Role of the Chinese community in achieving the NEM and 10th Malaysia Plan targets

Changing for the better




Sunday August 15, 2010

Changing for the better



MCA president Datuk Seri Dr Chua Soi Lek’s address to the Prime Minister and guests at the opening of the party’s Chinese Economic Congress yesterday.

WELCOME to the “Chinese Economic Congress” with the theme “Role of the Chinese community in achieving the NEM and 10th Malaysia Plan targets”.

The NEM and the 10MP are two of the four pillars of national transformation that will enable Malaysia to achieve the goals of Vision 2020, that is, to be a high-income economy and developed nation by 2020. The other pillars are the 1Malaysia concept and the Government Transformation Programme.

Keynote speech: Dr Chua delivering his address at the Chinese Economic Congress yesterday.

Much thought and effort has gone into crafting the NEM and 10MP, and, of course, far more work needs to be done for the actual implementation.

Let us bear in mind that these are national plans, and not just the Government’s plans. This means the nation as a whole has to come together and pull in the same direction in order for the NEM and the 10MP to succeed. Our immediate priority is to jointly grow the economic pie, instead of noisily debating over which slice we deserve. Make no mistake, failure is not an option.

We are here to ensure the transformation is successful and the targets for both the NEM and the 10MP are met.

> Liberalisation of economy

For a country to achieve accelerated growth, one needs to liberalise the economy. One of the better examples of sectors is the liberalisation of the oil and gas sector which encompasses areas as such shipping, distribution of gas, petrochemicals, education and vocational/technical training, and so on.

Our oil and gas sector has reached a stage in which we are already an established player in the global stage. Yet the opportunities for the SMEs are still small compared to other countries including non-oil producing nations like Singapore. Therefore, given the maturity of the sector, the opening up of the sector will boost the country’s GDP by many folds.

As such, sir, I sincerely urge you (Prime Minister Datuk Seri Najib Tun Razak) to consider liberalising Malaysia’s oil and gas sector, and allow many more of our non-bumiputra investors to be joint-venture partners, contractors and sub-contractors in areas such as exploration, platform constructions, logistics, deep-sea operations and others.

Another area that needs to be liberalised is the telecommunication sector. With the full opening of the sector, increased competition actually augurs well for both the operators and the consumers.

With protectionism, rates of telecommunication services offered are high. Thus the country’s broadband usage is less than desired. We are hardly touching the 40% penetration rate as compared to the higher levels achieved by other countries.

> The Role of GLCs in the NEM

The GLCs make up nearly 40% of the value of the Bursa and there is no denying that they dominate the private sector in the economy in terms of their assets and capitalisation. GLCs have been instrumental in helping the bumiputra business community to flourish – to give them a head start to form a core cluster of bumi entrepreneurs to mentor and nurture others to be equally competitive and to be confident in the global stage.

But at the same time, it must be recognised that Malaysia is just a small market with 26 million people. As such, GLCs must take the bold step to venture regionally and/or globally like CIMB Bank. CIMB has expanded its financial wings to Thailand, Singapore, Indonesia and is doing very well in South-East Asia.

However, to be regionally and globally competitive, we need to make sure that the best talent remains in our shores. I encourage more GLCs to open up their board of directors to include more non-bumiputras as well as international expertise. It is important also that GLCs open up their procurement system to include competitive SMEs based on the quality of their service and products that they offer, rather than based on race or equity requirement.

> Open Tender System

Likewise, we call for greater transparency in our tendering process. Closed tender systems have always been associated with corruption and kickbacks. Quality of projects will also be compromised. This does not go down well with the good governance which the Government is trying to project. The open tender system not only removes accusations and talk of corrupted administration but also lowers the cost of projects.

We hold the opinion that all the public procurement should be open to all local SMEs, provided with equal access and opportunities. Under the 9th Malaysia Plan, over RM1bil was allocated for SME development alone. Bank Negara estimated the number of SMEs in the country at about 600,000.

The importance of the SMEs is recognised by the Government. The NEAC report stated that SMEs currently make up 35% of Malaysia’s GDP and 20% of its exports. If the future procurements were to be opened to the SMEs, the SMEs would account for much more than the current 35% of the GDP. If the value of the SMEs were to double, they will account for over 50% of the country’s GDP.

Following the decision to relax the 30% bumiputra equity requirement for IPOs as well as the liberalisation of the 27 services sub-sectors I urge you, sir, to similarly consider being flexible in implementing the 30% bumiputra equity in other sectors.

Rather than enforcing the 30% bumi equity requirement across the board, a more flexible system in the form of a Margin of Preference system should be implemented on a sector-by-sector basis.

In the days of traditional economic structure, when capital and land were the major economic input, we could insist upon a certain percentage of equity distribution and still be fairly successful.

But we are now in the age of knowledge economy, where brain power in the form of innovation and creativity is the major (if not sole) requirement. If a talented investor, whether local or foreign, wants to start a new venture to design and manufacture a product based on his innovation for the new IT generation consumers in Malaysia, we cannot insist that he shares 30% of his creativity with us.

He is talented and can go to any other part of the world to pursue his dreams. Instead we should offer him all the assistance he needs so that he can come to Malaysia, create high-paying jobs and help propel us to being a high-income economy.

> Merit–based and Needs–based System

Fundamentally, the Malaysian Chinese have been and still are very understanding and loyal citizens. Globalisation has presented Malaysians many opportunities but it has also forced us to continue to be a competitive nation. Malaysians cannot remain globally competitive unless we go to a merit-based system.

On the other hand, we must inculcate a caring society in which the poor must be looked after. The NEM has pointed out that the bottom 40% of households earn less than RM1,500 per month. Thus, it is clear that preferential treatment must be given according to needs rather than race.

> Retaining and Attracting Talent

To achieve a high-income nation status, the NEM sets out a couple of primary thrust and enablers to move the economy up the value chain and also to address the persistent socio-economic inequalities. Amongst the enablers are developing a quality workforce and reducing dependence on foreign labour. In order to retain our talent pool in the country, we must recognise their contribution to the nation – to make sure that they are rewarded according to their merits.

Therefore, at this juncture, I would like to applaud YAB Datuk Seri’s recent decision to offer scholarships to all students, regardless of race, who scored 9A+ in their SPM examinations. This is truly in the 1Malaysia spirit.

This shows the Government’s efforts to develop human capital. Don’t forget high achievers are in fact hidden talents and assets to a nation. Elevating and improving the level of education in the country also mean paying more attention to vernacular schools.

Approximately 20% of Malaysia’s total trade over the last couple of years is with countries that adopt Mandarin as their main language. Total trade of the primary countries that use Mandarin as their mother tongue has been estimated at over US$2.5 trillion per annum. Malaysia’s trade with these countries in turn accounts for only 2% of their total trade. Given our multi-lingual and multi-cultural society, we believe Malaysia has yet to tap into the full potential of these trading nations.

The great strategist Sun Tzu has been frequently quoted on this where he said that whoever is first in the battlefield and awaits the coming of the “competitors” will be fresh for the fight. Whoever trails behind in the field will arrive exhausted, having to hasten to battle.

Thus, with more schools, we would be able to produce more students from these vernacular schools. Only then can we generate a workforce conversant in Mandarin in order to be able to seize the opportunities offered in the global markets.

Not only are additional schools required to cater for future demand and population growth but more importantly to ease the current overcrowding problem.

To add to the problem, the number of students in Chinese schools is expected to increase by an additional 65,000 over the next five years.

> Rationalisation of Subsidy, Minimum Wage and Skilled Workers

In Malaysia, only 23% of workers (11 million) are skilled workers, including those with higher education degrees. We are one of the countries with the least qualified workers in the region. Singapore, Hong Kong and Taiwan have about 40% skilled workers. Lack of skilled and qualified workers in Malaysia is impeding economic progress.

Malaysia is addicted to cheap foreign workers. Studies by the Human Resources Ministry show that 34% of our 1.3 million workers earn less than RM700 per month, below the poverty line of RM720 per month.

What is worrying is the World Bank study on wage trend which showed that Malaysia recorded only an annual 2.6% growth during the last 10 years. The influx of foreign workers depresses the wage increase of local workers.

MCA calls for the execution of a minimum wage policy on a sectoral and regional basis. Over 90% of the countries in the world already have legislations in place on minimum wage.

The setting up of a minimal wage system is in line with MCA’s calls for rationalisation of subsidy. Subsidy cut is a must to prevent distortion in the allocations of the country. Implementation of subsidy reduction schemes cannot stand alone as it needs to be complemented with a minimum wage system to offset negative impact of the reduction in subsidy.

The activation of the Minimum Wage Council now is therefore looking more and more appropriate. At this point, our businesses can no longer win market share by trying to be the cheapest producers of goods or providers of services. In a globalised world, such an edge is only fleeting.

Lasting competitive advantage today has to come from productivity-led growth and innovation. The 10MP includes Government measures to create an environment in which the creativity, energy and initiative of private enterprises can be nurtured and harnessed.

On that note, I believe the Chinese Economic Congress today is most timely. We need to ensure we know each and everyone’s role, to be able to tap into each forte to ensure the NEM and 10MP are executed efficiently to achieve the targets already set out. There is no denying the road ahead will be tough but I have full confidence that, under your leadership, we will see the bright light at the end of the tunnel.

I acknowledge that the business community has certain expectations of what the Government should and should not do.

In the overall scheme of things, 10 years is a mere blink of an eye. But for Malaysia, the next decade may well prove to be a crucial phase in our nation’s history.

Permit me to end with a couple of ancient sayings by Confucius. We should “better be a diamond with flaws rather than a pebble without”. Also, “only the wisest and stupidest of men never change” and for one “to know what is right and not to do it, is the worst type of cowardice”.

So we intend to change for the better and to do what is right. We can start off with this congress where we can brainstorm, learn our roles and how we can help in ensuring the target of becoming a high income advanced nation can be met.