Looking at competitive index is not enough
Phar Kim BengPublished: Nov 26, 2004 8:10 AM | Updated: Jan 29, 2008 10:21 AM
Anwar Ibrahim was right to affirm that Malaysia`s ranking in the growth competitive index (GCI) has declined. This year, out of a list of 104 economies, Malaysia slid two notches to number 31 on the World Economic Forum GCI.
The report ranked Finland as the most competitive economy in the world for the second consecutive year.
The US and Sweden retained their second and third positions respectively. Of the three other East Asian countries that made it into the list of top 10, Taiwan, Singapore and Japan were ranked number fourth, seventh and ninth respectively. In turn, Hong Kong was placed at number 21, whereas South Korea was pegged at 29.
But what exactly is the GCI ? To what extent should we conduct an economic debate in Malaysia by linking GCI with it, as Anwar Ibrahim has cleary tried to do.
Anwar Ibrahim was right to affirm that Malaysia`s ranking in the growth competitive index (GCI) has declined. This year, out of a list of 104 economies, Malaysia slid two notches to number 31 on the World Economic Forum GCI.
The report ranked Finland as the most competitive economy in the world for the second consecutive year.
The US and Sweden retained their second and third positions respectively. Of the three other East Asian countries that made it into the list of top 10, Taiwan, Singapore and Japan were ranked number fourth, seventh and ninth respectively. In turn, Hong Kong was placed at number 21, whereas South Korea was pegged at 29.
But what exactly is the GCI ? To what extent should we conduct an economic debate in Malaysia by linking GCI with it, as Anwar Ibrahim has cleary tried to do.
At the simplest level, the GCI report evaluates economies' potential to achieve sustained economic growth. In the context of the GCI, the process of economic growth is dependent on three key elements: the macroeconomic environment, the quality of public institutions and technology. Sub- indexes indicate a measure of these three elements.
Yet, it is a misnomer to focus on the composite index of GCI purely. Certainly, the economic reform of Malaysia cannot be carried out by one index or number. This is because the GCI`s sub-indexes are just as crucial in giving a better - indeed, more accurate light - of Malaysia.
Writing in The Edge, Joyclyn Lee correctly pointed out that:
"Of the 104 countries, Malaysia ranks 20th on the Macroeconomic Environmental Index, 38th on the Public Institutions Index and 27th in the Technology Index. Under the Macroeconomic Environmental Index, Malaysia is ranked third in recession expectations; eighth in national savings rate, 2003; 11th in wastefulness of government spending; 15th in inflation, 2003; and 23rd in interest rate spread, 2003."
To which she continued:
"As for technology, the government's success in promoting ICT is ranked eighth. Under the Business Competitiveness Index, in the category of sophistication of company operations and strategy, Malaysia is ranked 14th in prevalence of foreign technology licensing; 22nd in company spending on research and development; and 23rd in extent of branding."
Poor performance
Indeed, if one looks at the composite and sub-indexes carefully, Malaysia only performs poorly in three areas:
A) Public Institutions Index (Number 38)
B) Company spending on research and development (Number 22)
C) Extent of branding/innovation (Number 23)
Invariably, if the competitive report of Prof Michael Porter, who is one of the world`s leading authorities in the field, at the Harvard Business School is used, Malaysia`s overall international ranking is at number 23 - an improvement of eight places.
That Malaysia is only weak in three areas, but relatively better in others, does not mean the economy is well set to grow further. Now that global economy has entered the information age, competitiveness is no longer measured in yearly cycle, let alone quarterly ones.
If anything, Malaysia literally has to breathe, and live innovation every day, in order to remain in the international pecking order; which is perhaps what Anwar Ibrahim wanted to say, but could not, hence the narrow focus on core indexes at the expense of the sub-indexes.
Still, it is undeniable that Malaysia, having enjoyed decades of equitable growth, has become complacent, so much so that there is now the tendency of ignoring good public policy.
The neglect of sound public policy is a problem further aggravated by the lack of appropriate research and development in the think tanks. But this is not all. Malaysia`s weakness in competition and innovation are un-necessarily hampered by the divide that exists between the market and the government; when in fact the latter should follow the former to the best extent possible.
For instance, there were two columnists who wrote in The Edge on Oct 19, a day after the GCI was released. Butt Wai Choon, the managing director of Microsoft, wrote with a touch of caution that the Malaysian information technology sector was close to firing blanks:
"We have over 30 companies listed on the Mesdaq Market today, reflecting the steady growth of the local ICT industry, but none commands the presence of, say, India's home-grown Satyam or Infosys, although such is the ambition of the MSC."
Rosier picture
However, in the same issue, Dr Muhammad Arif Nun, who is the chief executive officer of Multimedia Development Corporation in Cyberjaya, looked at the same IT sector yet produced too rosy a picture, perhaps to reflect the government view:
"The MSC has demonstrated that it is a catalyst for innovation and growth. To date, MSC-status companies represent over 70 percent of those listed on Mesdaq. An impressive feat when one considers that several of these companies are now expanding their presence and reach into markets like China, India, Indonesia, Western Asia, Australia and the Middle East."
In this picture, it is clear that Butt, who hails from the market, has correctly assessed the importance of competition and innovation, whereas Muhammad Arif, echoing the view of the authorities, has missed the picture completely.
To be sure, any discussion of the competitiveness debate is good. Malaysia does not have the luxury to stand still any more can China expect to be a world economic power purely by reputation and word of mouth alone.
Both must work hard at their culture of competitiveness and innovation as comprehensively as possible. To gain strategic parity with the top tier countries, it is crucial not to focus on the core index purely, but the sub indexes of the GCI too..
The report ranked Finland as the most competitive economy in the world for the second consecutive year.
The US and Sweden retained their second and third positions respectively. Of the three other East Asian countries that made it into the list of top 10, Taiwan, Singapore and Japan were ranked number fourth, seventh and ninth respectively. In turn, Hong Kong was placed at number 21, whereas South Korea was pegged at 29.
But what exactly is the GCI ? To what extent should we conduct an economic debate in Malaysia by linking GCI with it, as Anwar Ibrahim has cleary tried to do.
At the simplest level, the GCI report evaluates economies' potential to achieve sustained economic growth. In the context of the GCI, the process of economic growth is dependent on three key elements: the macroeconomic environment, the quality of public institutions and technology. Sub- indexes indicate a measure of these three elements.
Yet, it is a misnomer to focus on the composite index of GCI purely. Certainly, the economic reform of Malaysia cannot be carried out by one index or number. This is because the GCI`s sub-indexes are just as crucial in giving a better - indeed, more accurate light - of Malaysia.
Writing in The Edge, Joyclyn Lee correctly pointed out that:
"Of the 104 countries, Malaysia ranks 20th on the Macroeconomic Environmental Index, 38th on the Public Institutions Index and 27th in the Technology Index. Under the Macroeconomic Environmental Index, Malaysia is ranked third in recession expectations; eighth in national savings rate, 2003; 11th in wastefulness of government spending; 15th in inflation, 2003; and 23rd in interest rate spread, 2003."
To which she continued:
"As for technology, the government's success in promoting ICT is ranked eighth. Under the Business Competitiveness Index, in the category of sophistication of company operations and strategy, Malaysia is ranked 14th in prevalence of foreign technology licensing; 22nd in company spending on research and development; and 23rd in extent of branding."
Poor performance
Indeed, if one looks at the composite and sub-indexes carefully, Malaysia only performs poorly in three areas:
A) Public Institutions Index (Number 38)
B) Company spending on research and development (Number 22)
C) Extent of branding/innovation (Number 23)
Invariably, if the competitive report of Prof Michael Porter, who is one of the world`s leading authorities in the field, at the Harvard Business School is used, Malaysia`s overall international ranking is at number 23 - an improvement of eight places.
That Malaysia is only weak in three areas, but relatively better in others, does not mean the economy is well set to grow further. Now that global economy has entered the information age, competitiveness is no longer measured in yearly cycle, let alone quarterly ones.
If anything, Malaysia literally has to breathe, and live innovation every day, in order to remain in the international pecking order; which is perhaps what Anwar Ibrahim wanted to say, but could not, hence the narrow focus on core indexes at the expense of the sub-indexes.
Still, it is undeniable that Malaysia, having enjoyed decades of equitable growth, has become complacent, so much so that there is now the tendency of ignoring good public policy.
The neglect of sound public policy is a problem further aggravated by the lack of appropriate research and development in the think tanks. But this is not all. Malaysia`s weakness in competition and innovation are un-necessarily hampered by the divide that exists between the market and the government; when in fact the latter should follow the former to the best extent possible.
For instance, there were two columnists who wrote in The Edge on Oct 19, a day after the GCI was released. Butt Wai Choon, the managing director of Microsoft, wrote with a touch of caution that the Malaysian information technology sector was close to firing blanks:
"We have over 30 companies listed on the Mesdaq Market today, reflecting the steady growth of the local ICT industry, but none commands the presence of, say, India's home-grown Satyam or Infosys, although such is the ambition of the MSC."
Rosier picture
However, in the same issue, Dr Muhammad Arif Nun, who is the chief executive officer of Multimedia Development Corporation in Cyberjaya, looked at the same IT sector yet produced too rosy a picture, perhaps to reflect the government view:
"The MSC has demonstrated that it is a catalyst for innovation and growth. To date, MSC-status companies represent over 70 percent of those listed on Mesdaq. An impressive feat when one considers that several of these companies are now expanding their presence and reach into markets like China, India, Indonesia, Western Asia, Australia and the Middle East."
In this picture, it is clear that Butt, who hails from the market, has correctly assessed the importance of competition and innovation, whereas Muhammad Arif, echoing the view of the authorities, has missed the picture completely.
To be sure, any discussion of the competitiveness debate is good. Malaysia does not have the luxury to stand still any more can China expect to be a world economic power purely by reputation and word of mouth alone.
Both must work hard at their culture of competitiveness and innovation as comprehensively as possible. To gain strategic parity with the top tier countries, it is crucial not to focus on the core index purely, but the sub indexes of the GCI too..
View Comments0