By LIN SEE-YANTHE Great Recession started in the United States in late 2007. It brought in its wake the biggest bubble since the Great Depression (1929-32). The past two years were difficult.
I have been in this business for almost 50 years – never saw anything quite like it. World recovery still has a soft-belly. In the US and Euro-zone, the rebound is uneven, even anaemic.
When I last checked, doubts encircle the vigour and rhythm of this nascent global recovery. But one thing is certain, the world has changed, so much so that we don’t know what’s normal anymore.
Indeed, it is now cool to talk about the “new normal” – views differ on what this really means. For us in Malaysia, much has changed over the past 25 months – in partisan politics, investor behaviour, business perception, economic outlook, even the art scene. Or, has it?
On the heels of the most harrowing period for exporters in particular, there was a convergence of resolve: never again!
I remember a multinational executive yelling his head off at the golf club on his unexpected new experience in late 2008 – the “waterfall” drop in demand for what he produces – today it’s here, tomorrow it’s gone!
For politicians, businessmen and investors, the talk was for review, restructure and reform in a fundamental way. A senior government official remarked: “We have been able to successfully identify, appreciate, debate and think-out-of-the-box on the systemic issues. Our job is to go back to basics, change and implement a new game plan.”
The Prime Minister’s New Economic Model (NEM) is seductive and to the point. He is pushing to change the parameters of the nation’s comfort zone. That’s leadership; to have the serenity to accept what cannot be changed, the courage to change what cannot be accepted, and the wisdom to distinguish one from the other (R.Niebuhr, US author).
As I look back, it is striking how little politics and business have really changed. Indeed, even amid the change, much more has stayed the same.
Talk, not change
How loud does the Prime Minister have to get? His vision of the NEM was first mooted in early 2009. His overarching strategy – to build an innovation-based economy with the clear objective of creating a high-income society.
Since then, much water has passed under the bridge. No doubt, reaction has been positive. This shift in direction is refreshing; the rakyat is thrilled with renewed expectations for a better life. Businesses and investors liked the idea and promised – together with the civil service – to assist in its design and delivery.
I understand the details of the NEM framework – to form the basis of the 10th Malaysia Plan (to be announced in June) – will be unveiled next month. But on the street and in corporate boardrooms, it’s still very much business as usual.
The momentum of change doesn’t seem to catch-on. The elite appear consumed with their incessant, discordant fiddling over money politics, vested business interests, old-school petty squabble over turf, and the “blame-game” over the delivery of public services.
In all of this, the hard working middle class and the very poor got pathetically short shrift. I wonder whether most politicians, civil servants and businessmen fully grasp the depth of the crisis and fully understand what the NEM can accomplish.
Implicitly, some question “if it ain’t broke, why fix it?” The trouble is, the system has cracked once too often. All that is needed is for something to happen and bang, the entire system breaks down. We definitely have to fix it. No question.
What’s at stake
I travel quite a bit these days fulfilling speaking engagements, engaging academic interests, networking Harvard alumni (as the university’s regional director for Asia) and occasionally, fostering business ties and ventures.
I feel the dynamism of Asia – refreshing, vibrant and invigorating. It is a region that never fails to amaze.
Malaysia has had a good run for nearly two-generations. It is slipping, squeezed in the middle by China and India, and failing to find a firm footing among its more dynamic Asean neighbours.
In the Asian market space, standing-still is not an option. Simply keeping-up is no better. We need to run faster than most to preserve our place in the sun.
Today, Northeast Asia and India are changing so fast, what a difference a year makes. Today, geography is history!
What’s at stake is our ability to compete and grow in a sustainable way to raise living standards.
We need to realise that:
·Time is not on our side – we must be able to move at a pace that meets stressed (not soft) targets;
·The world (especially Asia) moves-on whether we like it or not – it waits for no one;
·The window of opportunity to move up the value chain is still open, but we are already late – if not taken, we’ll be left behind;
·For inward foreign direct investments (FDI) from the US, Euro-zone and Japan, Malaysia is off the radar-screen – we have to work real hard to get FDI back in;
·Our best bet is to aggressively build on our long-standing relationship-capital within Asean, and with China and India. To succeed, we need to be small-and-medium enterprise (SME)-focused and innovation-based;
·We must be really “hungry” – be prepared to compete and fight for our niche-space; and
·Only private initiative and enterprise can make us efficient and sufficiently competitive to bring out the “animal spirit”, which is critical for success in entrepreneurial endeavours.
What is to be done
That’s why the NEM is so pivotal; it’s the change that brings to bear on our society. For the NEM to work, the innovation-based economic engine functions best in an ecosystem that fosters its own incubation – an environment that:
·Promotes the rule of law and a clear sense of security;
·Builds unity in the face of diversity;
·Embraces family values and a sense of community;
·Practises transparent democratic politics;
·Inculcates a fair and open society;
·Fights corruption; and
·Prioritises education; it grows, draws and retains talent, especially in science and technology.
We need to work harder at creating a more hospitable ecosystem. Indeed, this is a necessary but not sufficient condition for the NEM’s success. The new 1Malaysia drive helps but we need to do better in practice.
Sure, it is an on-going process. For without it, even the best of economic model will be sub-optimal. It is important we get this right.
The US experience has shown that given the right environment, innovation has driven more than one-half of its productivity growth over the past 50 years. As I see it, innovation simply means fresh approaches that create value and societal well-being.
While easier said than done, innovative value-add has to permeate every facet of our economic life from responsible politics to government policies and procedures, to business methods and organisation, to household practices and systems.
Finally, there is the issue of focus on new growth areas. These not only lend support to the innovative-based economy but equally important, provide a new source of strength to capitalise on new opportunities to expand both the gross domestic product and gross national product.
It must involve a sharper shift to expand the services sector, where the real stimuli are expected to emanate from vibrant entrepreneurial SMEs – the very essence of middle-class progression.
The four major pillars-of-support include: Health (wellness) and life sciences, tourism, education and human resource management, and renewal energy and the environment (green growth).
Education remains our last defence – the acquisition and management of knowledge capital remains key in building a pool of global-savvy talent and niche skills.
The nasi-lemak principle
The centrepiece of the NEM is to drive innovation. This is particularly timely. History teaches us that promotion of and spending on innovation must be sustained through tough times to better compete when the new cycle of growth emerges.
I see this being done by private enterprises in Japan, China, India, South Korea and Taiwan, where research and development spending remain aggressive despite recession. If you think about it, innovation is rather simple for the mark of true innovation is not the grand gesture but the simple things done well. I call this the nasi-lemak principle. It has done well for the folksy nasi-lemak. It will do well for the NEM.
What else to do
There are no quick fixes. Building strong fundamentals help but they are not enough. Sure, we have lots of problems. So do others. What’s important is to make continuing progress; make sure today is better than yesterday and tomorrow, better than today.
The direction is vital. In no time, we can be on our way. Similarly, leadership is important but it is not enough.
Leaders have to make serious political commitments to build unity out of diversity and to use a lot of political capital to bring about real change.
It is important that change is made transparent and highly visible. That change is seen in everything we do – applying the nasi-lemak principle in processes and procedures, systems and regulations, organisations and methods. This is the only effective way to deliver.
Concomitantly, two traditions need to be immediately revived and actively inculcated:
·A tradition of predictability in public policy, consistency in its application and transparency on the ground. This builds credibility.
·A tradition of integrity, strong work ethic, hard work, and always, value-added service. This strengthens credibility.
In the final analysis, the NEM works only if the ecosystem – within its bosom the model is conceived and in turn, re-enforced – is soundly grounded and solidly anchored in private enterprise.
A former banker, Dr Lin is a Harvard-educated economist who now spends time promoting the public interest. Feedback is most welcome at
starbizweek@thestar.com.my.
