What is it that ails us?


  • Columns
  • Monday, 31 Oct 2016

123rf.com

If we are to have an innovation-driven economy, we need to address a few key areas where the country has issues. Among them would be the substantial involvement of the Government in business, the heavy reliance on foreign labour and entrepreneurs who have come to expect handouts from the Government.

I WROTE an article with this very same title in April of 2012 for The Petri Dish, a leading local science newspaper. My lament then was the lack of follow-through in the development of the bio-tech ecosystem.

Four years on I find myself writing about something similar.

I feel that the title is apt and worth reviving. The lament this time is something far more serious as it relates to innovation or rather the lack of it across the industry.

I believe Malaysia is at a critical juncture of its development. We have let ourselves be conditioned by circumstances over the years that have stifled innovation, and if we don’t change now, we may find ourselves no longer competitive in the global stage. This would dash our hopes of ever attaining the high-income nation status that we so covet.

More critically, the problem has now reached systemic proportions, making it significantly intractable in nature.

The following are my own personal views, and I make them with the hope of starting a conversation about how we can address them together.

My first view is something that’s not new. The Government has crowded out business and industry. Data presented in The Edge, on Sept 26, showed that the Government, through entities such as the EPF, Khazanah, KWAP, PNB, LTH and Petronas own a total of 38.8% or RM389.6bil of the market capitalisation of 30 companies in the FBM KLCI.

This cannot be a good thing.

I remember reading an article by Wan Saiful Wan Jan, chief executive of the Institute for Democracy and Economic Affairs (IDEA), who said that the Government should not be in business or at least not in the proportions we see today. He opined that it opens a pandora’s box of anti-competitive preferential behaviour, abuse of power as well as leakages.

In engaging in enterprise, the Government potentially faces multiple conflicting objectives, ranging from maximising profit to furthering national or social interests, leaving very little room for innovation itself.

This brings me to my second view. Consider the fact that the 30 companies above (not to mention their government-linked investment company owners) are typically helmed by professional CEOs and not by “owner CEOs” or substantial shareholders. Their approach and capacity towards risk will likely be different.

It’s my belief that a professional CEO, when faced with a decision to innovate and depart from the norm or to continue with said (profitable) norm, tends to maintain the status quo.

The willingness to risk KPIs, to constantly push the envelope to remain relevant and be at the top of the game may not be as strong.

While these executives may be among the best of the best in corporate Malaysia, perhaps the problem is the system they operate in? There needs to be buy-in from the board and shareholders, so that innovation and the risk of failure from trying it is embraced.

This topic needs more discussion and thought.

My third view: We, as an economy, are addicted to cheap (foreign) labour for the longest time now. While it has helped drive the economy to where it is today, I think it may also be our downfall.

Their easy availability means that it’s easier to continue using their services than to innovate and explore other more efficient and sustainable means of production or service delivery. Until we do so, we will continue to be at the mercy of the foreign labour market, not to mention the collateral cost of hosting a burgeoning population of migrants.

My fourth view is that despite what we think, we are still primarily a production economy. While we have progressed much in most sectors, our biggest money-earners are still commodities-based.

Palm oil, oil and gas and rubber comes to mind immediately. We have failed to leverage our good fortune and build significant value up and down the value chains of each and prepare for a globalised world. This is quickly becoming a missed opportunity.

My fifth view is that for the longest time entrepreneurs have been conditioned by the generous support and funding from the Government. It’s like a drug, and we are the addicts.

You name it, grants, facilitation services, subsidies, we have done it all and still developing new ways to help. All in the name of catalysing growth and developing the eco-system.

While there is nothing wrong with this per se it becomes a problem when it rears its ugly head in the form of an entitlement mentality. The minute the taps are turned off or things are rolled back, we get a backlash and suddenly everyone suffers from withdrawal.

Again it’s not the support that’s the problem, it’s the conditioning and complacency that results from it. I think it is one of the many things that is suppressing real innovation today.

They say “necessity is the mother of invention”. If too much support makes things easy, can we really expect real innovation to emerge? Food for thought perhaps.

Sixth: real innovation is hard to come by. An emerging concern we have at both Cradle and the angel investing side is more “me too” type of startups emerging.

While we have seen more quality deals over the last few years, there are an equal number of rehashed ideas disguised as innovation. I have partners screaming for “quality” deals that are innovative and disruptive, but it is becoming harder to find the wheat from the chaff.

Where are the innovations for the sectors ripe for disruption such as healthcare, energy, banking, transportation and education?

Let’s start with the problem of increasingly costly (imported) drugs or the need for patients who need to keep coming back for check-ups that take half a day to perform or costly routine lab tests which are mainly imported. So many problems looking for a solution — if someone would just have a crack at them, please.

Finally, a personal favourite of mine: I think the answer to part of the problem mentioned above is simply for our universities, research institutions and industry/private sector to engage each other better and in a systematic way.

We have enough home-grown talent; we just need a different way of doing things, and we need to work together.

Insanity, they say, is doing the same thing over and over again but expecting different results. Maybe it’s time we did things differently and, better still, did things together.

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