On the Beat by Wong Chun Wai


  • Nation
  • Saturday, 12 Dec 2009

Finance Minister II Datuk Seri Ahmad Husni Hanadzlah is not known for making fiery speeches but he recently attracted attention with his honest views on pushing Malaysia’s competitiveness.

IT isn’t often that we read something refreshing from our politicians. Their statements are often predictable and unexciting. If they are in the government, they are talking down to us, lecturing us or are being plain defensive.

Those in the Opposition are not exemplary either.

Many still act and talk as if they are in the Opposition when they are already the government in some states.

It was thus refreshing to read a bold and honest speech by Finance Minister II Datuk Seri Ahmad Husni Hanadzlah last week, reproduced below.

The mild-mannered Perak politician is not known for making fiery speeches and he hardly makes headlines.

The function that he attended on Dec 8, the National Award For Management Accounting, understandably did not attract newsmen and many did give it a pass.

But what struck his listeners was his openness and his admission about the need to use the country’s plural society to push Malaysia’s competitiveness. It is a rarity these days as many politicians prefer to make “safe speeches”.

At a time when some politicians attempt to play the racial card, believing it to be still the best way to shore up voter support, Ahmad Husni has taken a different route.

“It is about time we fully exploit the potential synergy that is fully inherent in the diversity of our talent pool. When I visit the financial capitals of the world, London, Hong Kong and New York, I am struck by the diversity of the racial mix in their workforce.”

Indeed, what has put these capitals way ahead of Kuala Lumpur is that they have always emphasised meritocracy. You are either good or no good - nobody cares about the colour of your skin.

The fact is that the Malaysian domestic market is just too tiny and every businessman looking at the global market needs a good force of employees from diverse backgrounds and talents.

It would be plain stupid, even if he’s a self-professed nationalist, if he cannot see beyond the shores of Malaysia, or his village.

We will continue to lose our best talents to Singapore, Hong Kong, Shanghai and even Jakarta if we refuse to discard our old hang-ups.

“I see highly talented young people working together, respecting each other’s intellectual capabilities and, to an extremely large extent, measured by only that benchmark.

“They were the Caucasians, the Chinese, Indians, Koreans, African Americans and even a few Malays, all taking pride in the quality of their output and confident of their place in the organisation,” Ahmad Husni said.

As he correctly pointed out, we have the single best comparative advantage – our multi-racial make-up – but we have not used it, preferring instead to dwell on trivial emotional issues that serve little purpose.

“If we are to unleash this cultural synergy, this economic opportunity to all participants, we have to break down the invisible barriers that prevent us from truly accepting the beauty of each other’s culture and capabilities.”

There can be no compromise over the issues of transparency if we want to pull ourselves ahead again. We are on self-denial mode if we think all the above is not important.

Ahmad Husni has good reasons to wake us up. We seem to be trapped in endless and even mindless political polemics and conflicts. The world isn’t going to wait for us.

A week earlier, speaking at the National Economic Outlook Conference 2010-2011, he had used simple but honest language to describe the current state of the Malaysian economy.

“Malaysia is trapped in a low value added, low wage and low productivity structure. While Singapore and Korea’s nominal per capita GDP grew within the last three decades by nine and 12 times respectively, ours is only by a factor of four.”

I am glad that Ahmad Husni has the courage to pull the blinkers away. Malaysia is losing its place on the radar screen of investors. It doesn’t help that investors have the perception that it is costly to do business in Malaysia because of inflated cost as a result of corruption.

We can argue until the cow comes home that we are clean and transparent, but are we really so clean?

There is an urgent need to restore confidence, credibility and governance. We don’t need to send experts on study trips to realise the urgency to rebuild our institutions.

Ahmad Husni further said: “Amongst our peers, China, India, Vietnam, Indonesia, Philippines and Thailand, our real GDP growth in the last three years was the second lowest at 5.5%.

“Our manufacturing sector is not investing up the value chain while our services sector remains low in growth and is under-developed.”

We are obviously in danger of lagging behind in the region. One way to fend off these challenges would be to address the competitive pressure and to move away from traditional markets that could be already overcrowded.

Private investment has declined. Ahmad Husni revealed that “for the period 2000-2007, our investment per value added in percentage nominal terms in manufacturing dropped from 30.6% to 21.7% while (for) the services sector, the decline is from 26.8% to 22.1%.”

But what truly struck me was Ahmad Husni’s frankness. In his words, “a simple analysis of our capital account will show that there has been a continuous outflow of capital from our shores.”

That’s not all. The fact is that some of best brains are either staying overseas or, worse, migrating.

But we must not give up. As Ahmad Husni declared: “We have to rebuild an environment that gives confidence to the private sectors.”

It is heartening to hear the government talking about restoring confidence in leadership and governance, market driven resource mobility, strong and effective institutions and a knowledge and innovation society.

It is time for Malaysian politicians to use the right sound bite. The news now tend to be littered with inconsequential comments that make good political reading but name-calling and racist reactions, unfortunately, are not going to help check our declining competitiveness.

The two speeches by Finance Minister II Datuk Seri Ahmad Husni Hanadzlah referred to by Wong Chun Wai in On the Beat are below.

Minister of Finance II Datuk Seri Ahmad Husni Hanadzlah’s speech at the “National Economic Outlook Conference 2010-2011”, Dec 1, 2009, at Hilton Kuala Lumpur.

Ladies and Gentlemen 1. The Government intends to revise its estimate for next year’s GDP growth from 3.0% upwards. We have identified several sources of growth and we will enhance our capacity through domestic demand. We are also looking to strengthen the private sector’s contribution to the GDP through the Government-linked companies. We have identified several projects in the pipeline and we will bring them forward for implementation in the first quarter of next year. We are reasonably confident that a target of 5.0% is achievable.

2. Next year we will unveil the Tenth Malaysian Plan. We will focus on initiatives to revitalise private initiative as the primary engine of growth. In this respect, we will improve the dynamics of competition in the domestic marketplace, focus on technology and innovation in niche areas including green and bio technologies. We will develop these niches on existing comparative advantages and provide soft & hard infrastructure for the knowledge economy.

3. With all these, we will create new catalysts of growth, boost demand for knowledge workers and skilled labour, raise private and social returns to education and skills upgrading, and a more balanced internal economic structure with a bigger role for domestic demand. Externally, we will also continue to further promote closer economic, trade and financial linkages within the region.

4. For the longer term, our Prime Minister has tasked the New Economic Advisory Council (NEAC) to develop a new economic model to transform the country into a high income economy. This journey will be an exciting as it would represent the single biggest transformative process since the introduction of the New Economic Policy in 1970.

5. There will be many changes. Quoting the Prime Minister, business is not as usual. Fundamental and structural economic reforms are critical if our economy is to be transformed successfully. Malaysia is trapped in a low-value-added, low wage and low productivity structure. While Singapore and Korea’s nominal per capita GDP grew within the last three decades by 9 and 12 times, respectively, ours only by a factor of 4.

6. Amongst our peers, China, India, Vietnam, Indonesia, Philippines and Thailand, our real GDP growth in the last three years was the second lowest at 5.5%. Our manufacturing sector is not investing up the value chain while our services sector remains low in growth and under-developed.

7. The transformation is particularly urgent when we take the external environment into account. The global environment is changing. We can no longer rely on our traditional trading partners and we need to address the competitive pressure from other emerging markets on our existing exports.

8. Our economy has been stagnating in the last decade. We have lost our competitive edge to remain as the leader of the pack in many sectors of the economy. Our private investment has been steadily in decline. Our private investment is now half of what it was since the Asian crisis while both manufacturing and service sectors have become less capital intensive. For the period 2000 to 2007, our investment per value-added in percentage nominal terms in manufacturing dropped from 30.6% to 21.7% while the services sector, the decline is from 26.8% to 22.1%.

9. We need to restore the private sector’s role in the economy, serving as the primary engine of growth. How do we re-catalyse the private sector? In this regard, I wish to take this opportunity to articulate the concept of 1Malaysia in economic terms. There are some quarters, the cynics and the pessimists, whom view the 1Malaysia concept as another slogan gimmick. I assure you, it is not. We know that the bumiputras do not hold the bulk of Malaysia’s wealth. A simple analysis of our capital account will show that there has been a continuous outflow of capital from our shores. In this mobile world, capital will always flow to jurisdictions that are perceived to be more secure, not necessarily the ones that give a higher return.

10. Therefore, we have to rebuild an environment that gives confidence to the private investors. The critical pillars for us to restore confidence are leadership and governance, macroeconomic stability, market driven resource mobility, strong and effective institutions and a knowledge and innovation society. Allow me to articulate these five pillars, one by one. First: Leadership and Governance.

11. Political stability is a necessary component of leadership, especially so in a government that is based on a coalition of component parties. If there is to be continuity in a leadership structure that has the track record of a successful economy manager, Malaysians have to embrace acceptance of our differences and diversities which have been the base of our coalition. We also recognise that all Malaysians must be given equal opportunity to participate in the economy. Performance must be the primary rod of measurement. In this regard, we have announced that there will no longer direct negotiations for any public projects unless it is for the procurement that is related to national defence and security matters. There have been concerns that the Government is abandoning the bumiputras. This will not happen. The responsibility to develop and improve the economic standing of the bumiputras is the bedrock of this Administration’s mandate.

12. Nevertheless, we have to do it differently. There may have been a number of bumiputras who are awarded contracts whom are not genuine entrepreneurs. Yes, we encourage collaboration, of course. Consortiums and strategic alliances are a good thing but there must be a demonstrable element of genuine collaboration. For years the Government has denounced this “Ali Baba’ syndrome. It’s about time we get tough on it. Meritocracy must prevail. This is necessary for the long term economic survival of the bumiputras, of ourselves.

13. If we are to ensure there is fairness in the marketplace, there must also be a corresponding strengthening of our public institutions. Transparency and adherence to the highest standards of governance is something that we must strive towards. In this regard, we wish to see greater participation from all races in the public institutions, where performance is the key measurement. The introduction of NKRAs and KPIs is the first step in that direction.

Second: Macroeconomic Stability 14. Moving forward, we have to ensure that our fiscal position is restored to a more sustainable level. While the broad objective of increasing private investment in the economy will be continuously pursued, from the Treasury’s point of view, we also need to ensure that we receive optimal return from our hard-earned tax revenue. There have been too many leakages in the past and less than productive spending.

15. I do not for one minute underestimate the difficulty of achieving this. One of the most difficult things that anyone in management can tell you is “cultural change”. How can anyone change a cultural mindset that has been ingrained for so many years? But I have faith. Malaysians had developed all these centuries a strong survival gene. When push comes to shove, we change. The key is – there must be someone or something to do the shoving. The world is changing and that’s the biggest shove that I can think of.

Third: Market-driven Resource Mobility 16. The Government spends RM8,000.00 per capita annually in numerous subsidies. Not only this places a huge weight on our operating expenditure but it also create distortions in our marketplace. We need to realign this. We will re-calibrate the distribution of the subsidies. We want to ensure there is greater precision in its application. Nonetheless, we also want to ensure that there will be no erosion in the standards of living for the underprivileged and the poor, regardless of race or ethnicity.

17. We must also consider the gradual dismantling of our open-ended protection of specific sectors and industries which have introduced a climate of complacency and artificial levels of supply. The long term success of the nation’s economy must take precedence over the short term interests of a few protected groups.

Fourth: Strong and Effective Institutions 18. Entrepreneurs need to know that the public institutions are transparent and are run by the highest standards of governance. Entrepreneurs need to know that they do not compete in a market whereby their competitors seemed to possess institutional advantage. We need to see better competition policies and better regulatory environment which can allow market forces to operate in an orderly manner.

Fifth: Knowledge and Innovation-Driven Society 19. One of the biggest challenges that we face is the development of an innovative knowledge-driven society. Fortunately, we have a substantial middle class whom understands the value of knowledge. Unfortunately, our institutions of higher education have proven to be a disappointment. The mismatch between our industry’s needs and the output from the local universities has resulted in Malaysia having the highest unemployment rate of graduates, at close to 4.0%, compared to, for example, Ireland, Korea and Singapore. We have to consider introducing greater competition in our halls of higher learning. We have to introduce greater diversity in the range of capabilities in the members of the academia. If there is a lack of self-induced factors in our in our undergraduates and academics to strive for greater performance, maybe we should introduce external factors to drive excellence.

20. If there is one operative word that runs through consistently in all the points that I have just put across to you just now, the word would be competition. 1Malaysia equals inclusivity and by being inclusive, we introduce competition. We have to increase the level of competition in all the relevant sectors of our economy. To those that compete and win, there will be a set of rewards in terms of higher wages and awards. A performance-based culture does not accept mediocrity. We want to see a steady decline in those that suffer from the “dependency syndrome”.

21. Countries that have made successful transition into a high-income economy such Japan, Korea and Singapore have a single commonality – their workforce has strong work ethics, a disciplined mind and the hunger to succeed.

22. Historically, Malaysia never subscribed to any dogmatic approach to any particular ideology or economic school of thought. We are pragmatic people. Malaysia is a unique country that has its own particular set of dynamics. However, in a globalised world where economic and financial integration is inevitable, there will be a greater level of equalisation in our market economy with other participating economies. We cannot participate in half way measures although in our own pragmatic way, we will participate in ways and means that are prudent and cautious so as not to disrupt the existing equilibrium too much. A measured approach is called for but the end-destination is clear.

23. The journey ahead is certainly exciting but also daunting. The next decade will prove to be a period of unprecedented change in this Nation’s economic history since the last thirty years. Indeed, we are embarking on this adventure in a period where the external environment is also going through a level of transformation that is unparalleled since the conclusion of World War II. The challenges are great but if we persevere, God willing, we shall succeed.

SPEECH AT THE NATIONAL AWARD FOR MANAGEMENT ACCOUNTING (NAFMA) 2009, DEC 8, 2009 AT ONE WORLD HOTEL, PETALING JAYA.

1. I most pleased and honoured to be here this evening to present the National Awards for Management Accounting (NAfMA) 2009. It is a momentous occasion not for just those whom are present here tonight, but also for the management accounting industry as a whole. The recognition given to the deserving recipients tonight is create greater awareness in the importance of management accountancy in regards to risk management and corporate governance practices in Malaysia.

Ladies and Gentlemen: 2. Management accounting is one of the key pillars of corporate governance and corporate governance is a cornerstone of efficient markets. It requires corporate and business entities, as well as public sector organizations, to benchmark themselves against the best in their respective sectors. These benchmarks must indeed be global and universally accepted. The most prudent and comprehensive criteria must be applied, the highest standards adopted.

3. The Malaysian corporate sector is very important to the Government. We are most unhappy that the private sector’s share in its contribution to our Nation’s GDP has steadily declined since the Asian Financial Crisis. We are also alarmed by the decline in the private sector’s level of investment, both in the manufacturing and services industries. We wish to reverse these trends.

4. In the Government’s efforts to institute the necessary changes in the economy to re-galvalnise private investment, we seek to increase the confidence of investors in this country. Malaysia is facing the threat of being “squeezed” from all sides. On our right is India, India, on our left, China, behind us, Vietnam, and in front of us, Indonesia. We have to build up our comparative advantages quickly and strongly.

5. Over the next few years we hope that Malaysia’s comparative advantages will be emphasized and the factors that contributed to the decline of confidence lessen in their importance. One of our most important and obvious comparative advantage is the diversity of our ethnic make-up. It is striking that seventy percent of the Malaysian population is under 25, and I cannot think of anything more exciting to have such a mix in any economy – young and diverse pool of talents to propel the future growth of this beloved country.

6. In this respect, we have to acknowledge that we, all Malaysians, have not fully taken advantage of harnessing the synergy that can come from our racial mix. We have witnessed in a few other countries how ethnicity, tribal divisions and religion can lead a country to a state of strife and failure, one of the most obvious evidence being Northern Ireland, Fiji and the various African states. I do not ever believe that there is even a remote possibility that we will ever be inclined in such a direction.

7. Nevertheless, ladies and gentlemen, it is about time we fully exploit the potential synergy that is inherent in the diversity of our talent pool. When I visit the financial capitals of the world, London, Hong Kong and New York, I am struck by the diversity of the racial mix in their workforce.

8. I see highly talented young people working together, respecting each other’s intellectual capabilities, and, to an extremely large extent, measured by only that benchmark. There were the Caucasians, the Chinese, Indians, Koreans African Americans and even a few Malays, all taking pride in the quality of their output and confident of their place in the organization.

9. The United States have gone through, and still have yet to fully resolve its racial issues. But what they have done successfully is to fully realize the economic synergy that can be obtained by combining the talents of the American African and the whites. This is most evident in the music, film and sports industries, which I am sure you are very well aware, are worth in the tens of billions of US Dollars. 10. As we are surrounded by the four afore-said economies, we should look around us and identify how best we can penetrate these economies. The solution is staring right front of our noses, our single biggest comparative advantage is our racially diverse population.

11. In a creative economy, the export of cultural products and services can gain much importance, the most notable example being the American sale of its popular culture abroad. In this regard, I do not see any impediments that cannot be overcome for us to export films, music and multimedia content. The racial diversity that is ours can produce the most fascinating cultural products that can truly amaze the world.

12. We have been living in our respective parallel universes for far too long. By and large, the Malays going to see Malay movies, living in Malay areas and pretty much living in a Malay world. So, have the Chinese and the Indians. If we are to unleash this cultural synergy, this economic opportunity, which is mutually beneficial to all participants, we have to breakdown the invisible barriers that prevent us from truly accepting the beauty of each other’s culture and capabilities.

13. I have been brought up to believe that God has given each of us something to offer to the world, that everyone has a gift that someone else can appreciate, no matter how small or seemingly insignificant. If each one of us has the sincere desire to seek, to discover this gift, this world of ours will be a much better and prosperous place.

14. You may be wondering why I am talking about racial diversity at a management accounting award ceremony. Racial diversity is all around us, everyday, all the time. It is an applicable issue as long as the audience is Malaysian. Wherever we are, whenever, it is a valid theme. At the workplace, at home, at play, it is a valid issue. We cannot go on living with our heads buried in the sand, living in separate universes.

15. I have no doubt that there will be arguments and disagreements between us. To say otherwise would be unrealistic but does that not happen in any family? Blood is thicker than water. In this context, our history, the sacrifices and the rewards that we have shared together, the good and bad times together, in these so many years, are as good as blood can get. 16. The Prime Minister has inspired us with the 1Malaysia campaign. I hear now, what next? What is the Government going to do next? 1Malaysia is not the Government’s campaign. Take ownership, it is OUR campaign. The Government can only inspire but it us Malaysians that need to put life into it and make it happen.

17. In this regards, I am very proud to be here tonight. Earlier in this speech, I greeted Tuan Haji Rosli, Mr Chandran and Mr Yeo tonight. This is an excellent example of 1Malaysia at its best. Congratulations.

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