Transcript taking malaysian productivity from the industrial era to the

Perdana Leadership Foundation - CEO Forum
2014
TAKING MALAYSIAN
PRODUCTIVITY FROM THE
INDUSTRIAL ERA TO THE
KNOWLEDGE ERA
Stewart Forbes
Executive Director,
Malaysian International
Chamber of Commerce and
Industry (MICCI)
Productivity in the Knowledge Era
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where are we now? : the business community’s view of
productivity today.
❖
how does the new emphasis on services change the
productivity scenario?
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productivity challenges : can we meet them?
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moving productivity forward : preventing 2020 becoming
a dead end.
Where are we now?
❖
Malaysia continues to grow - 6.4% GDP in 2014 Q2 with
private investment growth of 12.1%.
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Malaysia continues to attract investors, domestic and foreign.
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Various indices (IMD Competitiveness, World Bank etc.) show
improving global status.
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But - speaking to businesses in Malaysia, there remains
concern over the immediate future … and the
government’s willingness to address fundamental
structural reforms.
Where are we now?
❖
Costs are rising both for businesses and for the public. Rising costs
are seen as reducing competitiveness.
❖
Roll back of subsidies, while a necessary long term fiscal measure
creates short term difficulties for smaller companies.
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Malaysia has full employment resulting in a need for foreign labour,
without a satisfactory environment for managing this labour which is
seen by many as being more productive than local labour.
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Businesses see leakages abounding further reducing
competitiveness and government legislation, rules and regulations
suffering from a lack of effective implementation.
Where are we now?
There is a gap between
expectations of business and
what they see being delivered.
Where are we now?
Accepting the inevitability of increasing
costs, businesses can only remain
competitive through a corresponding
increase in productivity.
Where are we now?
Malaysia’s
productivity level
has been growing
but the average
rate of growth has
been flat over a
considerable
period of time,
allowing many
countries once our
equal to surge
ahead.
This must change.
How do services change the situation?
❖
Productivity in manufacturing can be enhanced through
Capital Deepening.
❖
This is a situation where the capital per worker is
increasing in the economy.
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Overall, the economy will expand, and productivity per
worker will increase.
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Thus investing in new equipment, automation and other
technological assets can help boost productivity.
How do services change the situation?
❖
Services productivity however is a people game and less
driven by physical assets.
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There are technological assets to support service
productivity and TFP, such as ICT but ultimately successful
services depend on skilled people and quality processes.
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Here Malaysia continues to play ‘catch up’ with much more
needing to be done to generate the necessary quality of
human resources necessary and the balanced legislative
framework to allow business to manage those resources.
Productivity in the Knowledge Era
Malaysia’s
productivity is better
than many
neighbouring
countries with which
we compare
ourselves.
Is this the correct
basis for
comparison and
does it lead to
complacency?
Why not create
stretch targets by
tracking only
countries better
than ourselves?
Productivity in the Knowledge Era
While Malaysia’s
productivity is still
on an upward trend
we are years
behind other
developed nations.
Ultimately, there is
little value being a
big fish in a small
pond.
Despite being a
relatively small
economy, Malaysia
should aim to be a
bigger fish globally.
Can we meet productivity challenges?
• This is not a question of ‘can we’ but an issue of ‘we
must’.
• WE MUST reinvigorate our education and vocational
training systems.
• WE MUST review the way in which we manage our
human capital, which is our greatest productivity asset.
• WE MUST enhance Total Factor Productivity (TFP) in
the form of technology and efficiency as a key driver of
economic growth.
Will 2020 be a dead end?
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All the signs are that Malaysia will achieve its target of
‘high income economy’ fairly comfortably before 2020.
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The status of ‘developed nation’ is a different formula
but that too is moving in the right direction.
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However, both these statuses are reversible (as
Argentina found to its cost in the 1950s).
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Thus productivity driven competitiveness (costs will not
decline) must be sustained beyond 2020.
Sustaining Productivity
• Malaysia’s productivity is growing
faster under the various
transformation programmes.
• Historic rate of growth at around
2% is much too low and must
continue to improve.
• Malaysia’s productivity is better
than a number of neighbouring
countries.
• We should measure ourselves
against better countries not worse
and must not be complacent.
• Manufacturing will remain
important and bring new high
value industries to Malaysia.
• Greater Capital Deepening will be
necessary for greater sector
productivity.
• Services offers additional avenues
for growth and new knowledge
based businesses.
• Productivity in services is all about
people and skills and there is
concern that not enough is being
done.
Conclusions - Business Perspectives
❖
Action should have been taken before so many countries surged
ahead of Malaysia but we are on the right track.
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Government and private sector investment have resulted in a
good capital stock which can still be further enhanced by Capital
Deepening.
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Productivity (both labour and TFP) becomes the keystone that
will support sustainable growth.
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In the Knowledge Era, productivity will be driven by initiative,
skills, communications, and innovation and cost will be a
secondary factor.
Conclusions - Business Perspectives
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Three targets for real productivity :
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An education system (primary, secondary, tertiary and
vocational) on par with the best in Asia.
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A human capital management system (domestic,
foreign and expat) tailored for Malaysia’s needs as a
developed nation in the 21st century, incorporating
appropriate safeguards for workers and employers.
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Supporting IT environment on par with the best in Asia.
NOTHING LESS WILL DO!
Perdana Leadership Foundation - CEO Forum
2014
TAKING MALAYSIAN
PRODUCTIVITY FROM THE
INDUSTRIAL ERA TO THE
KNOWLEDGE ERA
THANK YOU
Stewart Forbes
Executive Director,
Malaysian International
Chamber of Commerce and
Industry (MICCI)