Transformation Continues: Open Letter to PEMANDU

Dear Dato' Sri Idris Jala,

Now that the election season has concluded, I presume you and your team at PEMANDU can continue to focus on the transformation efforts, among other things, to raise incomes and the quality of life for all Malaysians. I’ve been reading your articles in the Star. I’d like to share some comments, concerns and some suggestions to support your mission.

First of all, regarding the goal to reach the high per capita income, it seems that the general public is expecting the government to keep increasing minimum wages. You and I know that this is not the case. The big “I” for inflation would nullify this approach and could probably make the quality of life worse. Your point that everyone needs to work hard to reach the goal needs to be made more prominent. There is no shortcut. I strongly believe good education is the main pillar to support new, advanced economic endeavors and reach the developed status.

Below are some specific ideas for your team’s consideration:

1. Implement Integrated Planning to Improve Mobility and Quality of Life
Car and house are two key elements affecting the quality of life of all Malaysians. Continuing economic protection of local car manufactures deprive Malaysians from the opportunity to buy affordable cars at the cost of around RM10,000 from China and India. Yes, we need to consider quality to get the best value, but an efficient market will decide what’s best. We need to set aside our pride and move away from activities that we clearly don’t have competitive advantage. We should also develop affordable housings outside congested city areas and integrate housing development planning with MRT development to ensure less-than-one-hour commute one-way to work from the new areas with public transportation. Consider high-speed rail connections to Kuantan and Penang, besides the already planned to Singapore, from KL to transform peninsular Malaysia into a single metropolis. This is an expensive, but worthwhile infrastructure investment to encourage new economic activities among different regions in peninsular Malaysia.

2. Identify Our New Competitive Advantages
In general, Malaysia has been transforming from agricultural- to service/manufacturing-based economy. From the international perspective, Malaysia is considered as the leader in Islamic finance. We should capitalize this competitive advantage to the maximum if we haven’t done so. Meanwhile, we still have to answer the question, what are our other competitive advantages? In the past, we have been Johny-come-lately in the areas of information technology, biotechnology, call centers etc. Like some other governments around the world we were seduced by the hype of voguish high-tech sectors, and falsely embraced the notion that intervening in these sectors can drive growth and create jobs without evaluating our true strength and weaknesses.

You, indeed, need some visionaries to assist in identifying some potential new competitive advantages and blue ocean strategies for Malaysia. However, instead of picking the winners and committing resources prematurely, I’d heed the advice specifically for any government from an editorial published a few years ago in the Economist as follows:

• Implement straightforward steps to improve the environment for business, e.g. less red tape, more flexible labor markets, simpler tax and bankruptcy regimes, will be more effective than handouts to favored firms or sectors. 
• Invest in the infrastructure that supports innovation, from modernized transportation systems and electricity grids (a smarter way to help green energy) to basic research and university education.  
• Encourage winners to emerge by themselves, e.g.through the sort of incentive prizes that are growing increasingly popular, rather than the failed policy of picking winners.

3. Transform Government Subsidies
Government subsidy is a very sensitive matter, especially when it involves the majority Malays. I’ve penned my opinion in an unpublished article (http://wacanamalaysia.blogspot.com/2013/05/ge13-racial-dynamics-politics-in.html) about the need for all Malaysians to shift from dependent to independent and interdependent. I strongly believe education is the key for any underprivileged group. Government’s recent effort (e.g. BR1M, Klinik/Kedai Rakyat 1Malaysia) to focus on low-income people is the right direction to pursue.  In addition, we should seriously consider implementing or down-right copying the Bolsa Família social welfare program in Brazil that ties in efforts to help low-income people with education and health through conditional cash transfer. In an article (http://www.utusan.com.my/utusan/info.asp?y=2010&dt=0428&pub=Utusan_Malaysia&sec=Rencana&pg=re_02.htm) I wrote a few year ago in Utusan Malaysia, I proposed the idea to offer conditional ASB loan to low-income Bumiputras who send kids to schools. Innovative public-relation (PR) strategies are also needed when reductions in subsidies or new, rational and fair tax program e.g. GST are announced. Focus on what new benefits to be provided with new revenues to the government instead of what is being taking away/charged. Implement town-hall meetings to give the right information to the grassroot government supporters. Surprising the public with some new subsidy- and/or tax-related initiatives is always bad.

All the best!