COMMENT I was chatting casually with an economics professor at a private university, when all of a sudden, I blurted out: “The economic boom in the eighties was all engineered. It was not real growth per se.”

As a layman, I could not help but use words like ‘fake’ or ‘engineered’ growth, which would have been more sustainable if it was market driven. The discussion became more exciting as we exchanged views. Although trained as a scientist, I have never shut my ‘intellectual’ curiosity into topics that centre around economics or social sciences.

To my amazement, the professor who had the privilege of advising the top leaders, including presidents of some of the key major economies of the world such as China and Russia, agreed with some my layman observations. The opinions I share here are mainly from a layman’s point of view.

The keyword he used is ‘productivity’. Our country would not have become the way we are now if the money used for the mega projects had been utilised in more productive projects.

In other words, spend one ringgit to earn ten ringgit in the long run. This is no 1MDB magic to get rich quick, but what prolific writer Robert Kiosaki would have called “good expenses”. Every ringgit spent will generate many more ringgit in return.

After the 1998 Asian Financial Crisis, then-prime minister Dr Mahathir Mohamad had said that we can no longer expect the country’s GDP growth to be as robust as eight to nine percent per annum. Since then, the GDP growth has shrunk to 5 percent.

Now, I get it!

I have always wondered how Dr Mahathir could foresee the future. It was not until I made the remark to the economics professor that I began to realise one thing that I had long suspected but failed to see clearly what he meant.

The GDP growth of 8 percent was mainly primed up by the government’s spending on mega projects such as Putrajaya, Proton, Perwaja, Plus Highway and the Petronas Twin Towers. The projects lasted for a good 10 to 20 years at the most.

The list can go on, and the word used to window dress these mega projects is ‘modernisation’.

There was also privatisation, which helped to contribute to a robust growth in the economy until, of course, when the financial bubble burst. The ringgit fell overnight, leading to unsustainable businesses going bust.

Although privatisation is supposed to be good for any economy, it is unfortunate that, in the Malaysian context, it had led to a monopoly of the markets and most of these major privatisation projects have only benefited some well-connected cronies.

At one stage, Proton was the biggest seller in the market. It was the ‘unbeatable’ car in terms of prices, but its huge demand was unsustainable in the long run.

This is because Proton was not given the chance to compete in the open market and it depended on what I call an ‘artificial demand’. People bought a Proton because they could not afford any other vehicles, not because they saw a quality product and coveted it.

Projects were given to people who were close to people in the corridor of power. That is the reason why, in 1998, jailed opposition leader Anwar Ibrahim was harping on cronyism and nepotism.

What is happening now to MAS for example is the result of having the wrong people run the national airlines. The least qualified people are recruited to helm the major companies.

The same is happening even now with a host of other government-linked corporations and statutory bodies. No offence to anyone but someone jokingly told me that even a ‘tarik kereta boy’ can be the chairperson of an important fund.

Drawing lessons from the bigger economies such as China and Russia, the economics professor then told me that governments should not be involved in businesses.

He argued that if the communist model of state-run companies was perfect, it would have overtaken capitalism and the Berlin wall would not have to be torn down.

This is, in my opinion, the root of the problem. We have allowed the government to be involved in the market through the government-linked companies (GLCs). The government can no longer act as both the market regulator as well as one of its major players.

A more healthy market will begin to evolve when the markets are liberalised. This explains the economic miracle experienced by China since Deng Xiaoping’s economic reforms since the eighties.

China’s nominal GDP trend rose between 1952 and 2005, showing the rapid increase since the reforms of the late 1970s.

Better investments

Modernisation, unless they are based on well-thought productive activities, will lead us nowhere economically.

If all the monies had been invested into developing human resources, today, we would have become a high income nation.

Compared to the western world, we are still struggling to attract the best brains in research and innovation, which could add value to our economies.

Instead, we are producing some of the best brains but they are leaving the country for better pastures elsewhere. Many are finding it more attractive to work across the straits of Johor than to face the bureaucrats who are less competent. There is a lot of truth that intelligent people do not like to work with those who are less intelligent or fail to earn their respect.

In the eighties, was it not Dr Mahathir who had told Malaysians that if they did not agree with the country’s administration, they would be better off migrating elsewhere, which they did! Some of our most brilliant scientists are in major research centres all over the world, except Malaysia.

As a result, from being a low wage labour economy, we are now trapped in the middle-income bracket, where it is hard for the wages to go up despite all the talk of one percent poverty rate in the country.

In the academic arena, they talk about having a critical mass in a pool of intellectual thinkers. In Oxford University, for example, when there are 20 or more mathematical geniuses, there is so much vibrancy and great discoveries could be made when geniuses stimulate each other’s grey matter. Instead, we have, as a nation, which the academics call a ‘critical mess’.

Research grants given to scientists and other academics are in the tens of thousands here locally and we are already proud of it, whereas in the west, it is not difficult to attract a grant of 300,000 euros (equivalent to over RM1 million).

On infrastructure, an international airport that cannot cater to the bigger aircraft will not support tourism in Penang Island, with all its rich cultural and historical attractions that tourists look forward to. Instead, the money was spent on building a runway long enough for the international flights arriving in Langkawi, so where is the logic?

With the influx of low-skilled labourers from other Third World countries competing with the local employees, there is no way a local can earn more than RM900 a month. A few of them I had spoken to recently said that they feel unsafe living and working in Malaysia, as there is constant harassment from the authorities.

The government should invest more to strengthen the small and medium industries, and help the industry players to expand beyond the local market. The small and medium enterprise (SME) is the backbone of industrialisation; they are the engine of growth which is sustainable in the long run and given the chance, they will morph into multinationals.

In my opinion, this should also include the agriculture sector, which would have helped the rural Malay folk. If the right strategies had been put in place, most of our farmers would be well-off, and using modern agriculture machineries to increase the productivity instead of being dependent on subsidies.

But the question has to be asked: Where has all the money gone to? Why are the fishermen today still living in poverty? Why are our farmers still not as productive as they should be? Do we not have enough experience to run meat farms? Or, huge grants are given to inexperienced cronies who produce scrawny cows, while they fattened themselves.

Compared to New Zealand, as a nation blessed with sunlight for nearly 12 hours, we should be one of the major food production centres in the world, but we are still a net importer of food. A small nation like New Zealand can produce food for the entire world, why not Malaysia?

While we agree that some projects involving development of good infrastructure has long-term benefits for the nation, certain projects are simply a waste of billions of the rakyat’s money.

The Petronas Twin Towers were the tallest tower in the world for a short period of time, but it has since been overtaken by many other towers around the world. In order to be productive, the twin towers should be able to attract foreign investors who are willing to set up their offices in the city’s most prestigious address.

If it can be proven that I am wrong, and every floor of the twin towers is generating good income for the petroleum company, then I would salute the man behind the twin towers.

What I saw in the good years where our economic growth was above average are probably not as good as they seem, when I start reflecting back.

Part I: From ‘whacking’ to ‘trigger-happy’ politicians

Part II: Conducive climate for the moderates to rise

STEPHEN NG is an ordinary citizen with an avid interest in following political developments in the country since 2008.