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| An illustration of declining productivity |
This is not a new issue but had been left to prolong. SERC contributed an article to BERNAMA in 2020 here in view of the challenges to come from the pandemic. An updated view is the extract from Thick as a Brick's Declining Productivity: Worrisome economics beyond politics below:
To ... appreciate the problem and able to understand the implication, the issue of declining productivity raised in the recent Keluar Sekejap interview with World Bank Chief Economist for Malaysia, Aporva Sanghi incapsulate the crossroad situation we are in.
Aporva mentioned of the long term decline in productivity. Decline in investment at below 20% of GDP and the investment coming Malaysia's way lack quality.
One area in investment decline is education or in other words, human resource investment. He described and quantified Malaysia as facing learning poverty at 40%. There is lack of nutrition in school children, in which we recalled the late Ungku Aziz (Al Fatihah) talking about kerangka minda decades ago.
The economy needs to be more competitive and do away 4ith excessive APs, monopoly, and excessive reliance on imports.
The NIMP is good but its still horizontal i.e. lacking depth. As any IMF/World Bank mantra, need liberalisation and one area is on services mentioned to increase competition and raise competency.
He highlighted the semi-conductor industry to illustrates the weakness of Malaysia in taking advantage of its position and realised its potential to be a major global player.
Policy stability was lacking in Malaysia. The country need talent .. talent ... talent ..., but policymaker could only think of revenue sacrificing tax incentive to go about it, instead of taking the more painstaking and effective solution.
Too many plans and policies, but not enough on the doing. Too many programs, departments and special purpose agencies, which only increase overheads, to end up fragmentised and lacked deliverables. Madani and even Keluarga Malaysia had good intention and narratives, but still needed to do is the economy wide reform or transformation.
The problem with over reliance on foreign workers was mentioned. Repeated PMs expressed need to reduce dependence, but at the end, all succumb to industries' pleadings and end up not doing anything. The overdependence problem came at the expense of locals and it was glaring post-Covid in the effort to revive the economy.
Malaysia has problem of too low wages, but it still goes back to low wage against productivity as yardstick. Increasing minimum wage did not come with higher productivity and without it, could possible lead to business failure.
Landing to end the podcast on a diplomatic tone, Aporva said Malaysia is never as bad as it seem, but it is never as good as it should be.
Too many legacy issues of the structural kind. It needs to find ways to raise revenue. More spending needed to prepare for the aging population, defense, healthcare among others. It need to unlock the state-held growth.
Another way of saying, the civil servants are major hinderance and obstacle to change, new initiatives and ultimately progress.
Read also BNM's 2019 paper:
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