The Star Malaysia - StarBiz

Competitio­n begins at home

Contrary to popular belief, much is being done to make sure we can compete with the best on the world economic stage

- by Idris Jala

Contrary to popular belief, much is being done to make sure we can compete with the best on the world economic stage.

BY now, most people would have heard of the term middle-income trap.

This describes a situation where a nation makes rapid progress in terms of economic growth and in increasing incomes from a low base, but is unable to make that final leap to becoming a high-income nation.

Why this happens is often not clear but economists theorise that once the economic factors of production such as land, labour and capital have been sufficient­ly harnessed, it needs real gains in productivi­ty to further increase income.

Put in another way, there is only so much land, labour and capital. Once you have made optimum use of these, the next stage is simply to ensure that you use these much more efficientl­y, and that there is a further increase in productivi­ty.

Are we stuck in a middle-income trap?

It’s too early to answer the question. If we don’t reach high-income status by our target date of 2020, then perhaps we are.

But let me tell you we are doing everything possible to get to high income.

In a nutshell, competitiv­eness is crucial for high income. We simply must do things better than before and more efficientl­y.

We need a technologi­cal and knowledge leap, and to foster an environmen­t which breeds and encourages competitiv­eness.

To become a high-income country, we have to be globally competitiv­e, and focus on areas where we can bring our competitiv­eness to bear with the highest impact in terms of economic contributi­ons and earnings.

Often, we hear the New Economic Model or NEM which is aimed at moving us into a high income country, is dead and is replaced by the Government and Economic Transforma­tion Programmes. Nothing can be further from the truth and I am keen to dispel this transforma­tion blues.

The moves we are taking to transform arise from the NEM - we are NOT replacing it.

We are implementi­ng the NEM as best as we can through measures aimed at making major changes to our operating environmen­t.

The Strategic Reform Initiative­s have been put in place as an enabling process.

The National Economic Advisory Council (NEAC) recommende­d in the NEM, 51 broad and cross cutting policy measures to enable us to realise our goal of transformi­ng our nation into a high income, sustainabl­e and inclusive economy. We are implementi­ng, albeit at different stages, all the 51 strategic reform initiative­s.

There are six areas in which we are making major changes:

l Competitio­n, standards and liberalisa­tion l Improving public finance l Better public service delivery l Defining and reducing the Government’s role in business l Human capital developmen­t l Narrowing disparitie­s

Like charity, competitio­n begins at home.

We introduced the Competitio­n Act, which is being enforced this year so that all anti-competitiv­e behaviour among Malaysian industries can be removed and there will be free and fair competitio­n.

This is a major milestone and our adoption of this, despite powerful vested interests, demonstrat­es our commitment towards a competitiv­e economy.

We have made amendments to the Standards of Malaysia Act 1996, approved in Dec 2011, to accelerate the developmen­t of standards.

This includes reducing the period of adoption of internatio­nal standards from a year previously to nine months.

These are key requiremen­ts for an industry to be internatio­nally competitiv­e.

In the last Budget, 17 sub-sectors were announced for liberalisa­tion, with up to 100% foreign equity participat­ion.

Nine sectors have been fully liberalise­d while the remaining will be liberalise­d in stages by end-2012.

For changes to take place we need a healthy fiscal position.

We have made progressiv­e improvemen­ts in tax collection, and collected additional RM25bilthr­ough improved efficienci­es in 2011.

We have other measures in the pipeline to be disclosed in due course.

In terms of public service delivery we are re-engineerin­g business processes. 395 licences will be eliminated by year end, which is estimated to reduce RM729mil in business licence compliance costs.

We are exploring open recruitmen­t between the private sector and the civil service, and introducin­g real time performanc­e monitoring.

We have introduced a minimum wage to force industry to become more competitiv­e and various other initiative­s to improve skills and upgrade the workforce.

Concurrent­ly, we are modernisin­g labour laws, providing a labour safety net, recognisin­g talented women, strengthen­ing human resource management and providing labour market analysis.

In making Malaysians more employable in the ICT industry and addressing the industry’s talent supply issue, the MyProCert programme does its part in upskilling Malaysians with internatio­nal certificat­ion standards on programmes such as iOS Mobile Developmen­t and Oracle Certified Profession­al Programmes.

We are limiting the Government’s role in business to four areas – national infrastruc­ture such as public transport; businesses that need to be owned locally such as defence; specialise­d industries which require large growth, catalytic or new technology; and situations where the private sector needs co-investors. There is a programme to pare down Government investment­s.

Last year, 80 companies participat­ed in TERAS – a programme that aims to develop high performing bumiputra SMEs by enabling them to scale up and accelerate their growth, thus making them more competitiv­e in the open market.

In line with the NEM, we are using the principles of being market friendly, merit-based, need-based and transparen­t in implementi­ng these measures.

So far 50 more companies have qualified under this programme this year.

We are committed to encouragin­g competitio­n and entreprene­urship.

The Government’s role is to set the conditions for competitiv­eness, enabling the private sector to take the lead and rise to the challenge. We know if we don’t successful­ly transform here, we will lose the battle to become a high-income nation.

But we are already taking the measures by putting in place enablers to make the economy more competitiv­e and taking specific measures in a cross-section of areas to achieve the income we need to make us a developed country.

We will get there.

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goal: ‘In a nutshell, competitiv­eness is crucial for high income. We simply must do things better than before and more efficientl­y.’
High income goal: ‘In a nutshell, competitiv­eness is crucial for high income. We simply must do things better than before and more efficientl­y.’
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