13/5/11PRODUCTIVE GROWTH- THE NATIONAL PERSPECTIVE

Couple of days ago, Mustapha Mohammed, MITI Minister, had said that Malaysia need to have a Productive Growth of 5% annually in order to achieve the High Income Economy target by 2020. Without elaborating, such statement could be construed as long as we achieved the 5% GDP Growth, meaning we are in the right economic track to a Developed Nation. As a politician, Mustpaha is not daring enough to say what he really meant. And I don't believe, he simply mean the normal economic growth as we used to see or hear.

(2) Let me put up various simple scenarios to clarify on the matter.

(3) Say as gardeners, breeders, farmers, etc what do we really mean by growth? Achieving larger size, gaining better weight, getting higher height, getting more, are all those associated with growth? The snap anwer would be:yes. As long as we gain more, from what we do, that is term as growth. In Economy, the additional gain made is term as Value Added. But does Value Added really mean Productive Growth? In this example, I would say the Value Added is equal to Productive Growth, a Real Growth, because there is a real gain from the garderners, breeders, farmers, etc effort. The garderner, breeders, farmers, etc productivity create real Value Added.

(3) Now say if we just paint our house, is that a growth? Does our house getting bigger, the rooms getting more, or the house spaces increase once we completed our painting? Definitely, the anwser is no! Thus there is no growth in that sense. The house space remain the same, except the house may lok neater and much beautiful. Therefore, if we sell the house, definitely the price will be better, thus there is a Value Added to our painting job. In term of Income, there is that addition, and increment that might equal to Value Added. But, to a country, such an income increment is not necessarily contributing to a Growth. This type of Income Growth, could then be termed as Nominal Growth, not a Real Growth.

(4) In Malaysia, the Productive Growth could be generated by mean of Export Oriented Production. This production must not be limited to Goods, but must include Services and Innovation as well.

(5) Thus, any economic system that doesn't generated Export Income, then, we would term such a system as the Maintenance Economy. We gain no expansion, but our economy is self reliance. There exist money cycle. But we are just cycling our limited currencies, if we are strict in our monetary control policy.

(6) Such a system was practiced by China, and since they becaming worst lagging behind the rest of the world, thus over the past 15 years broke their Maintenance Economic System into an Open Economic-based with Export as their priority. Cuba to this day remain as the Maintenance Economy. See what happen in Cuba, as against all the other socialist and communist economies: Russia, Yemen, Libya, Central Asia, Eastern Europe, etc that had gone into Export-Opened-Economy.

(7) Last five years, while almost the whole world experienced the Economic Down Turn, economies such as China, India, Brazil, and even Indonesia were gearing for Domestic Consumption boost up. They then were successfull to keep their growth momentum, but as the world economy recovered, such a strategy would not work well. I would say, such economic strategy is equal to Maintenance Economic System.

(8) Thus I would say, under Global Growth Scenario, the State must go for Productive Growth, while under Global or Regional Growth Down Turn, we can choose to adopt for Maintenance Economy System (Domestic Consumption Economy).

(9) In this regard, for Malaysia to fit into Mustapha growth paradigm, we must move fast into the export-based economy. Definitely, all these while we had been focussing on those, but due to labor and capital fluidity, we now should be restrategizing ourselves into a greater competitive advantage sectors.

(10) The best export generating income sector is the manufacturing. Malaysian had once proven this, particularly in the electrical and electronic sub-sectors. But now time had changed. Capital, innovation and manpower had becaming very fluid. With a much liberalised economy, China, India, Brazil, all those under developed nations becaming the great competitors to all. Thus we need to restrategized.

(11) Food, medicine, and health products demand will upsurge with the improved world living standard especially if they move through non-agro-based industrialization. Worst with the current global weather uncertainties, food security would be everybody concern. Not many country had locational and environmentally advantage as Malaysia in that sense. Except probably if Israel is working hard enough on how to turn the desert into human next food frontiers. I believe, they did, except they are not willing to share.

(12) In this sense, innovation would be the next best export products. Japan, German, US, British, Sweden, Holland, etc had proven this. They have come with all the innovation that could mechanised and automated much of our production sector. But this doesn't meant, they have achieve all what we need.

(13) Purposely now, our production sector are facing numerous challenges, and all it means is for us to be much innovated. We must spent money to innovate.

(14) If we think hard, and really able to capitalise our peaceful nation (except really not harmony), while there are chaotic in the Middle East (socio-political) and America-Europe (Financial), we must then be a great place for the Arabs, Chineses, Indians, Indonesian and those South Esat Asian and Pacific nations to sent their children to study over here. We are now also being equiped with the regional technical training facilities of many MNCs, thus all these must be pooled as our great export money earner. We must move fast to really modernized and globalized our Education and Skill Development System to cater for such a need: make them affordable, high quality. Definitely, we must have Domestic Education Policies that should as well safeguard our National Interest.

(15) In the area of tourism, we should have a policy of improving our faclities firstly for our own people. Let the foreign tourist influx as a bonus due to our good, pleasant, well connected and affordable tourism facilities that we have. In such endavor, we must move beyond merely providing hospitality facilities. It should covered better, organised all related infrastructural, and facilities development. In short, just make everything great, firstly for our own people, then the others will just come as addition.

(16) Construction, utilities, transportation, and FIRE would be great money makers if they are directed toward supporting our Export-based Production.

(17) Other support services such as Custom, Police, Defense etc that merely to give local employment would not a best option for growth. Getting hold of a smugler, a thief or shoting a bullet, doesn't necessarily bring good income to a country. Such elements if not properly placed under good control would theift away the nation growth funding. To manage the nation 'enemies' must not necessarily through policing strategy. China, Russia, those Eastern Europe nations, and even people such as Sadam, Mubarak, Assad, and now many others in the Middle East, Africa nad Latin America, they have spent huge fund for defense and security, toward the end, their countries colapsed one-by-one.

(18) Equally bad, and a varuy good example was Suharto. Just to make himself popular, he subsidised many of the nation wants to such an effect he was left with little to bring development that his nation really need and want. Thus, to this day, Indonesia is struggling to walk pround. Malaysia, under Abdullah Badawi tried to do such and I hope Najib really have gut to correct this 'short sighted' economic managment that we have.

(19) Thus, it is not sufficient just to think to gain extra income for the people, it is also vital that the country must also gain from whatever economic strategy that we embark on. Most important, let make what our nation and our people needs and wants from both the quality and affordable perspective.

Kuching, Sarawak
16 May, 2011