Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

Growing the Malaysian Economy

Written by johnleemk on 3:46:44 pm Apr 25, 2007.
Categories: ,

It's highly commonplace to hear Malaysians complaining about the state of our economy. Practically any Malaysian can tick off a long list of complaints about the state our economy is in.

What is not so common, however, are solutions for this problematic situation. Certainly, we won't be hearing anything more than mindless platitudes and reassurances that "semuanya ok" from our lackadaisical government. Neither has the opposition been able to come up with more than vague statements about a non-race-based affirmative action policy, and a few suggestions about handling things like toll hikes, without regard for the bigger picture.

In politics, the small picture matters. In governance and statesmanship, we must look to the long run. I don't profess to be a professional economist or anything of the sort - I am all too aware of my own deficiencies.

However, I think we suffer from a dearth of commentary aimed at providing solutions to the state our country is in, with special regard to the economy. It wouldn't hurt, I presume, for me to get the ball rolling with some of my thoughts about economic policy.

The first thing that strikes me is that in our country, there are really two things that any broad economic policy (or set of policies) must address. The first issue is that of growth and development — how do we assure continued prosperity for the economy as a whole? The second is that of equity and distribution — how do we spread this prosperity amongst all Malaysians?

The present government sells economic development as its strong point. However, there is not much evidence that this development is more than a mirage, based on transient oil money.

Aside from oil, our economy has a number of export industries, dealing mainly in electronics, which are run by foreign multinationals. Palm oil and tourism also make up significant portions of the economy.

Were it possible, I would have prevented the formation of Petronas to be the country's sole oil firm. The lack of competition in this sector, and Petronas' reliance on state largesse, means that our oil is not being extracted as efficiently as possible.

Moreover, the government revenue collected from oil should not be spent on frivolous short-term projects. There is a reason our country is not known for its scientists — our education system is horrible. A significant portion of oil revenue should be invested in education, which will bear long-term fruits for the country, and also make "technology transfer" from the multinationals to local personnel and entrepreneurs easier.

Aside from that, if we want tourism to play a major role in the economy, it does not seem very sensible for the government to keep meddling in this sector. Let the market determine things, not the state. The state plays the role of the facilitator — it should be keeping the roads clean and preserving national heritages, but it should not be directly playing a role in the tourism industry. At the most, it should confine itself to well-targeted incentives to indirectly encourage appropriate activity in the sector.

Overall, however, what is most important for the economy is not any sort of centrally planned development policy (for some reason, despite being staunchly anti-communist, our government is terribly fond of five-year plans). What's most important to encourage economic growth is a climate of competition, transparency, openness, minimal red tape, and law enforcement.

If the government can develop such a climate in the country, the market will take care of the rest. The government should open up all industries and deregulate them, except possibly for some "natural monopolies" such as the post. Transparency and openness should be the order of the day, so all can see how our government and our companies are being run.

Keeping red tape to a minimum is crucial because it makes it easy for entrepreneurs to start new firms. Meanwhile, tough law enforcement will see to it that contracts are not breached, and that businessmen can have some certainty in their dealings — as with corruption, lax enforcement of the laws makes it difficult for businessmen to plan, thus deterring them from taking risks they would otherwise take.

Fostering this climate is something for the short or medium run. But in the long run, it is just as important that we get our human capital up to par with the rest of the world's.

Singapore is already suffering from their memorisation-focused education system; they have been having to import foreign scientists to run their advanced research programmes. Meanwhile, other countries which are not so memorisation-focused, or have alternative streams of education for the elite which do not rely on memorisation, are forging ahead in rsearch.

Malaysia, on the other hand, can't even afford to hire enough teachers. Our education system needs basic reforms if we want to compete in a global economy.

In a future article, we will look at how to deal with the problem of equity, and how much (if any) redistribution of wealth would be ideal for Malaysia.


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Infernal Ramblings is a Malaysian website focusing on current events and sociopolitical issues. Its articles run the gamut from economics to society to education.

Infernal Ramblings is run by John Lee. For more, see the About section. If you have any questions or comments, do drop him a line.


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