Our new path to economic growth

  • Opinion
  • Saturday, 13 May 2017

The implementation of the Malaysia Productivity Blueprint can change our future

ALTHOUGH it’s a plan that can potentially alter the country’s long-term economic trajectory, the Malaysia Productivity Blueprint has been underexposed so far. Its launch on Monday was relatively low-key, and it doesn’t help that people tend to be blasé, skeptical and shortsighted about such big-picture documents.

And let’s face it, labour productivity isn’t at all sexy.

But it’s certainly important. It’s not for nothing that the latest issue of the World Bank’s biannual Malaysia Economic Monitor, published last December, was subtitled The Quest for Productivity Growth.

“Raising productivity will be the key to future economic growth and prosperity in Malaysia,” says Ulrich Zachau, the World Bank country director for South-East Asia.

Our GDP has expanded mainly through the injection of capital and labour. But that path – the so-called input-driven growth – is narrowing. Headwinds, such as the declining oil and gas output, are hindering capital accumulation, and our labour force is not growing fast enough because the population is ageing.

To keep the Malaysian economy humming, the emphasis has to switch from pumping in inputs to squeezing more from every unit of input. This is why the Blueprint matters a lot. It outlines how Malaysia intends to boost labour productivity so that it’ll grow 3.7% per annum during the 11th Malaysia Plan period, that is, from 2016 to 2020.

Bear in mind that labour productivity only grew 1.8% a year between 2011 and 2015. The lofty target is based on the goal of Malaysia becoming an advanced economy and inclusive nation by 2020.

A lot has to change, and clearly the effort can’t only come from the government. The Blueprint talks about launching a “nationwide productivity movement to inculcate a stronger culture of productivity across all segments of society”. That can’t work, of course, without broad support.

No matter how cynical we are, it’s impossible to ignore how much productivity shapes a country’s destiny. We need to understand how Malaysia can be more productive. It goes far beyond working harder and smarter.

Here are some highlights from the Blueprint:

The tone at the top

Admitting that previous efforts to raise productivity have been fragmented, the Government says productivity has to be tackled holistically at all levels to ensure a systemic change across the economy.

“A strong coordination and governance mechanism has been established to ensure effective and transparent implementation of the Blueprint.

The private sector will drive this productivity agenda in partnership with the government,” Minister in the Prime Minister’s Department Datuk Seri Abdul Rahman Dahlan wrote in the foreword.

At the apex of the governance structure is the National Productivity Council chaired by Prime Minister Datuk Seri Najib Tun Razak.

Comprising senior government and private sector representatives, the council provides leadership, sets the strategic direction and drives the national productivity agenda.

5 challenges, 5 thrusts

The Blueprint says the challenges to productivity growth are in five areas – talent, technology, incentive structure, business environment and productivity mindset.

In response, the Blueprint’s recommendations are based on five key strategic thrusts – building the workforce of the future; driving digitalisation and innovation; making industry accountable for productivity; forging a robust ecosystem; and securing a strong implementation mechanism.

It depends on the execution

There are three guiding principles that are supposed to ensure that the Blueprint will be implemented effectively.

One, productivity must be addressed holistically and in tandem, at the national, sector and enterprise levels. Two, there has to be strong coordination and governance in the implementation. And finally, productivity needs to be a top-of-mind movement and embedded into day-to-day work culture.

What will happen?

The five strategic thrusts have spawned 10 initiatives at the national level and 43 initiatives at the sector level.

Led by core government ministries and agencies, the national-level initiatives outline policy priorities to uplift national productivity. These initiatives target governance of productivity policies impacting all economic sectors.

Examples include formulating a comprehensive labour market policy, conducting national strategic workforce planning, gradually reducing the reliance on non-critical subsidies, realigning funding mechanisms to productivity metrics and outcomes, and strengthen digitalisation among SMEs. The nationwide productivity movement is another initiative.

The sector-level initiatives will be led by key industry associations and anchor enterprises for each sector.

These initiatives outline explicit strategies to address sector-level productivity barriers. The aim is to accelerate productivity improvements among large enterprises as well as SMEs.

To address productivity on the enterprise level, the Blueprint proposes an Enterprise Productivity Programme. Through the programme, businesses can conduct a qualitative assessment of their productivity, and collect and track their productivity data.

The first steps

From the 10 national-level initiatives, the Government has identified 16 key activities that require policy reform and government intervention and action within the next 12 to 24 months.

Of these 16 key activities, six are designated as immediate priorities that “need to be implemented as soon as possible in order to achieve the targetted increase in productivity for the nation”.

The implementation of these immediate priorities has the potential to uplift labour productivity growth between one and four percentage points, says the Blueprint.

If things go according to plan, we will soon see the restructuring and improvement in the management of foreign workers; faster adoption of Fourth Industrial Revolution technologies by local companies; and stronger digitalisation among SMEs.

These immediate priorities also include measures to lift the logistics sector’s growth and efficiency; embedding productivity targets in the disbursement of new grants, incentives and soft loans to enterprises; and the evolution of the governance model to drive the Blueprint’s implementation.

Executive editor Errol Oh surprised himself by continuing to read after going through the Blueprint’s executive summary.

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