Towards A Competitive Malaysia #16
Chapter 4: On Being Competitive (Cont’d)
Competitiveness and Productivity
To most, being competitive would have the same meaning as being efficient. Economists have a more precise term to describe essentially the same thing: productivity, “the ratio of output per unit of input.â€4 In simple English, it means how efficient you are at producing goods and services for a given resource, whether it is land, labor or capital, or what value you can produce by using the same amount of resources. In the earlier example of “return on investment,†it is a measure on the productive use of capital. The more usual measurement of productivity is the value of goods and services are being produced per hour of labor. This is the statistics tallied by governments.
The McKinsey consultant William Lewis in his book, The Power of Productivity, defines the term more elegantly: “Productivity is simply the ratio of the value of goods and services provided consumers to the amount of time worked and capital used to produce that goods and services.â€5 Note the important proviso: provided consumers (users). One may be good at snake charming or arguing but if consumers do not value those activities then they would be useless or “non-productive.†This caveat is important for in the former Soviet economy, government factories were very efficient (“productiveâ€) in producing goods; the problem was those goods were not wanted in the marketplace.
American rice farmers by using combines, fertilizers, and high-yield seeds are so much more productive than Malaysian ones because an hour of work by the former produces more rice than an hour’s work by the latter. Higher output translates into higher income; hence American farmers drive Cadillacs and vacation in Hawaii, while Malaysian farmers exist just above the poverty level. This is what we mean when we say that American farmers are much more productive. Because of their productivity, American rice is cheaper in Malaysia than the local variety, despite American labor and land being more expensive, plus the added transportation costs!
The crucial point is that just because your workers are being paid more for their labor (as with American farmers), it does not mean that their subsequent products would be more expensive. It depends on that all-important measure:Â productivity.
Granted, those farmers receive massive federal subsidies, America’s commitment to the World Trade Organization notwithstanding. For the most part those farmers use their subsidies to enhance the productivity of their operations, and thus increasing America’s farm exports. Not always. Every year the US Department of Agriculture pays farmers handsomely to leave their land fallow and dairy farmers to cull their cows, all in the name of “price stabilization.â€
Ultimately when we refer to the productivity and competitiveness of a nation, we are referring to the well being of its citizens. While we cannot quantify this directly, we can infer it through such indices as the per capita GNP (income), longevity (a measure of health), and level of education. These could be considered the equivalent of a nation’s bottom line.
National prosperity is strongly affected by the competitiveness of the citizens and their enterprises. As long as a nation improves its productivity, the standard of living of its people will continue to climb. Declining productivity translates into lowering of the standard of living; hence the obsession of economists in tracking productivity.
Measuring a company’s competitiveness is straightforward enough, doing it for a nation is more complicated. First we have to consider all the various sectors of the economy, and the productivity of the country then is the average of all the industries and sectors weighted appropriately. The remarkable productivity of the American economy is that all its sectors—from agriculture to manufacturing and service industries—are highly productive. Japan may be highly productive in manufacturing and high technology, but its agriculture, banking, and retail sectors are protected and have low productivity.
Malaysia, like other developing countries, has significant employment in agriculture and construction. Both sectors have extremely low productivity, thus the aggregate national productivity is also low. Unless Malaysia significantly improves the productivity of these and other sectors, then the overall national rate will remain depressed.
Malaysia shares one important feature with other developing countries. Its ruling class is an impediment to improving productivity. Its members control the licenses, import and export permits, and major financial institutions. They do not brood or welcome competition, and when the competition comes from abroad, they hide behind their nationalism to protect their interests, at the expense of citizens and consumers. The elite are content with their rent-seeking activities instead of actually creating wealth.6
Competition is the best way to spur productivity. The playing field must be level with no undue barriers to discourage the entrants of new players. The barrier may be overt, as through explicit legislations allowing only certain individuals to partake in certain activities (a cardinal feature of Malaysia’s NEP and America’s Affirmative Action programs) or subtle, as with Malaysia during the pre- NEP era of the 1950s and 60s. Then, the colonial corporations, in cahoots with existing non-Malay enterprises with their clan and ethnic trade organizations, resorted to predatory practices, effectively squeezing out new entrants to the marketplace. It was wrong then, and it is wrong now; the economy (and hence citizens) suffers through the consequent reduced productivity.
The government’s major presence in the marketplace is a major impediment to effective competition. No surprise that Malaysia’s GLCs are not models of efficiency or productivity.
If countries enhanced their productivity, there would be no shortage of investors, local and foreign. Otherwise even their own investors would flee (capital flight), patriotic exhortations notwithstanding. One effective way to improve productivity is to allow more productive companies to invest. They will ease the transfer of technology as well as productive work habits and business culture.
I have always been impressed at how efficient Malay executives and workers of multinational companies are as compared to those working for GLCs. I vacationed at Club Med in Cerating and then traveled up the coast to Rantau Abang and stayed at a Tourist Malaysia’s resort. The difference in service could not be more different, despite both charging comparable rates. The senior managers at both places were Malays. One behaved like the other managers I observed at elite resorts elsewhere in the world, the other was like your typical aloof civil servant. No marks for guessing who’s who!
Despite its importance, one cannot be too obsessed with the traditional measures of productivity or carry it too far. Those measures cannot be blindly applied to other human endeavors. It takes four skilled musicians to perform one of Haydn’s string quartets today just as it was over two centuries ago when he composed it. No apparent gain in productivity there, if we use the economists’ traditional measures (Baumol effect).7 With modern technology however, millions can enjoy through their CDs and televisions the live concert performed in London, and do so over and over again in the comfort of their own surroundings. Granted, the experience may not be of the same intensity as being at a live performance, but that is a small trade off. From that perspective, the productivity of those musicians is considerably enhanced, potentially reaching millions instead of the lucky few during Haydn’s time.
The challenge is in creating an environment where productivity can be continuously enhanced. There are two levels at which productivity can be affected: at the general macro environment; and at individual and company (micro) level.
These concepts can best be illustrated with the sailing metaphor. The first decision is your destination. Having decided that, you plot the best course, factoring in the wind, weather, and sea conditions. Then you would select your appropriate craft. If speed were your top priority, you would want a fast boat like a catamaran that would literally skim over the surface. Fast and exhilarating, but wet! If you prefer comfort, safety, and a cabin to sleep, choose a displacement sailboat like a Tayana. Those constitute the macro environment.
Within that macro environment, your progress would depend on how well you trim your sails, read the waves, distribute your weight, and keep you hull free from fouling. You would be on the lookout for approaching sandbars, high waves or other obstacles that could potentially impede your progress and necessitate course change; hence the importance of a competent skipper and crew. Those constitute the microenvironment.
Whether you are in a race or merely a pleasure cruise, those factors still matter, and you want them all to be optimal.
Next:Â Macroeconomic Environment Enhancing Competitiveness
July 26th, 2007 at 5:24 am
Tunku Abdul Aziz in his article “Lessons from Singapore and HK” at Malaysia-today.net revealed a private conversation in Washington DC.
He asked an American private investment banker in late 1999, “Of all the countries in Asia, where would you invest your clients’ money?”.
Why is Tunku Abdul Aziz surprised with the response, “Anywhere except Malaysia.” This show how much out of touch he is with the reality on the ground in Malaysia. The situation has not improved since.
After spending some 30 years outside Malaysia, I thought my experience and willingness to come back under the “Malaysian Experts Returning” to help make Malaysia a better place, I was totally disappointed. - that’s an understatement. To be brief, my two proposals would not require any public fundings. One was to rescue a failed project of some 15years under a Bumi management company. The other was to develop a resort to enhance tourism and to help provide employment to the locals.
Both proposals were welcomed with enthusiasm with the relevant authorities. But to get on to the next level, getting the necessary approval is a nightmare. Needless to say, without unaccounted upfront “fees” the proposal came to a halt. I would not have minded being rejected on valid grounds. Despite a detailed proposal and financial forecast of both business proposal the two site remained rundown.
On a side note, I was informed that one of the head in charge of Business Approval was a known corrupt official. His greed was finally exposed and instead of being sacked he was transfered to another dept in charge of Community Services and Development. Having to deal with a new Head of Business Approval was time consuming despite the official pledge of 28 days (cant remember the exact days but it was prominently displayed on a wall poster). The whole procedure took 2 years and was finally rejected.
I do not think the local govt care much for local rejuvenation. If they really do, they would have tried to get as much investment and businesses to help promote and make the place an attraction for shoppers as well as tourists. They could go a step further and ask how they can help with my proposal to make it a reality. Sadly the answer is NO.
I met a few Malays and related my experience above. Without asking for their opinion they offered me their names to be used in the proposal. They implied that a Bumi applicants will have an edge over a non-Bumi. For these naive Bumi-Malay they are sadly misled by UMNO’s propaganda of special Malay privilege. One Malay I met told me that he find it doing business outside Malaysia is much easier - obviously he is not among the elite member of the UMNO circle.
Of the many experiences in my short return (5 years) one stood out from the rest. A town in Pahang is undergoing a major re-development. The plan was approved with all the terms and conditions ready for investors to reap the benefits. However, there is a catch.
The company awarded to re-develop the town with prime areas has both Malay and Chinese directors. The company has no intention to execute the plan but was looking for investors to take on the project. If my memory serve me correct, the cost for the development is in the region of RM30-50m and the projected return in the range of RM80m.
Here’s the catch. Potential investors must pay RM1m upfront and the rest a share of the properties developed. I was with a group of potential investors at that time and we took the Terms and Conditions for further scrutiny. To our surprise, one condition stood out that make the whole proposal untenable. The condition to reserve 30% of the properties at a huge discount to Bumi does not make sense. The projected return is based on the shop lots going for RM300-400k each whereas the Bumi price is under Rm200k. Now tell me how many investors or even buyers are willing to subsidize the Bumi lots.
Needless to say, there was no taker and the town remain as it was. The moral of the story - Malaysia is not conducive for Investment unless you have insider/connection to exploit the natural resources and land. In fact one project on a housing project took off with the state govt selling the land cheap because they needed the fund during the last GE. That’s Malaysia - there is still opportunity but only for the elite and well connected.
As for me I will always love Malaysia despite my family are now officially citizens of UK.
July 26th, 2007 at 2:50 pm
# Shrek Says:
July 26th, 2007 at 12:22 pm
Mika
I have nothing to say to wise guys like you taking shots at everybody. You don’t even know what 10-4 is, a radio car @#$%^&*()(*&^%$#@
This will be my last address to wise guys like you taking on innocent people, no chivary, no ethics. 10-4 homeboy
As always - well done and laughing… - and waiting for the others
July 26th, 2007 at 2:55 pm
Note the important proviso: provided consumers (users). One may be good at snake charming or arguing but if consumers do not value those activities then they would be useless or “non-productive.â€
Important proviso indeed, Bakri!
July 27th, 2007 at 1:16 am
I would like to believe ou’s tale very very much; but…
thanks anyway, ou. Good try - but tough. Yeah, till you come in with the details down to the last minutes it is still “non-productive”.
What really happen to the IGP story and Jo Baharum?
In blogs is fiction stranger than the truth, Din?
(And Din Merican this blog of bakri’s has been marked as dsai’s - which I find very suprising and greatly schocking!!! Ask ZAM or Azalina or Mike T, as I think this is King Ghaz’s. Only that Din Merican is too shy.)
July 27th, 2007 at 4:14 am
Mika,
I am not trying to convince anyone lest you wonder my hidden agenda. The fact that I omit details is simply because its a small town and I would like to protect my friends and family who are still Malaysian.
By the way if I told you I was offered a datukship for RM350-RM500k would you have believed it?
Unless you are in it you will never know what really goes on at ground level. Just a quick examples on how a Chinese national came to Malaysia on a Professional Visa (1 Year) is nothing more than a money making exercise for the agent and someone at the Immigration Dept. I checked the Chinese National Passport and the fee stated was something in the region of RM208 (cant remember exact amount) but he paid RM5k. Following his adventure in Malaysia I can tell you alot more that sound stranger than fiction. The underlying theme is money talks.
Since Internet Cafe license is in the Star’s news, my experience back in 2002/3 says that no licenses were to be issued in Pahang. Guess what? they were available for RM5k each via transferring existing licenses that were issued previously. Guess more and you will find the licenses were issued to a few “bosses” only. In fact it is easier to do illegal business in Malaysia than to be a good citizen going by the rules.
I could go on but I am getting tired and looking to a quiet retirement, gardening and traveling.
July 27th, 2007 at 6:15 pm
Mika Angel-O and Ou,
We have reached a stage in our country today where only money talks and walks. This money thing is happening at all levels of public administration, from the very top to the bottom. Our culture is based on making the fast and easy buck.
ACA (Anti-Corruption Agency, for those abroad who are not familiar with ACA) is used to issue “Mr Clean” certificates. Samy Velu was granted such a certificate some years ago during the Mahathir Administration, the latest being Johari Baharum, the Kubang Pasu MP and Deputy Minister. I suspect more will be issued.
So I believe you, Ou, when you said “…I was offered a datukship for RM350-RM500k”. Frankly, I think it is a good deal and, like our chinese businessmen, you should have taken it. You are lucky that you are not asked to settle someone’s gambling debts at the Ritz, London, for your datukship and that could have amounted to millions of ringgit.
“Datuk” Ou would have opened a lot of doors on deals for you and you could also be a front man or bag carrier for some politicians. Imagine your reward for loyal service could have been a huge timber concession in some secluded corner of Sabah!!
Jokes aside, there is no accountability and our system of checks and balances has broken down. Everywhere you go, you will experience incompetence and bottlenecks which only “grease” can clear. Our institutions have broken down. This is not fiction, but reality. This being the case, who will invest in this land of broken promises and crooked deals!!
Under the present Administration, it is “cakap cakap saja”. In Penang, we call it “tembak” and this is best depicted in the uniquely Penang Malay show “boria” (derived from the word BORAK).
Imam Badawi is the chief of the “boria” crowd in his Cabinet and our public services. He should spend more time in Hongkong and Singapore to learn how things are down, instead of becoming our touring representative making official visits here and there according to his own whims and fancies at taxpayers’ expense.
July 28th, 2007 at 12:53 am
He is the “tukang karang” of the boria troupe and the “tok dalang” of the wayang kulit show. As for Ou you are not alone. Many have experienced the same rejection, the same delay, the same excuses and have been sent from pillar to post. Greasing palm has been perfected into an art and is no longer the domain the high and mighty. Today even the lowly clerks and peons know what to ask and expect. Welcome to Bodohland.
July 28th, 2007 at 4:00 am
BAKRI&Din et al
By the way if I told you I was offered a datukship for RM350-RM500k would you have believed it?
Your datukship would have been over-priced by factor 8 to 10 times
but I need to check the latest
Unless you are in it you will never know what really goes on at ground level.
Never want to be in the midst without a safety door…
THANKS and KEEP IT UP!
July 28th, 2007 at 8:31 am
Count your blessings ou, not only gambling debts. Others may not be that lucky, even has to be involved settling someone else’s marriage to another’s ‘estranged’ wife!
Beware plenty of hypocrites, liars and thieves are all over the place.
July 28th, 2007 at 9:21 am
To Dim Merican, Mika
Yes the price of Datukship is cheap when there are so many opportunities for the taking to make enormous amount (at a risk of course). Hence, many young men are willing to pay for it. As for me, I am pass that stage to take that risk or to increase my wealth substantially. After all I cant take any of it with me to the next world!
My immediate concerns are for the well being of my family. I have been naive to think that my return could help make Malaysia a better place. I could not have turned my back in the country of my birth, at least I tried.
Corruption is now very much part of Malaysian Culture and making it the bulk of the “Asian/Malaysian Value”. Since those at the top are corrupt, those below, even the clerks know what to ask as pointed out by Fathol Zaman.
It’s a lot worse than what I can reveal. Since PM AAB, Malaysia is getting worse. As Raja Petra said, “..we live in interesting times”, unfortunately, for all the wrong interest/reasons.
Peace and lets dream on. “If you don’t dream, how can dream comes true”.
July 29th, 2007 at 1:55 am
Dear Ou,
I am not”dim” yet but my day will come for sure when I shall be dim for eternity. In the meantime, I want to be in the light so that I can see things as they are and exchange views and share ideas. Take care.
Fathol,
Thanks for the clarification. Hang pun pening, dah.
“Tukang Karang” who is the leader and the star of the boria is too complimentary to be used for our Imam. Apa yang dia boleh karang? He is just one of those sitting behind the tukang, fiddling his arms and hands, hopefully in unision with the rest and in rhythm. Itu pun kita tak boleh jamin bahawa dia boleh buat. Teruk betul, Lah.
July 29th, 2007 at 2:15 am
Fathol,
Here is my clarification on the boria thing.
When I said he is “the chief of the “boria†crowd in his Cabinet and our public services”, I mean that he is the supreme chief of the “pak turuts” (followers). Others in his Cabinet are super pak turuts in their enthusiasm to please the chief turut. “Kena lah jadi macam tu kalau nak cari makan (it has to be that way in order to survive).”
“Tukang Karang” is somebody else. Tun Dr. Mahathir thought that he could be that person. But he did not bargain for Khairy Jamaluddin aka KJ. KJ is UMNO’s super-Tukang Karang at this moment in time.
July 29th, 2007 at 5:25 am
Pak Din, KJ is not the “tukang karang” but the “tok dalang”. In a shadow play, the “tok dalang” plays a very important role for without him the play is meaningless. He is the scriptwriter and the director all rolled into one. And being the ‘tok dalang” he is, he manipulates the puppets the way he deems it fit.
The “tukang karang” in the cabinet is the MP from Jerai and to a lesser extent, Zam ala Kazam. They are good at “mengarang cerita yang bukan bukan.”
July 29th, 2007 at 6:09 pm
Fathol,
Both Dato Badruddin of Jerai and Zam ala Kazam are not “tukang karang”. They are just clowns. KJ is both the tukang and “tok dalang” and assumes the role of protector of our Pak Belalang, the Imam al Badawi.
I am sad today because our Pak Belalang is in Alor Setar to launch the Northern Corridor. My fellow Kedahans are now confirmed rice and vegetable farmers for eternity. What they need is to be integrated into our Knowledge Economy.
I think, there are too many corridors in our country involving massive investments of money. But where is the money coming from? What do you and the rest think?
July 29th, 2007 at 6:28 pm
Well, there is only one corridor they are familiar with and that is “the Corridors of Power” or more aptly, “the Corridors of the Corrupt”.
I’ll rest my case.
July 29th, 2007 at 7:42 pm
While Iraq uses football to unite, an enormous achievement and came out victorious uniting the Shites, Sunnis and Kurds which no politicians could ever have done, our “samseng karangs” and “samseng dalangs” will once again target the southern corridor, in the days/weeks ahead of GE.
Their “samseng karangs” and “samseng dalangs” will always be at the frontline and just watch out for their “modus operandi” once more to pick quarrels and create issues with our southern neighbour. That’s how low they can get to garner support for umno and BN against an ‘enemy’ whom they have always been insanely jealous of, one that is corruption- free, squeaky clean and economically vibrant for decades.
July 30th, 2007 at 4:35 am
They say when you stay in glass houses, never, never throw stones.
But hey, the Prime Minister’s official website is itself full of seditious shit. Some bright spark just took notice of those seditious comments which had been there in the PM’s website the past 20 months. A Police Report has been lodged by DAP’s Ronnie Liu against the Prime Minister in Kuala Lumpur today!
I am interested to know if our mata-mata is going to jump on it and haul in the Prime Minister of Malaysia for 8 hours of questioning? Or is there two sets of law, one for the PM and umno, and the other for ordinary rakyat like RPK, you and me?
Hey Mike Tyson, what do ya think of it? Oh well forget it , he doesn’t read English!