Saturday May 24, 2008
Malaysia must move up value chain
PETALING JAYA: This week's shock resignation by former premier Tun Dr Mahathir Mohamad as Umno member citing loss of confidence in the current party leadership grabbed the headlines.
The announcement was made as millions of Buddhist devotees around the world celebrated Wesak Day.
Many brokerages had expected the market to face selling pressure when it opened on Tuesday after the public holiday, just like the beating it took after the March 8 general election. Surprisingly, the stock market did not plummet as much as on March 10.
Yes, trading was lacklustre this week but the cause for the cautiousness was not limited to political uncertainty; it included external concerns over widening credit losses and weaker demand from China.
It doesn't help that the price of crude oil breached US$130 per barrel on Wednesday, with some analysts predicting that it could cross US$140 by year-end. That is just slightly more than six months away.
While subsidies have been shielding Malaysians from the impact of high energy prices, the Government announced this week that a new subsidy scheme is ready to be introduced in a few months.
In the meantime, prices of rice, soya and corn have reached all-time highs and inflation fuelled by food prices is hurting the pocket of the man in the street. A plate of char kuey teow and a glass of teh ais now cost about RM4.50 and RM1.80 respectively at hawker stalls. And these are not even the air-conditioned kopitiams.
The price of bread has increased by at least 20 sen a loaf and so have the prices of all dairy products.
The Government could, to a certain extent, control price increases or continue to subsidise certain basic goods but, in the longer term, we need a more productive economy to withstand more challenging times.
The challenge is to reduce wastage in the economy, increase efficiency and enhance competency, and move up the value chain. These are issues that have been raised again and again but the solutions so far have yet to bear the desired results.
Perhaps our subsidy mentality has prevented us from thinking out of the box. It has made us comfortable and complacent, and lulled us into losing our competitiveness to regional peers like Singapore and Vietnam. Even Thailand and Indonesia are getting back into foreigners' radar.
Malaysia has to come to terms with the fact that being a manufacturing base for multinationals is no longer sufficient to sustain the economy, especially when we keep focusing on low-end manufacturing.
Over the years, Singapore has created a niche in biotechnology and as a financial hub, and boasts knowledge workers while Vietnam has attracted foreign funds by offering cheaper, hardworking labour force, plus incentives like lower taxes.
But, when investors think of Malaysia, what is the first thing that comes to mind?
We have outsourced domestic work to Indonesian and Filipino maids and construction labour to Indonesians, Pakistanis and Bangladeshis while workers from Myanmar dominate our restaurants and cafes.
Yet, thousands of fresh graduates who flood the market every year can't find jobs. Either there are not enough vacancies or they don't fit the bill of what companies require in an employee.
In the end, the Government has to spend millions of ringgit on programmes to improve the competency of these graduates. If we are not nurturing the right type of labour force, how then can the economy move up the value chain? Where will this put Malaysia if we remain as we are?