More, much more, has to be done in addition to a stronger currency policy
LAST week’s article about engineering the currency upwards as a means of moving up the income ladder elicited a number of interesting responses, some of which pointed out that we can’t depend just on that.
Yes, we totally agree. The currency strategy is a key part of the moves towards generating higher income because that filters down and increases incomes cross the board.
A weak currency policy crimps income for most of us, and helps only the exporters by giving them more revenue in ringgit terms. That policy is good for a country with a clearly overvalued currency and with an uncompetitive manufacturing sector because of high labour costs. We are, of course, neither.
A stronger currency which reflects economic fundamentals and is sustainable will help equalise labour costs with those of more developed countries, lower input costs of capital goods and raw materials, and attract talent into the country. All of these will help move incomes upwards.
But as the currency appreciates – gradually that is without disruption to markets – the country has to make that move to get the income going. No longer can we make cheap export goods with cheap imported labour, depending on an undervalued currency for that extra competitive edge.
We need to put more value into our products and get more income into the country by improving individual productivity. Not just that, but productivity improvements must be in the right places where income can be maximised.
That’s where the concept of incremental income improvement comes. For many services, once a critical infrastructure level is reached, the right marketing moves can improve incomes with little increase in costs.
Take tourism for example. We already have the necessary tourism infrastructure although we can make great improvements. We have some of the greatest accommodation for the lowest prices. We have wonderful, cheap food. We have forests, mountains, beaches and everything in between.
Lonely Planet ranks us among the 10 places in the world with the most value for a visit. What is it that we lack? What makes millions of people come to Singapore and pass through that island state without so much as taking a single step into our country and all it has to offer?
We can describe it one word – MARKETING. No one is going to come to Malaysia on the promise of a slogan, even a catchy one like “Malaysia, Truly Asia”. People come here when they hear of the experiences of others. They come if there is access.
We should make the attempt to catch the regional tourist trade. Americans and Europeans are travelling less but Asians are travelling much more. Our airlines link the Asian countries pretty well, and Australia too. We should segment and target these markets.
If a tourist spends RM10,000 here, Malaysia’s collective income goes up by nearly as much, excluding the leakage through consumption of foreign products locally. That’s a pretty good way to kick the national income up without doing anything much but to market our product – Malaysia.
While high-end manufacturing will certainly have a role in raising incomes, there has to be a strong and sure shift to the services economy. We should be looking at ways and means to tap into the considerable savings pool in the country to fuel growth and income.
That will mean encouraging and fostering the developments of all kinds of industries to tap into the consumer dollar – restaurants and pubs, leisure activities, entertainment, local travel, home-stays, further education, lifestyle products and much more.
In the quest for the foreign buyer of goods, we have ignored those far more important – the Malaysian consumer – who offers great potential as a customer for goods and services. In the quest for foreign investors, we have forgotten our local investors, paradoxically giving them fewer incentives.
All that and much more has to change if we are to increase incomes. Are we ready? And importantly, do the politicians have the will and ability to go through with it?
Despite all the problems that face this country, managing editor P. Gunasegaram has no other choice but to remain an optimist.