A blessing becomes a curse

There is a certain lack of energy, ingenuity and “hunger” in the climate of this country that young people are most sensitive to. In the globalized job market, young people instinctively leave the less simulating and creative environments for those that have a spark to them.

By Tengku Razaleigh

*In a speech I made in January this year I spoke of where we stand in our developmental path and what I felt we must do to move forward.

Revisiting the middle income trap

I would like to revisit the argument of that speech to develop it further.

We are stagnating. The signs of a low growth economy are all around us. Wages are stagnant and the cost of living is rising.

We have not made much progress in becoming a knowledge and services based economy.

According to the World Bank, Malaysia’s share of GDP contributed by services was 46.2% in 1987. Ten years later, that share had grown by a mere 0.2%
Between 1994 and 2007, real wages grew  by 2.6% in the domestic sector and by 2.8% in the export sector, which is to say, they were flat over that thirteen year period.

Meanwhile our talent scenario is an example of perverse selection at its most ruinous. We are failing to retain our own young talent, people like yourselves, let alone attract international talent to relocate here, while we have had a massive influx of unskilled foreign labour. They now make up 30-40% of our workforce. Meanwhile, alone in East Asia, the number of expatriate professionals here has decreased. Alone in East Asia, private sector wage increases follow government sector increases, instead of the other way around. We are losing doctors and scientists and have become Southeast Asia’s haven for low cost labour.

I said that we are in a middle income trap, stuck in the pattern of easy growth from low-value-added manufacture and component assembly and unable to make the leap to a knowledge-intensive economy. Regional competitors with larger, cheaper and dare I say, hungrier labour forces have emerged. China and India have risen as both lower cost and higher technology producers, and with giant domestic markets.The manufacturing sector which propelled the growth we enjoyed in the nineties is being hollowed out. There is no going back, there is no staying where we are, and we do not have a map for the way forward.

I am glad that the characterisation of Malaysia as being in a ‘middle-income-trap’ has been taken up by the government, and that the need for an economic story, or strategy, for Malaysia is now recognized.  We stand in particular need of such a model because we are a smallish economy. We cannot be good at everything, and we don’t have to be.

We need only make some reasonable bets in identifying and developing a focussed set of growth drivers. It is not difficult to see what the elements of such a growth strategy might be. Whatever we come up with should build on our natural strengths, and our strengths include the following:

We are located at the crossroads of Asia, geographically and culturally, sitting alongside the most important oil route in the world.

a)    We have large muslim, Chinese and Indian populations that connect us to the three fastest growing places in the world today.

b)    We have some of  the largest and oldest rainforests in the world, a treasure house of bio-diversity when the greatest threat facing mankind as a whole now is ecological destruction and the greatest technological advances are likely to come from bioscience.

c)    We have the English language, a common law system, parliamentary democracy,  good schools, an independent civil service and good infrastructure.

These advantages, however, are declining ones. Our cultural diversity is in danger of coming apart in bigotry, our rainforests are being logged out and planted over, our social and political institutions are decaying.

I have spoken at length on different occasions about the causes and consequences of institutional decline. The decline in our society and indeed in our natural environment, originates in a decline in our basic institutions. The link between these is corruption. The destruction of our ecosystem for example, is made possible by corrupt officials and business-people. The uncontrolled influx of unskilled labour is a direct result of corruption.

Dependencies and the young

These are problems we need to be aware of before we speak glibly about coming up with new strategies and new economic models. We need to understand where we are, and how we have gone wrong, before we can set things right.

You are young, well educated Malaysians. Many among you have left for other shores. Record numbers of Malaysians, of all races, work abroad or have migrated. Among these are some of our best people. They sense the stagnation I described. There is a certain lack of energy, ingenuity and “hunger” in the climate of this country that young people are most sensitive to. In the globalized job market, young people instinctively leave the less simulating and creative environments for those that have a spark to them.

How did we lose our spark as a nation?

We have a political economy marked by dependence on easy options and easy wealth. Like personal dependencies, these bad habits provide temporary comfort but discourage the growth of creativity and resilience.

I mentioned our dependence on low cost foreign labour.

The other dependence is something I played a part in making possible. This is a story I want to leave you with to ponder in your deliberations today.

Read more at: a blessing become a curse