1Malaysia competitiveness

Dubai debacle of asset bubbles

After the US-triggered financial crisis lead by the sub-prime asset bubble, another volcano is now erupting on this same model of \”ugly-capitalism\” driven by today\’s greedy economics.

Amitai Etzioni, full professor at George Washington University wrote The Moral Dimension: Towards a New Economics , but because he was a sociologist, nobody in Economics seems to have taken his thesis seriously.

I had bought and given copies of the book to seveal of our so-called economists at EPU. But I fear that they did not take the matter seriously.

F1 type competitiveness

Can Malaysia therefore meet the challenges of the newer F1-type economic competitiveness? We all know that the government-supported capital-driven private sector in Malaysia has now embarked on another \’mega-project\’ by the name of MY F1 Team.

But, do we know what we are in for? F1 type competitiveness has no room for \’kampung standards or kampung class solutions\’, Malaysian entrepreneurs aside.

MY F1 Team must first and foremost be globally competitive from day one. They cannot \’try to become competitive over time.\’ They are either world class or they are not. There will be no time for \’maturing to competitiveness\’.

Even giant auto-companies with deeper pockets have pulled out of the F1 race for obvious reasons. Competitiveness must exist in the bones of the owners, actors, players, systems and processes.

They must know the meaning of the word in their genes. They must fully understand desire and aspire to excel. They must also understand the standards and meaning of teamwork.

Winning in the F1 is always defined by split second decision-making and support. There is no room for mistakes at all.

The government of Malaysia and related companies do not quite understand this kind competitiveness. We are still stuck in the older model of competitiveness of developing countries, of being simply better than a neighbour but do not know how to become \’real world cutting edge best in the world.\’

The problem definition

The PM has extolled a new agenda labeled 1Malaysia. More needs to be asked and said to understand this interesting concept. While Malaysia has achieved more than most developing nations in the last 50 years, our Growth with Equity Model or GEM (popularly called NEP) may now be not good enough into the future.

We need a truly new mathematical formula for a 1Malaysia, premised on the integer of unity. Therefore, if we do not tweak the current development model, budget strategy and related financial arrangements in critical areas, we will be no better off, and our Titanic will still hit the metaphorical iceberg.

The most critical of these is what is our new business model for growth with equity? What is the new Economic Policy of the new NEAC for a high income country?

The current and mainstream business model is still premised on renter capitalism, i.e. those who own the capital or licenses sell them to real value creators for a sizeable rent (about 30%), only because they are the \”owners or licensees of the resource.\”

The APs and Toll Ways are the worst examples of such abuse. Such a model of renter capitalism is no more a sustainable model as the Americans have adequately demonstrated to the world.

The world needs a better and newer model of new value creation. Some call this Moral Capitalism. The world is fast moving into a newer post-capitalistic model of value innovation for development and growth.

The same was first pioneered and developed in technology-based and driven Silicon Valley. Knowledge applied vide technology is the new value creation opportunity in the information age. Internet which is now 40 years old provides the framework structure for this new paradigm.

Google is an excellent example of this new emerging model. Internet and convergent technologies therefore provide the foundation for the newer economic model of technology-driven new value creation. Some have called this a Blue Ocean strategy way of doing business.

Towards a triple bottom-line win

Our PM talks about a high income model premised on his People First Performance Now agenda. The Budget 2010 therefore began articulating this new approach but there are still many missing links to anyone with a trained eye.

Let me therefore review some of our historical framing assumptions of the GEM/NEP and our concept of development and suggest the limitations. Allow me also to use metaphorical language of the Free Trade Zones to identify various models of development and value-addition frames of the past:

• 1970s-80s: \’FTZ Version 1\’ was Bayan Lepas – a mere free trade zone premised on cheap land and cheap labour for new investments for 100% global exports. Limited value addition other than employment and local business linkages.
• 1980s-90s: \’FTZ Version 2\’ is Kulim High Tech Park – where higher technology production processes operate, but essentially the same value proposition but maybe with more local SME partners and suppliers with some technology know-how and value addition.
• 1990s-2000s: \’FTZ Version 3\’ is a Multimedia SC-type initiative wherein ICT-based processes e-enable new multimedia businesses (including content industries). The example is Cyberjaya or Technology Park Malaysia. Essentially the same model but with a new range of converged multi-media industries and services with more IP ownership and some new value creation.
• 2000-2010: \’FTZ Version 4\’ is a Science City where results of foreign S&T and R&D are commercially deployed for new value creation across borders. For example the BioPark with leading global IP-holders in Singapore or InventQJaya in Cyberjaya or the more current Green Clean technology parks being promoted by the new Budget. This is still a body shop with a bundle of high cost incentives with little or no real new value creation (i.e. IP ownership). It lies somewhere between version 3 and 4.
• 2010-2020: \’FTZ Version 5\’ needs to be Innovation by Design and Development where an \’ideal commercialisation environment\’ (or ecosystem) is nurtured using a replicated framework of critical success factors. It is similar to those found in the Silicon Valley for rapid prototyping and quick scale-up for IP-based value creation through ready and available financial engineering facilities and venture capital funding for global roll-out. The local Bio-valley Initative using local biotechnology from our rubber and palm oil industries or our biodiversity may be more along this line of IP-based new value creation.

The way forward

Malaysia has little or no choice but to become a knowledge and technology creator nation. Older renter models of value addition are not good enough. New value creation must center on IP or Intellectual Property ownership.

These cannot happen without serious R&D and efficient commercialisation of such results of R&D. I hope the PM\’s new budget strategy is truly new and not merely another renter model for funding crony activities for pay-offs.