COMMENT The country’s leaders – business and political – should not get too carried away by the jump in the country’s competitiveness ranking according to the recent International Institute for Management Development 2010 World Competitiveness Yearbook report.
Without trying to take too much away from the positive reception being accorded to the New Economic Model unveiled by the government which has rekindled foreign investor interest in the country, a large part of the improved ranking is also due other factors.
These are the larger Asian region’s resilience to the economic turmoil that has engulfed the US and Europe, and the recent strong upsurge in the country’s exports.
Note especially that the countries that have fallen behind Malaysia are mainly European countries and Qatar, all of which are currently experiencing economic instability.
What this means is that our advance is not so much due to our improved competitiveness per se but other countries falling off in their competitiveness.
There are at least four key concerns that we need to pay attention to before we congratulate ourselves.
The most important is that there is little evidence of productivity increases in the major sectors during the past one year. If there is, perhaps the data and evidence can be shared by the government with a very skeptical public.
The second is whether this improved performance is sustainable or whether it is a flash in the pan – a one- or two-year phenomenon before we drop back.
Reduce the civil service
The third is that the improved ranking is based on the perception that the changes announced in the country’s economic policies in the way of liberalization, greater transparency, an emphasis on merit and need, a crackdown on corruption and cronyism, etc. can be quickly carried out, and in toto. This perception has to be assessed more realistically.
Finally, any lowering in the cost of doing business and raising productivity will depend on structural changes to the civil service, including bringing about a reduction in its present size.
Currently, we have a civil service that is at least twice the size of what is found in many high-income and developed nations on a comparative per capita basis.
Is there the political will to right size the civil service?
Astute marketing of reform policies can improve our image and ranking for a while.
If the political will of our leadership to carry out the correct set of economic reforms and increase the nation’s productivity is missing, then we will see Malaysia’s competitiveness ranking plummet downwards just as quickly.
Lim Teck Ghee is the director of Centre for Policy Initiatives. This artcile first appeared at CPI's website.
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