Working on sustaining economic growth momentum
TWO major initiatives which sustain economic growth and development, at least based on our experience, are economic diversification and human capital development.
Continuous efforts to diversify the economy and place emphasis on human capital development has assisted the long-term economic growth of both upstream and downstream activities, while human capital initiatives enhanced productivity, creativity and innovation, adding extra mileage to growth impulses.
The process of economic diversification in our country from tin, to rubber, oil palm, and moving into industrialisation, beginning with imports replacement strategy and later to labour-intensive industrialisation and export orientation, have sustained economic growth through the eighties and nineties.
The economy is now building its services industries so as to lead the nation to have more tertiary industries catering for the increasing number of qualified Malaysians, who have acquired skills and qualifications at tertiary level of education.
The challenge of attaining a higher growth are, however, more difficult now, largely as a result of our own doing; we have relied for a long time on labour intensive industrialisation, on foreign labour and foreign direct investments, which have less affinity for building local capacity in research and development in the local economy.
It is because of this that many of our Government Linked Companies (GLCs), such as Petronas, Telekom Malaysia, Tenaga Nasional, and DRB-Hicom, still have a prominent role in the economy, as they take long-term view of the economy by growing local entrepreneurship, talent and technology.
Unfortunately, many Malaysians do not realise this and keep on circling back to the point that GLCs compete with local enterprises.
As said earlier, the challenges for us to achieve higher economic growth, of between six and seven per cent a year, may be quite daunting as we face the fourth wave of industrialisation, based on the evolution of the digital economy, anchored upon information technology, the Internet of Things, design, and creativity.
Old techniques and methods are destroyed, while new apps are being created as soon as old techniques become obsolete.
In a way, this process of “creative destruction”, is the essence of capitalism, as explained by earlier observers of economic growth — the likes of Schumpeter and Adam Smith.
How ready are we, as a community, to enter the era of the digital economy? Are our critical institutions such as Malaysian Investment Development Authority (Mida), which has done a wonderful job in the past years, prepared to promote industries which contribute to the digital economy?
Have our skills training institutions prepared, or even trained, our work force to meet the needs of that economy?
Have we done a thorough exercise to examine what are the activities and sub-activities which are under the guise of the digital economy?
At this point of time, the level of disaggregation in our Input-Output Table, which expresses the country’s total output as a production lineage, would not be able to furnish more details of the activities related to the digital economy to help plan the various promotional efforts, including the provision of relevant incentives for such activities.
It is equally pertinent to note that the nature of digital economic activities may be largely service in nature and not much can be “commoditised” to allow easy identification. Thus, the common features of services, (information and communications technology economy, and high skills), are often embedded in the activities and products which need to be promoted.
We may be largely preparing ourselves for the manufacturing of bodies and parts, which are items that can be easily “commoditised”. We may also need to prepare ourselves for the activities related to systems, avionics, communications, etc, which create more value.
Finally, moving towards this direction, is the need to establish the whole ecosystem and supply chain that can support the unimpeded development of these industries, which have to meet high international standards and expectations.
In this regard, the policymaking apparatus and planning machineries need to take stock of where we are and what we need to do immediately and in the medium term to ensure that longterm interest is well positioned in our transformation towards a digital economy.