the poor are the result of the prevailing economic system, and the poor are relative in terms to the rich - except for the absolute poor who are those who have not been able to gain membership into the economic mainstream that the system has evolved into, and which usually means the uneducated, the incapacitated, the single mothers burdened with young children, as well as the very young and the very old.
The social safety net that everybody talks about now should be about the absolute poor.
The huge 40% of society who are considered poor in Malaysia today are directly the result of the economic system that we have - and which could be the consequence of the inefficiency that has arisen from the deliberate attempts by policy to distort the economy in favour of a few based on claims to rights rather than efforts to add to the national output so that all could have more, so long that the output is not hoarded.
When there is a great dichotomy in society - when the parents are illiterate and the children highly educated - there will be great disparity in income and subsequently in wealth as the income is saved and invested. There will be no dichotomy when the economic foundations of society are more even, and when there is a lesser distance between the very top and the very bottom.
When the economic disparity is huge, there is a tendency for politicians to give subsidy in order to pacify the poor majority. This makes the poor less angry but it does not provide them the means to equalise themselves with the rest of the world.
This is why the policy thinking today is to go away from financial assitance to technical assistance. While providing temporary financial assistance to tide over the difficult transition period, there should be injection of technical skills for the poor to lift themselves up by the bootstrap out of poverty. Technical skills can be injected through institutional re-arrangement where every one has an opportunity to enter the training and education stream at all stages.
Removing subsidies in the economy is therefore a policy call that can only be justified at a high-level economic conceptual level. As I have said, efficiency is an ideal I share.
But the reality of removing subsidies is fraud with political difficulties, as entire governments have been brought down by it, as they hit the poor who form the majority of the voting power. The government has been circumspect in this respect in the recent Malaysian case.
Industry-wise, the national car project has been costly and I have discussed this in an earlier post. The costs are the import duty that consumers have to pay as well as the need to push some many new cars on the road which inevitably create traffic congestion and increases the cost of travelling. The resources put into the national car project could have been better used in developing a good public transport system not only in the capital city but through the nation. Instead of a good railway system, for example, we have got a good trunk road.
So instead of a second trunk road, we should now have an improved or a better second railway system.
FTZs
Would we then go the other extreme and say we do not impose import duties and other taxes on all goods manufactured in the country?
If the collection of taxes greatly hinders economic efficiency, then the FTZ for the whole nation would be a good idea.
But taxes have their purpose in providing the means for the richer portion of society through its government to provide some equalisation to the disadvantaged section of society.
If the FTZ is the only means by which industries can become efficient, then the economic system must really be in an aweful state. The FTZ is an argument used for the purpose of competing with neighbours who are using the FTZ as a major weapon for attracting foreign investments when none could be hoped for from within.
The economic system is like the human body. If the body is healthy, it functions without sound. If there is too much noise coming from the system, there will be attempts to apply external band aids to reduce the noise, most likely without healing the internal injuries. We would just be waiting for the system to break down.
The economic system improves and grow healthy with exercise of its people in terms of acquring skills, earning a living, saving and investing and helping their neighbours. The job of policy and politicians is to provide the open space for the exercise to take place, while policing to ensure that there is no mugging that will spring on the hapless workers. Clearing the ground and providing some apparatus to improve the exercise routine may be interesting, but the exercise gets better only when natural obstacles do occur.
In the NEM, what we are trying to do is to create an efficient economy.
Efficiency
But efficiency is NOT a natural state of affairs for an economy. Efficiency is an ideal cooked up by the Enlightenment European gentlemen of the eighteenth century. It is an ideal which I share as an economist.
In other words, efficiency is an ideal that we have to work at in order to ensure its existence. Otherwise, we are likely to find the economy crumbling into chaos and anarchy. Which means free market and free enterprise are not necessarily the path to the economic prosperity that we all dream of - but they may create a world where some would be more equal than others.
Subsidies
Subsidies enter into the economic picture when the world is seen to be unfair to a section of society, usually the poor.
Bear in mind that the poor are the result of the prevailing economic system, and the poor are relative in terms to the rich - except for the absolute poor who are those who have not been able to gain membership into the economic mainstream that the system has evolved into, and which usually means the uneducated, the incapacitated, the single mothers burdened with young children, as well as the very young and the very old.
The social safety net that everybody talks about now should be about the absolute poor.
The huge 40% of society who are considered poor in Malaysia today are directly the result of the economic system that we have - and which could be the consequence of the inefficiency that has arisen from the deliberate attempts by policy to distort the economy in favour of a few based on claims to rights rather than efforts to add to the national output so that all could have more, so long that the output is not hoarded.
When there is a great dichotomy in society - when the parents are illiterate and the children highly educated - there will be great disparity in income and subsequently in wealth as the income is saved and invested. There will be no dichotomy when the economic foundations of society are more even, and when there is a lesser distance between the very top and the very bottom.
When the economic disparity is huge, there is a tendency for politicians to give subsidy in order to pacify the poor majority. This makes the poor less angry but it does not provide them the means to equalise themselves with the rest of the world.
This is why the policy thinking today is to go away from financial assitance to technical assistance. While providing temporary financial assistance to tide over the difficult transition period, there should be injection of technical skills for the poor to lift themselves up by the bootstrap out of poverty. Technical skills can be injected through institutional re-arrangement where every one has an opportunity to enter the training and education stream at all stages.
Removing subsidies in the economy is therefore a policy call that can only be justified at a high-level economic conceptual level. As I have said, efficiency is an ideal I share.
But the reality of removing subsidies is fraud with political difficulties, as entire governments have been brought down by it, as they hit the poor who form the majority of the voting power. The government has been circumspect in this respect in the recent Malaysian case.
Industry-wise, the national car project has been costly and I have discussed this in an earlier post. The costs are the import duty that consumers have to pay as well as the need to push some many new cars on the road which inevitably create traffic congestion and increases the cost of travelling. The resources put into the national car project could have been better used in developing a good public transport system not only in the capital city but through the nation. Instead of a good railway system, for example, we have got a good trunk road.
So instead of a second trunk road, we should now have an improved or a better second railway system.
FTZs
Would we then go the other extreme and say we do not impose import duties and other taxes on all goods manufactured in the country?
If the collection of taxes greatly hinders economic efficiency, then the FTZ for the whole nation would be a good idea.
But taxes have their purpose in providing the means for the richer portion of society through its government to provide some equalisation to the disadvantaged section of society.
If the FTZ is the only means by which industries can become efficient, then the economic system must really be in an aweful state. The FTZ is an argument used for the purpose of competing with neighbours who are using the FTZ as a major weapon for attracting foreign investments when none could be hoped for from within.
The economic system is like the human body. If the body is healthy, it functions without sound. If there is too much noise coming from the system, there will be attempts to apply external band aids to reduce the noise, most likely without healing the internal injuries. We would just be waiting for the system to break down.
The economic system improves and grow healthy with exercise of its people in terms of acquring skills, earning a living, saving and investing and helping their neighbours. The job of policy and politicians is to provide the open space for the exercise to take place, while policing to ensure that there is no mugging that will spring on the hapless workers. Clearing the ground and providing some apparatus to improve the exercise routine may be interesting, but the exercise gets better only when natural obstacles do occur.
Wednesday, April 7, 2010
NEM, NKRAs, SRIs: Putting Them All Together
I have a strange feeling that we are doing everything but nothing may get done.
Why? There is a lot of visioning and missioning going on. But somebody has to stoop down to scoop up the dirt for the path to be clean.
Let me explain myself. (I am still trying to make sense of the NEM: Part 1.)
1. The new administration starts with a Big Bang - on slogan.
1Malaysia: People First, Performance Now.
What this is presumed to mean is that we should all put aside our petty differences and get on with doing some real work. 1Malaysia could be a rallying call to the rakyat to get out of own individual sectarianism and start thinking of ourselves and each other as Malaysians. In other words, let's move to a higher level of distinction for ourselves.
It is also a rallying call to all the races to live in harmony by respecting each other to right to a means of livelihood and economic opportunities so that by each of us putting in our efforts and working hard, we all together contribute to the improvement of our economy. Hence, performance now so that each of us will benefit from our own efforts and the efforts of each other as a result of synergy, momentum and economies of scale for example.
People First, Performance Now can also be a rallying for the civil service so that each and every public servant will work hard and smart in the interest of the people by helping them to solve their day to day problems in earning a living because of the many laws they have to comply, and through new and improved systems to create create efficiency and new opportunities.
1Malaysia is an ideal we all Malaysians should strive for so that we can always think of all Malaysian citizens as one people.
1Malaysia is an ideal now because it is a wish we have but a reality which we do not have.
In other words, there should be an attempt by us to change the way we have been thinking about ourselves and our fellow Malaysian citizens - because the way we have been thinking is not good enough, below our high new ideal.
There is a group who are happy with the old way of thinking, and there is a group who will be happy with the new way of thinking.
Each camp will argue its case in order to persuade more people from the other side to join them. It all boils down to economics and politics: who has the power to ensure that they are the main beneficiary of the position they are fighting for. The thinking is likely to be on the way the economy should be managed.
The slogan therefore operates like an overall label for the regime.
2. The next thing for the government to day is to do something big and significant that will redefine the key parameters for the Malaysian society and economy. What are the major parameters?
They are called the 6 National Key Result Areas (NKRAs): Reduce crime rate, Fight corruption, Improve education, Help the Poor, Improve infra in rural areas, and Improve public transport.
These 6 NKRAs are indeed big and significant because if we are think back to what our comments are on the NEM, we find that we keep falling back to the NKRAs.
So, the NKRAs contain most of the major solutions to the problems that are inflicting society as well as the economy - crime, corruption and education.
The NKRAs deal with issues that affect our national social and moral fabric, as well as our national social and economic infrastructure.
In fact, the NKRAs should be sufficient for the NEM and be dubbed the Great National Transformation Programme. Instead, it is being diminished as the GTP - The Government Transformation Plan.
But, seriously, if we can do the 6 NKRAs well, we should not have to worry too much about the NEM. But no, the NEM has to come into being.
3. The New Economic Model is supposed to be an economic model like no other economic model because it is supposed to be entirely new - if I know my English.
So the NEM is supposed to be this great Economic Transformation Plan (ETP) which is equal in stature to the NKRAs' GTP.
How is the NEM supposed to transform the Malaysian economy? There are 8 Strategic Reform Initiatives (SRIs):
(1) Re-energising the private sector
(2) Developing quality workforce and reducing dependency on foreign labour (NKRA3)
(3) Creating a competitive local economy (SRI1)
(4) Strengthening the public sector (NKRA2)
(5) Transparent and market-friendly affirmative action (NKRA2 & NKRA4 & NKRA5)
(6) Building the knowledge-based infrastructure (NKRA3)
(7) Enhancing the sources of growth (SRI1)
(8) Ensuring sustainability of growth (SRI1).
which can, as shown above, be reduce to just one simple objective: To re-energise, fire-up the private sector by creating a competitive environment for it, by encouraging the exploration of new ways of doing business (innovation) and by sustaining growth by paying more attention to the natural environment.
SRI5 is dicey, as the argument is that affirmation policy is good but there should be no rent which can presumably be created through corruption and collusion. Some may even want to add crime.
4. The "fourth pillar of the national transformation" according to the NEM: Part 1 is the 10MP which should contain details of economic programme for 2011-2015.
*
I think the NEM should just focus on narrow economic issues regarding investments - how to stimulate local investments. While the business institutional framework may be improved by streamlining rules and regulations, there should be greater cooperationa nd coordination by the NEAC with Pemandu to fine-tune the NKRAs to improve on the overall national social and economic framework that defines the general character of the nation.
The greatest piece of announcement in the PM's Keynote Address may be the corporatisation of MIDA which actually tries to address the issue of investments. If MIDA is going to be worthy of its new name of Investment Development (and not just Industrial Development), then there may be a case for NEAC with the NEM to be nested under MITI in order to work closely with MIDA to get investments going.
The real action of the government for transformation should then be given to Pemandu to drive government policies and spending in the right directions along the lines of the NKRAs.
The purpose of the 10MP then may just be for the government to announce the extent to which it is broke, so that there should be greater need for the general public to take care of itself. Hence, efficiency and private investments.
Why? There is a lot of visioning and missioning going on. But somebody has to stoop down to scoop up the dirt for the path to be clean.
Let me explain myself. (I am still trying to make sense of the NEM: Part 1.)
1. The new administration starts with a Big Bang - on slogan.
1Malaysia: People First, Performance Now.
What this is presumed to mean is that we should all put aside our petty differences and get on with doing some real work. 1Malaysia could be a rallying call to the rakyat to get out of own individual sectarianism and start thinking of ourselves and each other as Malaysians. In other words, let's move to a higher level of distinction for ourselves.
It is also a rallying call to all the races to live in harmony by respecting each other to right to a means of livelihood and economic opportunities so that by each of us putting in our efforts and working hard, we all together contribute to the improvement of our economy. Hence, performance now so that each of us will benefit from our own efforts and the efforts of each other as a result of synergy, momentum and economies of scale for example.
People First, Performance Now can also be a rallying for the civil service so that each and every public servant will work hard and smart in the interest of the people by helping them to solve their day to day problems in earning a living because of the many laws they have to comply, and through new and improved systems to create create efficiency and new opportunities.
1Malaysia is an ideal we all Malaysians should strive for so that we can always think of all Malaysian citizens as one people.
1Malaysia is an ideal now because it is a wish we have but a reality which we do not have.
In other words, there should be an attempt by us to change the way we have been thinking about ourselves and our fellow Malaysian citizens - because the way we have been thinking is not good enough, below our high new ideal.
There is a group who are happy with the old way of thinking, and there is a group who will be happy with the new way of thinking.
Each camp will argue its case in order to persuade more people from the other side to join them. It all boils down to economics and politics: who has the power to ensure that they are the main beneficiary of the position they are fighting for. The thinking is likely to be on the way the economy should be managed.
The slogan therefore operates like an overall label for the regime.
2. The next thing for the government to day is to do something big and significant that will redefine the key parameters for the Malaysian society and economy. What are the major parameters?
They are called the 6 National Key Result Areas (NKRAs): Reduce crime rate, Fight corruption, Improve education, Help the Poor, Improve infra in rural areas, and Improve public transport.
These 6 NKRAs are indeed big and significant because if we are think back to what our comments are on the NEM, we find that we keep falling back to the NKRAs.
So, the NKRAs contain most of the major solutions to the problems that are inflicting society as well as the economy - crime, corruption and education.
The NKRAs deal with issues that affect our national social and moral fabric, as well as our national social and economic infrastructure.
In fact, the NKRAs should be sufficient for the NEM and be dubbed the Great National Transformation Programme. Instead, it is being diminished as the GTP - The Government Transformation Plan.
But, seriously, if we can do the 6 NKRAs well, we should not have to worry too much about the NEM. But no, the NEM has to come into being.
3. The New Economic Model is supposed to be an economic model like no other economic model because it is supposed to be entirely new - if I know my English.
So the NEM is supposed to be this great Economic Transformation Plan (ETP) which is equal in stature to the NKRAs' GTP.
How is the NEM supposed to transform the Malaysian economy? There are 8 Strategic Reform Initiatives (SRIs):
(1) Re-energising the private sector
(2) Developing quality workforce and reducing dependency on foreign labour (NKRA3)
(3) Creating a competitive local economy (SRI1)
(4) Strengthening the public sector (NKRA2)
(5) Transparent and market-friendly affirmative action (NKRA2 & NKRA4 & NKRA5)
(6) Building the knowledge-based infrastructure (NKRA3)
(7) Enhancing the sources of growth (SRI1)
(8) Ensuring sustainability of growth (SRI1).
which can, as shown above, be reduce to just one simple objective: To re-energise, fire-up the private sector by creating a competitive environment for it, by encouraging the exploration of new ways of doing business (innovation) and by sustaining growth by paying more attention to the natural environment.
SRI5 is dicey, as the argument is that affirmation policy is good but there should be no rent which can presumably be created through corruption and collusion. Some may even want to add crime.
4. The "fourth pillar of the national transformation" according to the NEM: Part 1 is the 10MP which should contain details of economic programme for 2011-2015.
*
I think the NEM should just focus on narrow economic issues regarding investments - how to stimulate local investments. While the business institutional framework may be improved by streamlining rules and regulations, there should be greater cooperationa nd coordination by the NEAC with Pemandu to fine-tune the NKRAs to improve on the overall national social and economic framework that defines the general character of the nation.
The greatest piece of announcement in the PM's Keynote Address may be the corporatisation of MIDA which actually tries to address the issue of investments. If MIDA is going to be worthy of its new name of Investment Development (and not just Industrial Development), then there may be a case for NEAC with the NEM to be nested under MITI in order to work closely with MIDA to get investments going.
The real action of the government for transformation should then be given to Pemandu to drive government policies and spending in the right directions along the lines of the NKRAs.
The purpose of the 10MP then may just be for the government to announce the extent to which it is broke, so that there should be greater need for the general public to take care of itself. Hence, efficiency and private investments.
Friday, April 2, 2010
NEM: The Real Issue
How do we get ourselves out of the current economic quagmire?
The real issue is clear: Rights and privileges have been equated with monopolies and rent collecting - and this has led to an uncompetitive economy, exactly as propounded by the textbooks.
The change we require is simple: Reduce monopolies and distortions, and encourage multiple players in order to promote competition.
But the major counter argument is this: Why do we need a more competitive economy? With monopolies and economic distortions, we have managed to obtain for ourselves a fairly good standard of living. We are happy with things as they are and we should continue with the status quo.
The problem with this argument is that is that it is predicated on the proposition that there are some people who are willing to work very hard because they will get no government support as they are not indigenous and therefore they must fend for themselves. Thanks to their circumstance, they are forced to get out of the hole they find themselves in.
As these old slaves leave their hole, other unskilled immigrants will have to come in to take over their labours. Our economy therefore gets stuck in the agriculture that we have been fortunate to have inherited from the British colonials as a strategic position in the global economy.
The major hinderance to change in this country is the anachronistic poltical system that propagates sectarianism. There should be an overhaul of our political system. The alternative front based on justice and religion is also a tough alternative for the people to choose.
I hope that the political line could one day be drawn between the liberals and the conservatives - those that want globalisation and those that want a bit more of local control.
But no sectarianism, please. We are Malaysians!
Sometimes, I wonder whether our national problems are really a problem of the positions we take, or are they a reflection of our inability to communicate properly among ourselves, as a result of stereotyping and fear and suspicion. For everybody claims to be reasonable - which I would like to think they are and see things through their eyes.
The real issue is clear: Rights and privileges have been equated with monopolies and rent collecting - and this has led to an uncompetitive economy, exactly as propounded by the textbooks.
The change we require is simple: Reduce monopolies and distortions, and encourage multiple players in order to promote competition.
But the major counter argument is this: Why do we need a more competitive economy? With monopolies and economic distortions, we have managed to obtain for ourselves a fairly good standard of living. We are happy with things as they are and we should continue with the status quo.
The problem with this argument is that is that it is predicated on the proposition that there are some people who are willing to work very hard because they will get no government support as they are not indigenous and therefore they must fend for themselves. Thanks to their circumstance, they are forced to get out of the hole they find themselves in.
As these old slaves leave their hole, other unskilled immigrants will have to come in to take over their labours. Our economy therefore gets stuck in the agriculture that we have been fortunate to have inherited from the British colonials as a strategic position in the global economy.
The major hinderance to change in this country is the anachronistic poltical system that propagates sectarianism. There should be an overhaul of our political system. The alternative front based on justice and religion is also a tough alternative for the people to choose.
I hope that the political line could one day be drawn between the liberals and the conservatives - those that want globalisation and those that want a bit more of local control.
But no sectarianism, please. We are Malaysians!
Sometimes, I wonder whether our national problems are really a problem of the positions we take, or are they a reflection of our inability to communicate properly among ourselves, as a result of stereotyping and fear and suspicion. For everybody claims to be reasonable - which I would like to think they are and see things through their eyes.
Wednesday, March 31, 2010
NEM: NEAC Presentation at InvestMalaysia 2010
Went to the morning sesssion and came away with mixed feelings.
The NEAC presentation was about 10 slides based on the report NEM Part 1: Strategic Policy Directions.
The whole thing has been incredibly boring because it has got everybody talking about what's wrong with the Malaysian economy - and the whole agenda is making the whole nation with interested foreigners to bicker about our economic afflictions.
It would not be difficult to gather the data and details to support various arguments - especially by a well-paid team of young and enthusiastic graduates - and I would even imagine that NEM Part 1 would make a good read in this regard and probably be therapeutic for those reading it.
The tendency of everybody in the session - and even my tendency now - is to try to identify what are the real problems with this economy - but at one point or another, what needs to be said has already been said and probably a hundred times over.
This whole NEM has become a national nightmare.
The common phrase we now hear about the NEM is - the devil is in the details of the implementation. The other one is this - change we must but it may not be easy.
I choose to differ.
I think the most crucial aspect is to identify the core issues and to make core changes to policy and everything else will follow.
If we are going to get ourselves stuck in another rigid (and rigged) - though modified - system, then I think we are going to be no better than before.
The PM gave several guiding principles yesterday. I wish to give some of mine now on the NEM.
1. We should build a flexible and dynamic economic system with basic rules, and not a rigid system based on a new set of rules. There should be dynamism for investors and savers.
2. The key agencies should be answerable to the general public in some way on a regular business basis. We should call up BNM, MOF, MITI. MOE, MOT to explain what is happening on the ground. To my mind, the greatest misjudgement in policy is on the exchange rate which plays a key role in restraining Malaysia from getting out of the middle income. (But there are groups who are happy with us being in the middle trap because they are personally enjoying a good life while cracks and strains are appearing in the rest of the economy.)
3. There are some stale mindsets staying in senior officials. When asked what about the SMEs in the NEM, Amirsham - to the best of his ability - said, "I thought the role of the SMEs is clear - to support the big companies." This is a layman's view. What a shame, Amir! My view is that SMEs stay small and medium sized because they failed to grow to be big international firms, and this could be due to market constraints such as being hampered to serve just local MNCs or GLCs. We should be building a national route for local firms to compete in the global markets.
4. This brings me to the point about the state of the local economy. We have been so dependent on government spending to get the economy to grow since 1990, thanks to the greatness of our previous economic architect, that almost every corporation of any measure in Malaysia looks to the government for some form of business. And the argument now is that since we do not have the cash anymore, we should look to private investments. If the "private" sector is government-dependent, then tenders for government projects become a major issue. To focus therefore on the government tender system is therefore to miss the point.
5. A point is made that middle income economy depends on semi-skilled labour and graduates, and a high income economy depends on masters and PhDs. This takes time. The immediate solution is to grant PRs to foreign skilled professionals as well as double citizenship to Malaysians or ex-Malaysians already abroad.
6. The list can go on. But to create a great list to fix the national economic system is a telling indiction of the government system - that the ministers and the civil servants that we have now are a hopeless lot. They have to be told exactly what they have to do in order to do their jobs well. The so-called detailed Roadmap that is to be in NEM Part 2 a further proof of this paralysis in the public sector. I can be sure that the Roadmap will be extremely detailed and will take years to implement. To blindly implement a detailed Roadmap is to create yet another rigid system, albeit a better one. I think we are not getting out of the box.
7. Being stuck inside the box is a real problem. One of the slides this morning made the point that if our real GDP grows by 6.5% pa for the next 10 years, we must hit US$17,700 per head by 2020 which allows us to sneak in at the bottom of the high-income economy. I would interprete that income to be the top end of the middle-income economy, and if this is even trying, then we could as well slide down the pole to the bottom of the middle income, and below - if we fail to become flexible and dynamic as a society and economy.
8. If our administrative system is already efficient and functioning properly, the NEM is supposed to take a strategic role. We only have to provide one or two or even a handful of specific directions - such as market economy, transparent government, independent courts, poverty eradication - these should be sufficient to get the ball rolling for the system to change. No, instead, we are stuck arguing the details.
The NEAC presentation was about 10 slides based on the report NEM Part 1: Strategic Policy Directions.
The whole thing has been incredibly boring because it has got everybody talking about what's wrong with the Malaysian economy - and the whole agenda is making the whole nation with interested foreigners to bicker about our economic afflictions.
It would not be difficult to gather the data and details to support various arguments - especially by a well-paid team of young and enthusiastic graduates - and I would even imagine that NEM Part 1 would make a good read in this regard and probably be therapeutic for those reading it.
The tendency of everybody in the session - and even my tendency now - is to try to identify what are the real problems with this economy - but at one point or another, what needs to be said has already been said and probably a hundred times over.
This whole NEM has become a national nightmare.
The common phrase we now hear about the NEM is - the devil is in the details of the implementation. The other one is this - change we must but it may not be easy.
I choose to differ.
I think the most crucial aspect is to identify the core issues and to make core changes to policy and everything else will follow.
If we are going to get ourselves stuck in another rigid (and rigged) - though modified - system, then I think we are going to be no better than before.
The PM gave several guiding principles yesterday. I wish to give some of mine now on the NEM.
1. We should build a flexible and dynamic economic system with basic rules, and not a rigid system based on a new set of rules. There should be dynamism for investors and savers.
2. The key agencies should be answerable to the general public in some way on a regular business basis. We should call up BNM, MOF, MITI. MOE, MOT to explain what is happening on the ground. To my mind, the greatest misjudgement in policy is on the exchange rate which plays a key role in restraining Malaysia from getting out of the middle income. (But there are groups who are happy with us being in the middle trap because they are personally enjoying a good life while cracks and strains are appearing in the rest of the economy.)
3. There are some stale mindsets staying in senior officials. When asked what about the SMEs in the NEM, Amirsham - to the best of his ability - said, "I thought the role of the SMEs is clear - to support the big companies." This is a layman's view. What a shame, Amir! My view is that SMEs stay small and medium sized because they failed to grow to be big international firms, and this could be due to market constraints such as being hampered to serve just local MNCs or GLCs. We should be building a national route for local firms to compete in the global markets.
4. This brings me to the point about the state of the local economy. We have been so dependent on government spending to get the economy to grow since 1990, thanks to the greatness of our previous economic architect, that almost every corporation of any measure in Malaysia looks to the government for some form of business. And the argument now is that since we do not have the cash anymore, we should look to private investments. If the "private" sector is government-dependent, then tenders for government projects become a major issue. To focus therefore on the government tender system is therefore to miss the point.
5. A point is made that middle income economy depends on semi-skilled labour and graduates, and a high income economy depends on masters and PhDs. This takes time. The immediate solution is to grant PRs to foreign skilled professionals as well as double citizenship to Malaysians or ex-Malaysians already abroad.
6. The list can go on. But to create a great list to fix the national economic system is a telling indiction of the government system - that the ministers and the civil servants that we have now are a hopeless lot. They have to be told exactly what they have to do in order to do their jobs well. The so-called detailed Roadmap that is to be in NEM Part 2 a further proof of this paralysis in the public sector. I can be sure that the Roadmap will be extremely detailed and will take years to implement. To blindly implement a detailed Roadmap is to create yet another rigid system, albeit a better one. I think we are not getting out of the box.
7. Being stuck inside the box is a real problem. One of the slides this morning made the point that if our real GDP grows by 6.5% pa for the next 10 years, we must hit US$17,700 per head by 2020 which allows us to sneak in at the bottom of the high-income economy. I would interprete that income to be the top end of the middle-income economy, and if this is even trying, then we could as well slide down the pole to the bottom of the middle income, and below - if we fail to become flexible and dynamic as a society and economy.
8. If our administrative system is already efficient and functioning properly, the NEM is supposed to take a strategic role. We only have to provide one or two or even a handful of specific directions - such as market economy, transparent government, independent courts, poverty eradication - these should be sufficient to get the ball rolling for the system to change. No, instead, we are stuck arguing the details.
Tuesday, March 30, 2010
NEM: PM's Keynote Address at InvestMalaysia 2010
I was supposed to attend but didn't make it due to short notice, but managed to catch it live on TV just now.
First impressions:
1. The coverage ranges from poverty eradication, price distortions, middle-income trap, social safety net to high-income goal, political will, change, innovation, Bumiputra policy, investments, EPF, institutional change (MIDA) listed companies, GLCs, divestments, and property development. It is too comprehensive to be focused.
2. I feel at times that the first part of the speech was drafted by an analyst, which is a bit impersonal, while the latter part is a bit more gutsy and more categoric.
3. I feel that poverty cannot simply be eradicated by just raising the income level of the poorest section of society to solve the poverty problem. Poverty is inherent in the capitalistic system that we are in, and therefore needs a system to over-ride the system defect. A higher-income economy does not necessarily mean that will be no poverty. Widening the social safety net is one, but it must be seen as a systemic issue about helping those unable to participate in the mainstream.
3. The real juxtoposition is between change/high-income policy and the Bumiputra policy. There is so much psychological baggage from the latter that it is going to distort the thinking on economic policy. I suppose it is this politics that is hard to shake off. The Bumiputra policy has graduated out of the poverty discussion and is now concerned about rights in taking a cut in the pie. The PM talks about being more transparent in the tender process for Bumiputra where the definition of Bumiputra is now more inclusive of other Bumiputra. It is as lapis a cake as you can get, without the cream or core or investors of the economy.
4. EPF is to divest into foreign markets to make way for foreign investors to come to the Malaysia stock market. It is as silly an idea as you can get. I blame the advisers. I thought the original intention of having an EPF is to fund local development in order to accelerate the growth of the local economy. If you put an accountant in charge of the EPF, you are going to get a non-economic strategy.
5. The change/corporation of MIDA into the Malaysian Investment Development Authority is a step forward in removing the excessive power from the MOF who deals with all things strategically and financially important for the local economy. The trend should continue to remove more authority from the MOF, in lieu of the MOF authority not removed from the PM. (Would this mean that the MIDA CEO will now be half an MOF?)
6. When a PM talks about economic policy, he should just focus on policy. The moment he gets into specific cases, such as the divestments by GLCS and the nature of the divesments, I think we are zoomed back into the same old matrix.
I could have gotten some of the points off, so let's see what the reports say and see if I need to correct myself later.
First impressions:
1. The coverage ranges from poverty eradication, price distortions, middle-income trap, social safety net to high-income goal, political will, change, innovation, Bumiputra policy, investments, EPF, institutional change (MIDA) listed companies, GLCs, divestments, and property development. It is too comprehensive to be focused.
2. I feel at times that the first part of the speech was drafted by an analyst, which is a bit impersonal, while the latter part is a bit more gutsy and more categoric.
3. I feel that poverty cannot simply be eradicated by just raising the income level of the poorest section of society to solve the poverty problem. Poverty is inherent in the capitalistic system that we are in, and therefore needs a system to over-ride the system defect. A higher-income economy does not necessarily mean that will be no poverty. Widening the social safety net is one, but it must be seen as a systemic issue about helping those unable to participate in the mainstream.
3. The real juxtoposition is between change/high-income policy and the Bumiputra policy. There is so much psychological baggage from the latter that it is going to distort the thinking on economic policy. I suppose it is this politics that is hard to shake off. The Bumiputra policy has graduated out of the poverty discussion and is now concerned about rights in taking a cut in the pie. The PM talks about being more transparent in the tender process for Bumiputra where the definition of Bumiputra is now more inclusive of other Bumiputra. It is as lapis a cake as you can get, without the cream or core or investors of the economy.
4. EPF is to divest into foreign markets to make way for foreign investors to come to the Malaysia stock market. It is as silly an idea as you can get. I blame the advisers. I thought the original intention of having an EPF is to fund local development in order to accelerate the growth of the local economy. If you put an accountant in charge of the EPF, you are going to get a non-economic strategy.
5. The change/corporation of MIDA into the Malaysian Investment Development Authority is a step forward in removing the excessive power from the MOF who deals with all things strategically and financially important for the local economy. The trend should continue to remove more authority from the MOF, in lieu of the MOF authority not removed from the PM. (Would this mean that the MIDA CEO will now be half an MOF?)
6. When a PM talks about economic policy, he should just focus on policy. The moment he gets into specific cases, such as the divestments by GLCS and the nature of the divesments, I think we are zoomed back into the same old matrix.
I could have gotten some of the points off, so let's see what the reports say and see if I need to correct myself later.
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