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Tuesday, July 2, 2024

Competitiveness ranking: An objective perspective

MALAYSIA’S competitiveness ranking dropped by seven notches to 34 in 2024, from 27 in 2023.

It was the worst ranking on record as the lowest score was 32 in 2022 based on the available data since 1997.

The country’s ranking also slipped four rungs to 10 out of 14 countries in the Asia-Pacific region, making it the first time that Malaysia had ranked lower than Thailand (25 from 30 in 2023) and Indonesia (27 from 34 in 2023).

We must view the slip rationally and identify areas for improvement in order to undertake necessary actions for improvement.

Prime Minister Datuk Seri Anwar Ibrahim had remarked: “We take an open approach and if there is constructive criticism to improve, we will do it. We will not take a too defensive stand if there are weaknesses that could be improved.”

From 1997 to 2024, it was observed that our country’s ranking had declined 14 times, went up 13 times while one time remained unchanged.

On a long-term trend analysis, Malaysia’s competitiveness ranking had been slipping since 2010

Our ranking had dropped by nine notches to 28 in 1999, 10 notches to 26 in 2005, six notches to 16 in 2011, 12 notches over four years to 24 in 2017.

In 2020, the ranking had declined by five notches to 27, and dropped by seven notches to 32 in 2022 from 25 in 2021 (see chart).

The highest ranking on record was 10 in 2010. Since then, it was hovering between 12 and 19 from 2012 to 2016, before slipping lower to between 22 and 34 from 2017 to 2024.

The government has eight years to achieve top 12 in the Global Competitiveness Index, one of the seven key performance indicators targeted under the Madani Economy Framework.

We have to analyse objectively the factors and components attributing to the competitiveness trends, and identify areas for improvement. Policymakers must use the findings of this report to benchmark progress, stimulate policy debate and identify potential challenges.

On the competitiveness landscape, the ranking for “government efficiency” dropped by four notches to 33 in 2024 from 29 in 2023, reflecting largely a drop in business legislation (to 50 in 2024 from 45 in 2023), societal framework (to 42 in 2024 from 39 in 2023) and institutional framework (31 in 2024 versus 29 in 2023).

The ranking for “business efficiency” dropped by eight notches to 40 in 2024 from 32 in 2023.

This was reflected in productivity and efficiency (53 in 2024 versus 36 in 2023), management practices (42 in 2024 versus 31 in 2023), attitudes and values (40 in 2024 versus 34 in 2023), Labour market (34 in 2024 versus 30 in 2023).

While the “infrastructure” ranking was maintained at 35 in 2024, the technological infrastructure slipped to 29 in 2024 (2023:16), while the ranking was still low for scientific infrastructure, health and environment, and education.

As for the “economic performance” competitiveness, it was ranked eight (seven in 2023), mainly due to a sharp drop in domestic economy to 35 in 2024 from 16 in 2023, as real gross domestic product growth slowed to 3.6% in 2023 (8.7% in 2022) on a normalisation of domestic demand post the Covid-19 pandemic as well as exports contraction.

We believe that the ranking for the domestic economy will improve in 2024-2025 as the economy will strengthen to grow by 4.5% to 5.5% over the medium-term, underpinned by continued expansion of domestic demand and stronger momentum of exports recovery.

However, we caution that domestic economic growth outlook remains subject to downside risks, mainly from the worsening of geopolitical tensions, stubborn inflation, as well as higher and longer interest rate in the US economy causing more financial volatility.

On the domestic front, any delay and execution risk in the implementation of approved investment projects and fiscal projects as well as slower consumer spending inflicted by the subsidy rationalisation’s cost adjustment would temper domestic economic growth.

Malaysia remains a sweet spot to investors.

The respondents of the Executive Opinion Survey have ranked the following top five key attractiveness factors for the economy. They were business-friendly environment (61.8% of total respondents), followed by cost competitiveness (58.8%), reliable infrastructure (52.9%), skilled workforce (44.1%), and dynamism of the economy (39.2%).

By fostering a more business-friendly environment and thriving ecosystem, Malaysia can unlock the full potential of its investment opportunities, entrepreneurial spirit and innovative capabilities. Both public and private sectors have to step up efforts in reskilling and upskilling the workforce.

The Malaysia Economy Madani Framework, New Industrial Master Plan 2030 and National Energy Transition Roadmap has laid the direction, initiatives and policy thrusts to transform the economy and manufacturing industries into high technology as well as green sustainability.

Malaysia has embarked on a series of incremental reforms to address competitiveness issues related to subsidies, transparency in public procurement, over-reliance on foreign workers, technological capacities as well as skills development.

Nevertheless, the following bottom five indicators have the lowest percentage of respondents are effective labour relations (17.6%), competitive tax regime (17.6%), competency of government (16.7%), strong research and development culture (15.7%), and quality of corporate governance (11.8%).

The taskforce comprising of representatives from public and private sectors not only need to sustain the improvements or even raise their ranking higher but also work on

improving the components and factors that contributing to a decline in competitiveness ranking.

The government, through a Special Task Force to Facilitate Business or Pemudah platform, is drafting a document entitled “New Deal For Business” to boost business confidence, stimulate economic growth as well as drive national digital transformation.

The need for a new look at the new deal for business. In an increasingly complex economic and business environment, we have to redouble our efforts to reduce business paint points, address structural impediments and situational challenges as well as undertake reforms towards dealing with bureaucratic red tape, inefficient and outdated regulations and undue regulatory burden faced by investors and businesses when doing business in Malaysia.

The pain points for businesses amongst others are problems of lengthy processes for registration, inconsistency application processes across states and lengthy approval time for incentives, the difficulty in complying with regulations, complexity in getting a construction permit, layering at various agencies and departments, burden of providing the same information multiple times as well as outdated rules, regulations and laws.

There are also funds and incentives support as well as financial related pain points such as tedious application procedures and processing, resulting in slow disbursement of fund and low utilisation rate.

Delivering a new deal for business must go beyond ‘business as usual” and “government knows all”, requiring a long-term commitment to maintain a cordial and clean relationship between government-business to create a conducive ecosystem where business feels empowered to invest, to innovate and to create good jobs.

Priority actions are as follows:

> “Act, Enable, Influence” framework, which offers a comprehensive approach to outline a defined sustainable and meaningful relationship between government

and businesses with a culture of collaboration to achieve common goals to grow our economy. The Government is not merely an actor implementing consistent

and simpler rules and regulations, but also listen to businesses and allow the right business voices’ active participation in policy development and shaping the

operating environment.

> Maintaining an effective open, inclusive and honest engagement between business and government (Federal, state and local authorities) with innovative and critical thinking can provide certainty and consistency for businesses as well as break down barriers to efficiency and high productivity.

> Developing new ways to oversee and assess the impact of regulations on business, including a full review of existing and new government’s policies and regulations are developed to ensure businesses are consulted at all stages.

> Three Rs of effective REGULATORY REFORMS: First, RETAIN regulations that support the basic rules of a market economy. Second, REPLACE regulations that

have legitimate aims but also have harmful unintended consequences. Third, REPEAL regulations that are motivated primarily by the manipulation of public

policy for unproductive rent-seeking.

> PEMUDAH to monitor and assess the competitiveness performance of Federal, state and local authorities in reforming processes and regulations for making them more efficient, accessible and simple as well as to avoid costly regulations for businesses and investors. Focus on regulating the exercise of power to constantly streamline administration and delegate power, improve regulation, and upgrade services.

> Provide a central dashboard as policy tool to monitor and analyse the performance of government websites and digital services (e.g. tracking website traffic, automated reports with key metrics to inform the progress of KPI, benchmark performance compared to other government websites).

By Lee Heng Guie who is Socio-Economic Research Centre executive director. The views expressed here are the writer’s own.

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Saturday, June 26, 2021

Decoding an awakening giant, the China's secret recipe of success for an economic miracle

World main countries 2021 Q1 GDP Growth Infographic: Wu Tiantong/GT

Xi Jinping: Chinese people will never allow foreign bullying, oppressing or subjugating

https://youtu.be/oS5QqS9C_xw

https://youtu.be/J1s1evS3xJc

As China gears up to celebrate the 100th anniversary of the founding of the Communist Party of China (CPC) on July 1, one of the greatest achievements of the CPC to be highlighted is what has been widely described as an economic miracle. From a backward agrarian economy in the early days of the People's Republic of China (PRC) to an economic and technological powerhouse today, China's economic success story under the CPC's leadership has arguably become the global story of the century and the envy of the world.

The secret codes behind such miraculous achievements have also become a hotly debated topic around the world. This article will decode those codes.

Born into a poor rural family with per capita disposal income of less than 50 yuan ($7.80), the PRC, now in its 70s, has seen the income reading top 32,000 yuan as of 2020. Behind the 640-plus fold surge is the country's rapid ascent to a global behemoth in almost every aspect in an unparalleled timeframe and path.

What are the CPC's secret codes to economic success?

To answer that, the Global Times conducted an extensive examination of the CPC's economic policymaking at several critical junctions and interviewed domestic and foreign experts. Four key themes stand out.

World main countries 2021 Q1 GDP Growth Infographic: Wu Tiantong/GT

Bold planning, effective execution

"The five-year planning is the major driving factor that boosted the Chinese economy to the No. 2 in the world. This system is effective and reliable in focusing on and predicting how the economy performs and which necessary adjustments are required to finetune it along the way," David Monyae, director of the Centre for Africa-China Studies at the University of Johannesburg, told the Global Times.

Since its beginning in the 1950s, there have been 14 five-year plans (FYP) - each marks a significant shift in China's economic policies and advances in social and economic development.

The first FYP, which started in 1953, envisioned the industrialization of China, starting the 60-plus year journey of creating an economic constellation that's being renovated every five years.

"China has led a different path than the West's laissez-faire capitalism or its so-called marketization. China maintains more compelling institutional prowess than the West," said Cong Yi, dean of School of Marxism under Tianjin University of Finance and Economics, citing the Party's strong ability to make strategic development plans that integrate short-term plans into medium and long-term ones.

After initially drawing on the Soviet Union's five-year planning experience, the CPC soon realized the limitations of the Soviet model and some of its shortcomings and mistakes, and then decided to independently explore a socialist construction road suited to China's national conditions, which, coupled with laser focus and effective execution, led to one milestone after another.

The 13th CPC National Congress in 1987 made a proposition of a three-step development strategy that envisaged doubling the gross national product (GNP) between 1981 and 1990, doubling its GNP again by the end of the 20th century and per capita GNP reaching moderately developed country levels by the middle of this century.

Buoyed by unprecedented reformist drives since the country's grand reform and opening-up in 1978, the second-step target was hit at the conclusion of the Eighth FYP (1991-95), five years ahead of schedule.

In yet another milestone, the Third Plenary Session of the 14th CPC Central Committee in November 1993 passed the decision on certain issues in establishing a socialist market economic system. With the guidance of the Ninth FYP (1996-2000), the country made good the transition from a planned economy to a socialist market economy in 2000, a prelude to its accession to the WTO in December 2001.

In the latest proof of the effectiveness of the FYP, just as planned, the alternation of the 13th FYP ended 2020 and the newest FYP starting this year is on course to deliver a victory for its first centenary goal of building a moderately well-off society on the CPC's 100th anniversary.

"The main feature of the five-year plans is the top-level design, which is holistic, macroscopic, forward looking, anticipatory and binding," Zhao Xuejun, director of the Modern Economic History of China Research Center under Chinese Academy of Social Sciences (CASS) Institute of Economics, told the Global Times.

Today, China's FYPs have become a closely watched policy document around the world as it provides a valuable window into China's economic policies and development goals.

This year, global attention was focused on the 14th FYP ending 2025, which is set to pave the way for the second centenary goal to be attained - building a modern socialist power by 2049 when the PRC turns 100.

File photo:VCG

Seeking truth from facts

However, even as China's economy advanced in an overall steady pace as planned, there were no shortages of difficulties and mistakes over the past several decades - from some early decisions and policies that were against market rules to the "decade of the catastrophe," to the blind pursuit of extensive and high-speed growth over a certain period of time.

In overcoming those challenges and mistakes, the CPC showed its ability to "seek truth from facts" - a phrase that epitomizes the Party's flexibility and ability to objectively pinpoint the problems, experts said.

That ability was highlighted in the Party's response to crises during the Great Leap Forward era, which coincided with the Three Years of Natural Disasters (1959-61) and the breakdown of Sino-Soviet Union relations.

During the period, exaggeration about production prevailed across China, being called "launching satellites," and from wheat, rice and steel, places and reports started to boast of false high productions. The economic and social campaign that aimed for a rapid industrialization to steer the-then poor economy into a modern communist society appeared to have wrong-footed the economy.

Instead of turning a blind eye to the truth, the CPC Central Committee urged maximum efforts to correct all deviations in an urgent instruction letter in November 1960 and a Party plenum in January 1961 decided on the implementation of an economic adjustment.

As the economy ran its course of adjustment at the end of 1965 and began its third FYP, the Cultural Revolution began, putting the country in "10 years of catastrophe" until 1976.

Then came another turn - the 11th National Congress of the CPC in August 1977 declared the end of the Cultural Revolution and reiterated that the Party's fundamental task was to build the country into a socialist modern power.

"The CPC has a strong mechanism of self-correction; internally it came from the democratic system of the Party, and essentially it is built on the Party's tenet of seeking interest for the people and re-juvenation for the nation," Zhao told the Global Times.

The perseverance with seeking truth comes across as building the economy's resilience that has dissolved various challenges and crises, such as the 1997-98 Asian financial crisis, the 2008 global financial crisis and the COVID-19 pandemic, into hiccups which only result in increased economic sophistication, observers noted.

In response to the crises, the CPC was able to seek truth from facts and be flexible, as well as to be free from prejudice and ideological bias, encouraging local exploration and innovation, Zhao said.

In another striking and more recent example, the Party has managed to bid farewell to an unhealthy obsession with GDP growth that regards GDP statistics as the core or even the only indicator for assessing government performance, which stoked concerns over high GDP numbers at the expense of the environment and economic imbalance.

For instance, in August 2014, East China's Fujian Province cancelled the GDP assessment in 34 counties and cities, and implemented the evaluation method of giving priority to agriculture and ecological protection.

Aerial photo taken on Sept. 17, 2020 shows the Houhai area in Nanshan District of Shenzhen, south China's Guangdong Province. Photo:xinhua

Reform and opening-up

Just as the CPC is very swift in correcting mistakes, it is also profoundly persistent and steadfast in carrying out scientific policies - another pillar of the CPC's economic success.

The milestone Third Plenum of the 11th CPC Central Committee in December 1978 has been widely known as a starting point for the economy's 40-plus years of reform and opening-up, ushering in a transition from a class struggle-themed Party platform to a focus on economic building.

The main resistance force came from people's fear of capitalism, thinking that opening to the outside world would alchemize New China. With keen observation on the world's development in economy and science and technology, Deng Xiaoping launched the opening-up policy, pushing aside all hesitance and skepticism.

In early 1982, the Shekou industrial zone in Shenzhen was criticized by some for planning to hire a foreign business manager. When Deng learned this, he immediately applauded the decision, saying that it's OK to hire foreigners as managers and it is no traitorous behavior.

The reform of the country's state-owned enterprises (SOE) is an evocative story of the country's undaunted approach to boosting its economy.

By 1987, 80 percent of the country's state-owned enterprises (SOEs) adopted various forms of the contracted managerial responsibility system. Some enterprises even began to undertake shareholding system reforms.

Graphic:GT

In the first quarter of 1996, the country's 68,800 SOEs, as a whole, recorded their first net loss since the founding of the PRC.

After the pain comes the result. From 1989 to 2001, though the number of SOEs dropped to 46,800 from 102,300, their total industrial added value increased to 1.47 trillion yuan from 389.5 billion yuan, surging 11.67 percent annually.

Despite tremendous success over the past several decades, difficulties and hurdles never ceased to test China's commitment to the reform and opening-up policies today.

The thorn-covered yet high-yielding road to reform and opening-up, as such, was being paved as efforts to liberate thoughts and the bold push for innovation trickled in. With an endeavor to sustain liberation on multiple fronts for there to be even deeper reforms, China finally pushed through.

In 2020, China overtook the US to become the world's top destination for new foreign direct in-vestment. In the first five months of 2021 alone, China attracted 18,497 new foreign-funded firms and 481 billion yuan in foreign capital.

Graphic:GT

Self-sufficiency, innovation-driven

However, increasingly opening up to the outside world does not mean China will not mitigate seri-ous risks for its national and economic security. Since the earlier days of the CPC's leadership, self-sufficiency in many core sectors such as food and technology was a major focus, which has also become a key code to the CPC's success.

In an early sign of a self-reliant approach to development, by 1964, the self-sufficiency rate of China's main machinery and equipment had reached over 90 percent. With construction of the Daqing oilfield completed and Shengli and Dagang oilfields under development, China achieved total self-sufficiency in oil by 1965.

Since then, that quest for self-sufficiency in many areas, including technological innovation, has never stopped and has helped lift China to a world-leading global technological power in many areas - from 5G to high-speed rails, and from new-energy vehicles to space exploration technologies.

Just last week, China pulled off the country's first-ever automated fast rendezvous and docking of a manned spacecraft with China's orbiting space station core cabin, after the Shenzhou-12 manned spacecraft was successfully launched on the Long March-2F Y12 carrier rocket.

China's considerable technological prowess has already unnerved the US, which has been a domi-nant player for decades.

The CPC's focus on self-sufficiency and innovation-driven strategy was particularly notable in the country's efforts to mitigate an increasingly hostile external environment marked by a relentless attempt by the US to contain China's rise.

Even before the US' crackdown campaign, the focus on self-dependence and technological innova-tion was highlighted as the CPC convened its 19th National Congress in October 2017, where a new era of China's socialism was declared. The Party's 18th National Congress also introduced an innovation-driven development strategy.

Since then, in a series of meetings and top policy documents, the CPC has constantly stepped up efforts to pursue efficiency in a wide range of areas, from semiconductors to crop seeds.

"Against the backdrop of an intensifying China-US rivalry, China may face rising risks of high-tech blocks, supply chain obstruction, or further trade disputes. What China needs to do is focus on its own business and concentrate on overcoming the difficulties in key technologies, equipment, raw materials and design software that are being held back by Western countries, and coordinate devel-opment and security," said Zhao.

As these new challenges emerge, while China is no longer the backward, war-torn country it was 7 decades ago, challenges and risks, both domestic and foreign, remain. With the CPC's firm leader-ship and its proven successful economic policymaking, China is better positioned than ever to reach its bold development goal of becoming a modern socialist power in the coming decades, analysts said.

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Malaysia's East Goast Rail Link (ECRL) project cost saved by RM21.5 bil to RM44 bil

https://youtu.be/FxibXKYslSQ

PUTRAJAYA: Malaysia Rail Link Sdn Bhd and China Communications Construction Company Ltd have signed a supplementary agreement that will pave the way for the resumption of the East Coast Rail Link (ECRL) project.

The signing was achieved after months of negotiations between the companies involved as well as the governments of Malaysia and China, said the Prime Minister’s Office (PMO).

“We are pleased to announce that the construction cost of Phases 1 and 2 of the ECRL has now been reduced to RM44bil.

“This is a reduction of RM21.5bil from the original cost of RM65.5bil.

“This reduction will surely benefit Malaysia and lighten the burden of the country’s financial position,” said the PMO in a statement Friday (April 12).

The supplementary agreement covers the engineering, procurement, construction and commissioning aspects of the ECRL, it added.

The PMO also said that further details of the improved deal will be made known at a press conference next Monday (April 15).

Prime Minister Tun Dr Mahathir Mohamad is expected to give the press conference.

According to earlier reports, Phase 1 of the 688km rail line will be from Klang Valley to Kuantan while Phase 2 will cover Kuantan to Kuala Terengganu.

The project’s Phase 3 will see the rail line connecting Kuala Terengganu to Kota Baru and Tumpat. - Star, NST, MM

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Tuesday, July 2, 2024

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