Prime Minister Datuk Seri Anwar Ibrahim is right to put immediate focus on the “tummy” economy issues, tackling the high cost of living and finding ways to reduce the national debt. While addressing short to medium-term economic issues take the priority and media limelight, the structural and institutional reforms must be done simultaneously and immediately.
Anwar’s administration must learn from Pakatan Harapan’s previous 22-month tenure and avoid this mistake. Though Anwar may downplay the issue of instability, the fact is that the government may fall with a simple change in allegiance.
The worthwhile legacy in the face of this threat is to have a reformed structure that cannot be easily reversed, no matter who is helming Putrajaya.
Anwar’s administration will have to find a way to get the buy-in, if not coerce the heads of ministries and agencies and fellow parliamentarians to fully support and carry out the necessary reforms.
Ministries and agencies must operate under a transparent system and be monitored under an Input-Output-Outcome-Impact (IOOI) model. Oversight bodies and checks-and-balance organisations must be made independent. Competent and trustworthy people must be put in key organisations.
Likewise, it is crucial that Anwar puts the right people in his cabinet, with particular attention to the education, finance, defence and home affairs portfolios.
Without these changes, no policies or national plans can be successfully and sustainably executed.
Lay down the Foundations for Growth, Focus on National Security Needs
Though popular and even necessary, “band-aids” emergency socio-economic responses may not be sustainable.
In the pursuit to quickly come up with short-term solutions, one must not lose sight of the need to boost the real economy through long-term foundations. That is, local businesses, both big and small, must be capable of continuous innovation to sustain value creation.
Reduced private consumption and investments can limit the effectiveness of targeted subsidies and the gradual reintroduction of GST.
Furthermore, we have little or no control over inflationary pressures resulting from external supply chains. Subsidies are not sustainable if they are not supported by the increasing income of the nation, working against strategies to reduce Malaysia’s national debt.
The real long-term solution to managing the high cost of living is for people to have continued access to secure jobs that are paying competitive salaries relative to increasing living costs.
Simply put, Malaysia needs growth in the real economy, so that we can have more companies employing more people paying better salaries. For better security against external shocks driven by situations faced by Malaysia’s trading partners, geopolitical conflicts and health crises such as a pandemic, it’s important that more of these jobs are generated by local companies that are moving up the value chain.
Relatedly, and in addition to socioeconomic and financial security, national security issues such as food, water, energy, health and military security must be among the government’s top priorities.
Examining Malaysia's main exports in electrical and electronics products (E&E), chemicals, petroleum products, liquefied natural gas, and palm oil, Malaysia greatly benefits during times of high demand for microchips and semiconductor cycle as well as a favourable commodity market, but Malaysia lacks downstream companies where biggest value is created.
Malaysia’s E&E and manufacturing sectors are the country’s biggest export contributors, yet Malaysian companies are mostly in the upstream i.e., in the manufacturing of components, modules, systems, and for the service of electronic components and assemblies (EMS) for original equipment manufacturers (OEM). End-user products and equipment are dominated by foreign companies.
Most of Malaysia’s downstream oil palm companies produce various types of edible oils, but end-consumer products in the processed and packaged foods and personal care industry are dominated by large foreign brands. This is also similar to the production of high-end downstream chemicals and end products from fossil fuel or petroleum products.
Therefore, the seeds of a robust domestic economy, in the form of innovative large companies and a healthy pipeline of start-ups and smaller businesses – which employ most of the B40 and lower end of M40 segments – must be laid down now, as these are crucial for the protection of vulnerable groups in an economic turmoil.
The capacity for creating more local companies and venturing these organisations into higher-value products is a function of various factors, but at the heart is human capital. This brings us to the subsequent points.
Overhaul the Education System
Three main issues underline most of the major problems faced in Malaysia: unity, morality, and talent.
The big wedge in society post-GE15 can be seen as a combination of ethnocentric and theocentric divisions in society. Widespread corruption, injustice and discrimination are symptoms of moral regression while problems in economic growth, innovation and competitiveness are a function of the overall level of talent in the workforce.
In view of limited resources, the focus must be put in places that can kill three (big) birds with one stone. Specifically, the education system holds the key to unity and is the moral and intellectual bedrock of a nation.
Unfortunately, the Malaysian education system is highly politicised with widespread racial discrimination and segregation. Vernacular schools keep Malaysians apart at a very young age and consequently, this impact of racial and ethnic segregation culture carries on, if not worsens, when they enrol in higher education institutions.
Ultimately, the ethnic segregation culture indoctrinated over many years in the education system gets carried over into the workforce.
It’s ironic and hypocritical that the very same politicians and their support base also expect “unity” among the people when the very foundation of the nation (the youth) was made to spend many years being racially and culturally segregated in primary and secondary education and/or experience racial discrimination at tertiary levels.
The formation of a ‘unity ministry’ will be near useless against such a backdrop.
Make Ethics and Morality a Central Pillar in Education
It is also alleged (or rumoured) that some religious schools are spreading deviant/extreme teachings and fanning hate towards other races and religions. In the immediate term, this must be thoroughly investigated, regulations put in place and such activities must be stopped.
In the long term, ‘Pendidikan Agama’ and ‘Pendidikan Moral’ shouldn’t just be subjects at schools that students need to pass. If anything, the notion of merely ‘passing’ instead of excelling in subjects on morality and ethics should raise eyebrows.
The teachings regarding respect, justice for all, abhorrence of corruption of all kinds and the rejection of racism and other forms of discrimination must be a central topic throughout Malaysia’s education system.
When these central (theoretical) teachings are combined with years of actual practice, for example, when our children grow up having friends from other races and religions from a very young age, and they all learn from each other’s culture and languages, national unity forms organically.
Real human bonds cannot be forged with fake rhetoric and insincere narratives.
Separation, segregation and discrimination are antithetical to unity.
Instil Deep Interest in STEM and Innovation
Malaysia can set up ministries, agencies, GLCs and GLICs, sandboxes, incubators, and various funding mechanisms to promote a favourable ecosystem for growth, but ultimately it is the perseverance of innovative individuals that defy all odds to make things happen.
In the near term, we need to keep existing talents from leaving. This is where structural and institutional reforms, making the business and financing landscape fair and equitable, and the provision of incentives and better pay are important to reduce or reverse brain drain and promote the growth of local companies.
Getting the short- to medium-term strategies right helps catalyse the first step in making the long-term solution a success, which is the instilling of interest in science, technology, and innovation early on in the education system, to churn out more talent.
Popularisation of science, engineering, technology, and mathematics (STEM) must be taught in ways that promote it beyond a mere subject, but as a culture so that ideas of innovation and the technocratic-entrepreneurial spirit can be inculcated in primary and secondary education. This is where interest to pursue related courses at the tertiary level is ‘organically’ grown.
Higher throughput of innovative individuals from the education system increases Malaysia’s chance to produce a higher number of successful companies offering high-value products and services that can hire more Malaysian talents.
Having exemplary industry captains and an attractive high-value (and high-paying) innovation-driven industry would provide the much-needed self-sustaining feedback loop to instil interest among students and allow the growth of more funding sources in the form of (but not limited to) private equity investments, grants, and technocrat ‘angel’ investors, in addition to government funds and financial institutions.
Taking stock of where Malaysia is right now, we have a long way to go. But it starts with proper education, and these foundations must be laid down now.
Ameen Kamal is the Head of Science and Technology at EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research.