PETALING JAYA: Well planned growth strategies – medium and long-term ones – should be adopted for corporate Malaysia to remain competitive and ensure economic sustainability while taking cognisance of the Covid-19 threat.
Despite 95% of the adult population fully vaccinated, new Covid-19 cases are on the uptrend and this could throw the spanner in the works and hamper economic growth targets and initiatives.
Economists concurred that growth strategies should spur, among others, consumer, investor and business confidence to sustain recovery and steer economic trajectory.
At the same time, they opined that managing the Covid-19 threat and ensuring long-term economic growth should go hand in hand.
Sunway University Business School professor of economics Yeah Kim Leng said an investment-centred strategic thrust, comprising strategies to attract domestic and foreign direct investment, could be developed to focus on opportunities arising from three key developments.
“First is the post-pandemic reconfiguration of global supply chains where Malaysia can be in a better position to attract investments from the United States, China and Europe and countries within the Asian region.
“Second, the vast global investment funds available for investment in ESG (environment, social and governance) and SDG-related (United Nations 2030 Sustainable Development Goals) activities.
“The third area covers domestic and foreign investment opportunities arising from regional trade agreements such as the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership,” he said.
The second mid-to-long term growth thrust is centred on accelerating productivity and development of research, technological and innovation capabilities, he noted.
Yeah said key strategies include aligning the education system to better match industry needs in addition to closing the skills gap between Malaysian workers and those in more advanced economies such as South Korea, Taiwan and Singapore.
Although strategies to foster closer industry-university-government collaboration to push the country’s technological frontier are already in place, he said there is a need for more effective and follow-through implementation strategies.
The third suggested strategy focus is a comprehensive review of the involvement of the government in the economy, especially pertaining to the role of government-linked companies (GLCs) and state-owned enterprises.
A more streamlined GLCs’ and state-owned enterprises (SOEs) strategy aimed at unlocking entrepreneurship and invigorating private sector dynamism may need to be pursued to achieve a more dynamic and competitive economy, Yeah noted.
AmBank Group chief economist and member of the Economic Action Council Secretariat Anthony Dass said policies are needed to encourage businesses and bring back confidence.
“In this respect, there is a need to revisit the entire system of the country in a holistic approach. And there is no better time and opportunity for us to reset the country than in the post-pandemic era with radical measures on many fronts.
“Covid-19 has opened the door for opportunities for us to reform in many areas.”
Going forward, Dass said the government would need to address a number of long-term economic recovery plans. These include red tape and regulatory matters, he said.
“The mismatch between labour demand and supply, unemployment of youth and fresh graduates, the low percentage of skilled workforce and high reliance on low-skilled foreign workers need to be addressed for the economy to compete effectively,” he said.
Dass said skilled workers make up less than a third of the working population and hardly improved over the last 10 years. Foreign workers account for between 10% and 32% of total employment in sectors such as agriculture, construction, manufacturing and services.
Another key issue to address is the low technology adoption and digitalisation among firms, especially the small and medium enterprises (SMEs).
While focusing on these areas, he said there are many SMEs who are still struggling to get a grasp and understand the impact on their bottom line.
“Comparing our economic performance with regional peers, competition has particularly become more intense in the last couple of decades, with higher growth rates achieved by Vietnam, Indonesia and the Philippines compared with Malaysia,” Dass said.
Based on the Institute for Management Development (IMD) World Competitiveness ranking of 64 economies in 2021 (released on June 17), Singapore was ranked fifth while Malaysia was at the 25th spot.
In terms of economic performances, however, Singapore was at the number one spot in 2021 from number three in 2020, while Malaysia dropped from the ninth spot (2020) to number 15 in 2021.
Malaysian Institute of Economic Research (MIER) head of research Shankaran Nambiar (pic below) said it should not be assumed that the Covid-19 contagion is over as new strains of the disease could crop up as seen in other countries.
Furthermore, as Malaysia moves into the endemic phase, pressure on healthcare facilities would require government expenditure.
“At the same time, concerns regarding long-term growth cannot be overlooked. There has to be a clear understanding that both strands of action will have to be undertaken simultaneously – handling Covid-19-related risks and attending to long-term growth.
“Aside from the policies that come under 12th Malaysia Plan (12MP), the broader ecosystem has to be enhanced. These include enhancing governance, undertaking institutional reform and ensuring political stability.
“Malaysia has done well in improving conditions for ease of doing business but there is perhaps more that can be done,” Nambiar noted.
He also said there are various issues that have to be attended on the “soft” side of transformation. And it is perhaps these issues that have to be prioritised as they would propel the nation to its new growth trajectory.
He said not only there has to be technology upgrading and improvement in skills but also transparency, the right to information and good governance.
Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid, while commending the 12MP and measures under Budget 2022, said execution is key.
He said risks associated with bureaucracy due to multiple agencies would be the key factor that could stall the multiplier effect of government spending.
“Meaning to say, the government really needs to address the practical issues so that the take-up rate for each measure is high enough to create a desirable impact on the economy and society.
“If there is variance in their target achievement, it will need to be rectified as quickly as possible and if there is a need to tweak the programme, then they should do it. It’s about being pragmatic and effective.”
Afzanizam said the government needs to be vigilant on the risks associated with Covid-19. He said monitoring the key indicators such as the infectivity rate and healthcare sector capacity should never be compromised.
In this respect, he said the allocation for healthcare would need to be spent in a timely and efficient manner.
Effective communications, better coordination and execution would be the primary driver for confidence building.
“At the end of the day, the markets, the general public and businesses want results that can enhance their welfare and competitive edge,” he said.