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ASLI-SEDAR ROUNDTABLE DISCUSSION Saturday, January 14, 2006 Economic Competitiveness of the Nation By Datuk Paul Low Vice President Federation of Malaysian Manufacturers (FMM) Economic freedom helps create real wealth Selected Countries Average per capita GDP,$000s, 1996 Hong Kong, New Zealand, Singapore, Switzerland, U.K., USA $14.8 Argentina, France, Germany, Mexico, Spain $12.4 Botswana, Estonia, Greece, Hungary, South Africa, Sri Lanka $6.4 China, Egypt, India, Nicaragua, Pakistan, Tanzania $3.1 Algeria, Brazil, Nepal, Nigeria, Zimbabwe, Rwanda Growth of real per Capita GDP, %, 1985-96 $2.5 Source: I. Gwartney & R. Lawson, Economic Freedom of the World, 1997 Annual Report Vancouver, Fraser Institute The size of the global arena will have increased nearly 12-fold by 2027 US $ trillion $91 5 13 Local Globalizing $28 4 18 6 1997 Source:The Mckinsey Quarterly, 1999, #4 “ Getting to Global $73 Global 2027 (estimate) Growth Performance of Malaysia • • • • • • • • • • Average 1960s Average 1970s Average 1980s Average 1990s Average 1971-1990 Average 1991-2000 2000 2001 2002 2003 6.0% 7.5% 5.8% 7.1% 6.7% 7.1% 8.9% 0.3% 4.1% 5.3% Import substitution Export orientation Heavy industries High-tech Can past high growth rates be sustained? Malaysia’s Competitiveness… Attracting Investments • Fifth most competitive country – Institute for Management Development, Switzerland • Seventh in world as FDI location for investments – UNCTAD • Top quartile of 145 countries on ease of doing business – The World Bank and International Finance Corporation • 15th out of 60 countries & Top 3 for outsourcing – A T Kearney – Heavy manufacturing ranked Malaysia 16th most attractive – Light manufacturing ranked Malaysia 9th most attractive Malaysia’s Competitiveness… Trade • 18th leading exporter & 20th leading importer in world – WTO • Fourth most open economy – IMF • Trade accounted for 208% of GDP • Net exports contributed 2 percentage points to growth • Trade increased by 23.2% • Gross exports increased by 20.8% (2004) • Manufactured exports grew by 19.7% Key Imperatives • Sustainable economic growth • Generating wealth • Income/ wealth disparity (NEP) Key Drivers of Competitiveness • Globalisation and Internationalisation – Multiple location, multi cultural – Elimination of protection – Global sourcing (materials, services and expertise) – Integration of demand & supply chain (logistics, inventory mgt.) – Global brands, marketing and market customisation. Key Drivers of Competitiveness • Knowledge based – Individual talent (creativity, intellectual property ) – Relational skills and transfer – Acquisition, development, adoption, contextualization and application – Execution know how and skills • Technology driven – Convergence and integration of discipline – Obsolescence, high pace of development – Intelligent process (software engineering) Generating Wealth • Education opportunity to pursue preferred field of study • Support to pursue invention and commercialisation • Originator and risk taker to be rewarded • Institutions and system support (policies, incentives, grants etc) must have integrity and clarity of purpose • Non discriminatory – based on merit of each case and transparent Income/Wealth Disparity (NEP) • Equity condition (ICA) – Joint venture • Quota Based affirmation action – Predetermine outcome open to manipulation – Move to merit base • Transparency in Government procurement Competitiveness in MindsetChange Trajectories • • • • • Radical Change Entire transformation Enormous risks Accept inevitability of change Intermediate Change Restructure key relationships Unconventional ways to extract value from core resources, including diversify • • • • • Creative Change Constantly redeveloping assets and resources Innovation in fits and starts Progressive Change Incremental build-up of resources and capabilities Leveraging and sustaining Carving out distinct positions Change Trajectories…for Government • • • • • • • • Radical Change Remove security of tenure from civil service and local authorities Change mindset Meritocracy in civil service Service standard measurement Intermediate Change Customer orientation Track & trace approval/processing Remove overlapping functions and fragmentation Improve integrity • • • • • • • Creative Change Renewed professionalism Institutionalised transparency International competency – Dealing with negotiations Progressive Change Integration & connectivity of government services Declaration-based approvals Improve maintenance Standardisation of procedures Change Trajectories…for Manufacturing • • • • • • Radical Change Bankruptcy – mindset change Knowledge sharing culture – R&D, innovation Original equipment manufacturing Intermediate Change Competitiveness – cost, quality, speed Mercantile attitude - local companies ICT adoption & literacy • • • • • • • • Creative Change Value pioneering – create demand High-tech entrepreneurship Technology & knowledge-driven culture Global sourcing & collaboration Progressive Change Reverse investment – off shoring Green productivity - resource recovery Agile, adaptable, integrated & aligned supply chains Branding Change Trajectories… for Human Resource • • • • Radical Change Immigration– a talent attraction function needed for growth Education – creativity & merit Intermediate Change Flexible hire and fire policies Productivity linked wage system • • • Creative Change International sourcing of knowledge to complement technology transfer and FDI Progressive Change Middle management of technical professionals who can design, innovate and adapt technology Marketeers Change Trajectories… for IT Industry • • • • • • • • Radical Change IT talent pool Coordinated IT applications eg event driven systems Drive need for adoption Creator of intellectual property Intermediate Change IT literate workforce Stand alone IT applications eg ERP “Follow the herd” adoption Make IT components • • • • • • • • Creative Change Outsource IT workforce globally Networked IT applications globally Mass adoption Licensed intellectual property Progressive Change Skilled IT workforce Interoperate IT applications eg supply chain management Early adoption Make IT products Competitiveness in HRD OPERATOR (ACTUAL) WORTH TO FOREIGN INVESTORS TECHNICAL MIDDLE MANAGEMENT (DESIRED) TECHNICAL MIDDLE MANAGEMENT (ACTUAL) THRESHOLD OF WORTH Courtesy of Prof Raj Balendra, University of Strathclyde TIME (YEARS) Recommendations…Graduates • Employability – Skills & values • Generic & technical – design • Right attitude & values – Industry exposure • Work in labs, R&D centres • Actual project assignments – 1-year in industry – Vacation training DESIGNERS TRAINING EXPERTISE Product Process Machinery Systems Postgraduate design & manufacturing Original Mach. & System “Design & Manufacture” Engineers Engineering Undergraduate Problemsolving Design Design Technicians Technical Colleges Detailing Design Design Managers Non-engineer Undergraduate Manage Design Procedure Industrial Designers Art Colleges Product Modelling & Visualisation Courtesy of Prof Raj Balendra, University of Strathclyde