DAP calls for White Paper why Malaysia’s international competitiveness rating had suffered a catastrophic collapse falling by nine notches in the past year or 16 places in the past three years

(Petaling Jaya,  Saturday): The Government should present a White Paper when Parliament reconvenes for the 2001 budget meeting on October 16 next month to explain why Malaysia’s international competitiveness rating had suffered a catastrophic collapse falling by nine notches in the past year or 16 places in the past three years.

It is a shame that for the past 48 hours, there has been a blackout in the mainstream media of the worldwide release of  the 2000 global competitiveness ranking by Swiss-based  World Economic Forum (WEF), which  throws some light for  the collapse of Malaysia’s international competitiveness rating and  why there is such deep negative perceptions of the Malaysian government and economy by international business executives.

The 48-hour media blackout of the bad news about Malaysia’s catastrophic collapse of its international competitiveness rating is clearly designed not to spoil the multi-media extravangza presided over by the Prime Minister, Datuk Seri Dr. Mahathir Mohamad at the Multimedia Super Corridor (MSC) this week, which includes the fourth MSC  International Advisory Panel (IAP) meeting, the second MSC-IAP Multimedia Business Summit,  the MSC Expo 2000 and  the launch of the E-Village Studio at the Entertainment Village.

The effect of the 48-hour  media blackout however is the exact opposite, as  it could only succeed in keeping Malaysians in the dark about the country’s catastrophic collapse in its international competitiveness rating but not the movers and shakers in the IT world,  who have instantaneous access to information two days ago about WEF’s  2000 global competitiveness ranking - whether they are in Malaysia or in their respective countries.

The 48-hour media blackout has only highlighted to the IT world of Malaysia’s Achilles’ heel and the greatest threat to the success of the ambitious MSC to enable Malaysia to take the quantum leap into the information society - the total lack of a culture of transparency and openness which is an essential prerequisite for any nation to transform itself into an IT power.

What is the use of the government announcing the MSC  Bill of Guarantees, particularly "No Censorship of Internet", when Malaysia is giving a classic illustration of the censorship mentality and culture in government and the mass media where there could be a 48-hour blackout of important but adverse news about the Malaysian economy?

It is very sad that while neighbouring Singapore has been publicly agonising over the loss of its top placing as the world’s most competitive economy, having maintained  the No. 1 position in the international competitiveness rating for five years, Malaysia is engaged in a blackout of the bad news, confirming that the mainstream media’s role is to report good news but suppress bad news.

The latest WEF global competitiveness ranking shows the United States  with the world's most competitive economy,  almost 20 percent above its next closest competitor,  Singapore. The US was ranked second in last year's list,  a position it had held for several years.

As  the result of  a new weighting system for  the 2000 report that emphasised technology and innovation, there were  three newcomers among the top five, in  addition to a string of other changes lower  down the line.

WEF president Professor Klaus Schwab  explained that the 2000 competitiveness  report attached "significantly greater weight  than before to technology as a key driver of  sustained economic growth''.

"As a result, our rankings reflect to a much  larger degree whether countries belong to the group of innovators or adopters whose  economies look set to expand particularly  fast, or whether they are technologically disconnected,''

And as a result, the US vaulted to the top  while Luxembourg, the Netherlands and  Ireland shot past Canada, Hongkong and Taiwan to take third, fourth and fifth places respectively. They pushed the three down to seventh,  eighth and 11th places respectively.

Malaysia slipped to 25th position from 16th last year, a fall of nine notches. Since 1997, when Malaysia was ranked in the 9th position, the country’s international competitiveness ranking had fallen disastrously by 16 places.
 
The latest WEF global competitiveness report should be a final "wake-up" call to the government that the Malaysian economy is confronted with many "time-bombs" which must be defused if it is not going to be marginalised in the international marketplace.
 
In other countries, where the country’s international competitiveness ranking had fallen by three notches, there would have been a change of finance and economic ministers - but in Malaysia, the governments seem totally  impervious and unconcerned about the fall of nine positions in one year and 16 placings in three years!

Yesterday, I urged the phasing out of capital controls and the end of Mahathir’s anti-foreign rhetoric, which would have been factors contributing to Malaysia’s catastrophic collapse of its international competitiveness rating.

The latest issue of Asiaweek described the lack of foreign investment in Malaysia as a "Time Bomb for Malaysia" and its correspondent Assif Shameen  warned that

"an investment draught threatens not only to derail recovery but also leave Malaysia behind as its nearest competitors move to reinforce their positions in the New Economy."

The Asiaweek article said:

"Malaysia's recovery in the past two years has had little to do with the capital controls. Nearly all crisis-hit countries in Asia have seen their economies bounce back. The best performers have been those like Korea, which took the IMF medicine seriously and instituted real reforms, or Hong Kong, which has completely reinvented itself as more of a New Economy player.

"Among the factors that have sustained the recovery in Malaysia are its huge electronics exports  and the surging increase in demand for electronics components by Japanese and US companies selling the latest gadgets and gear to American and European consumers. In other words, the very people whom Malaysian leaders blame for their economic problems have been buying loads of goods from Malaysia and helping it recover. For a substantial oil and gas exporter like Malaysia, the record high oil and gas prices in the past year have also helped, though energy is fairly small part of total exports. However, higher government oil revenues  have helped keep fiscal spending up and that has kept the wheels of the economy turning slightly faster.  Because of its investment-friendly policies of the 1970s, 1980s and early 1990s, Malaysia is now the fourth-largest exporter of semiconductors and sixth-largest manufacturer of electronics components in the world. In some low-end categories, such as hard disk drives, it now leads the world.

"Much of this can be tied to the investments that poured in from U.S. and Japanese electronics companies before capital controls were introduced. The problem now is that even the Malaysian government's own statistics show that new foreign direct investments (FDIs)  especially in the high-tech sector, just aren't coming in at all. FDIs in the first six months of this year were drastically down  - more than 20%  - on the same period last year. FDIs in electronics manufacturing dropped even more sharply. What's more worrying is that most competitor nations - particularly the likes of Thailand, China and a few others - are seeing FDIs in electronics manufacturing soaring.  U.S. and Japanese electronics companies, which considered Malaysia their best investment destination in 1996, now don't even count it as among the top-five destinations.

"Though capital controls do not apply to multinationals in the electronics sector (who are by law exempt) they have adversely affected decisions to relocate factories to Malaysia or set up new plants. An undervalued ringgit scares away investors who need to buy huge equipment today, fearing that at some point down the road the Malaysian government can arbitrarily change the exchange rate. The little new investments that is coming in is by companies who already have a plant in Malaysia and need to expand or upgrade.

"One problem with electronics manufacturing is that product cycles are getting smaller. New companies are peddling new components for ever-sleeker gadgets all the time. Even existing plants need to retool far more quickly today than they did five or 10 years ago. A country that has just a few dozen top-notch multinationals with electronics plants can rely on those plants to keep shipping out products for a few years only unless there is massive new investment, reinvestment and retooling.

"Clearly, that is not happening in Malaysia and its leaders are worried. On a recent trip to Seoul, I wandered into hotel ballroom after a lunch interview to find Malaysian Trade and Industry Minister Rafidah Aziz addressing Korean businessmen. She seemed irritated at the questions they were throwing at her about political stability, corporate governance, transparency and above all capital controls. ‘Why can't you just invest in Malaysia and see for yourself,’ she said. If only it were that simple.

Malaysia's new inward-looking policies, its inability to meet the globalization challenges, its backtracking on AFTA (ASEAN Free Trade Area) deadline for sectors such as autos do not instill confidence in long-term foreign direct investors.

"SG Securities Asia in a recent report said that falling FDIs in Malaysia will lead to other more worrying trends such as the loss in technology transfers, best practice management techniques and integration into global trends. ‘This is an obstacle to the development of a productivity-based growth model,’ the report said.

"Over the past two decades Malaysia has drawn foreign investment in high-tech industries. It will be a shame to see the skills that have been developed now wasted on old machinery and obsolete technology in heavily protected industries, instead of being deployed to catapult the country into a manufacturing force in the New Economy."

(9/9/2000)