Time to fish in global waters
We need to tap global markets to accelerate the increase in our incomes
I LOVE to fish – you could say I am mad about fishing. I forget everything, I am relaxed, I am focused on what I am doing and the time just flies. And when I get a catch on the line – that’s something else altogether. You have to try it for yourself.
Well, I was fishing with my nephew once in Australia. We were not having much luck but the Aussie guy not far from us was. So we moved closer and closer to him until our lines tangled. We had to cut them free.
He had this to say: “There’s a big beach out there mate.”
I suppose that’s a bit like life too. There’s a whole big space out there and plenty of opportunity but we keep crowding around the same little area and forget about all the potential elsewhere that could be tapped if we just do things the right way.
If you are wondering whether I am taking you on a fishing expedition, no I am not. I am getting to my point already. Our transformation programme focuses on increasing income and the quality of life.
But to increase our incomes we must look beyond our own shores. Wemust explore other markets, find out what they need, market the right products/services, sell it to them and, yes, make money in the process.
By this process, we increase our net trade, the excess of exports of goods and services over imports. Net trade is a direct contributor to our income.
Our gross national income (GNI) is the income that accrues to our country. If you use today’s prices, that will be our current income. Divide this figure by our population and we get our GNI per capita – the average income earned per person.
The sum of goods and services produced in a country in a year is its gross domestic product or GDP. GDP is the total consumption in the country plus investment plus net trade plus an adjustment for inventory changes. The value of this in today’s prices plus the net income we earn from abroad is the total income that accrues to us, our GNI.
The equation is this: GNI = domestic consumption + investment + net trade + net income from abroad + inventory adjustment. In this formula, domestic consumption includes both government and private consumption and likewise for investment too.
Increasing our net trade increases our income as a nation directly and hence our per capita income too. It is a crucial part of becoming a developed country, especially for a small country with limited market. But to do that, there is something crucial and critical that we must do: Be competitive - equal to or better than others at what we do.
Although the world economy is going through a slowdown, Malaysia is arguably not as vulnerable as 69% of our GDP is actually domestic consumption and 22% is investment. Net trade is only about 7% and the rest is inventory. Going forward we must grow our net trade so that exports are much bigger than imports.
A prerequisite for our exports to grow is that Malaysian companies must be competitive. This means they must produce products and services which can compete internationally and win market shares in other countries. This is what South Korean companies such as Samsung and Hyundai have successfully done.
It is about time that Malaysian companies step up their efforts and innovate. Weshould not be vortexed into internal quarrel over limited Government contracts. We shouldn’t just seek Government incentives to succeed in business. The best companies are those that succeed without needing direct Government assistance. They win because they are simply good!
They produce products and services that customers crave for. The right question for our companies: How can we produce Malaysian products that are superior in terms of quality and value for money. And how can we fish and succeed in big markets such as the US, Germany, China, India and UK? These markets are large and the winners are those who are innovators in their field.
Initiatives
Our target is to increase the income per person to US$15,000, by 2020. At the rate we are going, it is likely that we may achieve this ahead of 2020 but we’ll need the initiatives of the economic transformation programme to spur this on.
I will not be far wrong if I said that becoming competitive is one of the most crucial things we need to do to become a developed country and as with all things strategic, it will without doubt be the most difficult. I have discussed some of the changes undertaken in one of my previous columns (see Competition begins at home, June 14).
To recap, there are six areas where we are making major changes:
1. Competition, standards and liberalisation; 2. Improving public finance; 3. Better public service delivery; 4. Defining and reducing the Government’s role in business;
5. Human capital development; and 6. Reducing disparities All these six areas are interdependent. The Competition Act fosters competitiveness locally. Imposition of international standards and liberalisation of various sectors helps to foster competitiveness amongst our own industries and enterprises by bringing them up to international standards.
Improving the government’s financial position enables human capital development and better public service delivery. Defining and reducing the government’s role in business allows private enterprise to flourish while the government’s role is focused on some key areas.
Reflecting this, we have been steadily bringing our budget deficit down from 6.6% of GDP in 2009 to 5.6% in 2010 and 4.8% in 2011. This year, it is targeted to go down further to 4.5% and next year 4%, as announced by the Prime Minister.
The success in all the first five areas will help reduce income and other disparities between the people and help enable a higher quality of life for all, as envisaged in the sixth area. We have also other programmes to reduce disparities.
But if our net trade is small, we will have problems. We need to be focused in the economic areas that we believe we can be highly competitive in and fix the six areas to get the net trade up.
We are at a crossroads. Right now, domestic demand is driving the economy. Yes, that’s good but we must diversify the base, we need to find new markets, new sources of growth, new industries where growth is high. We need to know and improve our competencies so that we understand where we can best compete.
We simply can’t rely on domestic demand forever – we have it now but we must use this interlude to build up our competitiveness.
There is so much more out there if only we take the trouble to look, explore, discover and penetrate. Make a product or provide a service which fits the need of the market at a competitive price and you are in business.
Better still, further down the line, differentiate your products through innovation and invention while staying in touch with the market and you can really begin to start reaping big rewards. Why do people pay so much more for Apple iPhones?
At the end of the day, it’s a people game but you need systems, processes, plans and programmes to produce and attract the best. That is the most difficult thing about transformation, and if you become better at what you do – no matter what you do - you help it along.
But one thing is crystal clear: It’s time to fish in international waters if we want to increase our catch. We are untiringly finding the ways and means of doing exactly that. Help us achieve that!
Datuk Seri Idris Jala is the CEO of the Performance Management and Delivery Unit (Pemandu) and Minister in the Prime Minister’s Department. All fair and reasonable comments are most welcome at idrisjala@pemandu.gov.my