NEW PLAYERS, SAME GAME: Excerpts of Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah’s keynote address at the Khazanah Megatrends Forum 2013 in Kuala Lumpur yesterday
KHAZANAH Nasional has indeed done a wonderful job for the last eight years since this Megatrend was first held in the year 2000.
Personally, I believe that with the exception of only one single category of paradoxes, anything else in this world can be explained away. The paradox universe can be classified into two categories:
(a) Paradoxes that we are unable to explain because we yet to have the knowledge or technology to understand it. As such, it would only be a matter of time before we rationalise it or;
(b) Paradoxes that will forever remain a mystery for God Almighty has chosen it to remain so. In this case, we have to trust our given faith that it is so.
Anyway, in the light of what I just said, I will try my utmost best to rationalise a paradox that is outlined for this forum - whether developing countries would necessarily follow the growth pattern and the historical economic models of the developed economies. The simple answer is yes and no.
Yes, because there is a sequence of developmental models - from an agriculture and commodity-based economy progressing to an industrial one and then onward to a knowledge-based economy.
Obviously this increased and increasing velocity in the speed of change creates a lot of challenges to any nation's policymakers.
I can only say that with the way global dynamics have been in the last 10 years, even the world's biggest economies need to be nimble and flexible to move ahead.
While countries with highly disciplined central planning systems may have their five- to 10-year master plans, on the other hand, laissez faire economies such as the United States economy has very little input from the government in its direction forward.
And in so far as the US government's role in charting its economy forward, the American private sector has a very large say in how their industries are directed.
Malaysia straddles between the two aforesaid models. We are now in our 10th Malaysia Plan and we have our annual budgets to implement this master plan in phases.
Nevertheless, as you are all aware, the lingering effects of the global economic crisis in 2008-2009 have caused us to respond in ways that we could not anticipate when we drew up the 10th Malaysia Plan in 2011.
We also have running parallel our Economic Transformation Programme , a plan which is basically a series of targets to lead us to the year 2020 when we are expected to be a high-income economy.
There are economists who suggest that we should look to South Korea as a model. I can only agree to a limited extent.
We must always keep in mind that a study of an economy's success cannot be limited to public policy cases, public administration models, fiscal and monetary policies and the various institutions and practices of state.
A study of a nation's success cannot be divorced from a thorough understanding of the subject economy's societal behavioural patterns, the national psyche, their history and their cultural legacies.
Why I say this is because it is the people, the citizens themselves, who are going to implement the policies and carry out the masterplans.
We can have one brilliant national master plan after another but if we do not have people to believe in it, to execute it, to have the ability to mobilise the entire nation to move forward in that one well-aimed direction, even the best master plans are doomed to fail.
Let us look at other possible models. I think the closest models that we can aspire to is in the Nordic countries of Denmark, Finland, Norway and Sweden. In every international table, these four countries occupy the top 10 ranks, for health, democracy, education, income per capita, quality of life, quality of environment - I can go on and on.
If we are to look at their financial indicators, it is evident that despite their extensive state welfare systems, their treasuries are healthy and their financial sectors strong.
With the exception of Norway's oil, the Nordic countries have limited natural resources. Notwithstanding a very small population, they have produced Nobel prize winners, world-class companies and strong agricultural-based export industries.
Certainly, looking at these statistics, the Nordic countries are exemplary models. How close is Malaysia to these four countries?
First - Our population is similar in size, 29 million ours, a combined 26 million theirs.
Second - the Nordics underwent a financial crisis, a debt crisis, in the 1990s. Just as we did, they undertook far-reaching reforms.
Third - Despite their many political leanings, their politicians adopted pragmatic approaches to solve their problems. Malaysia's policymakers do the same.
Fourth - A very large percentage of their workforce is in the public sector - 30 per cent. Ours is 10.2 per cent, high by our region's standards.
Fifth - They have world-class companies with global brands - Ikea, Lego, Carlsberg, Alfa Laval and many others. We have our regional brands - CIMB, Felda Global Ventures and AirAsia, among others.
Sixth - the Nordics are willing to try new things. They were early adopters of telecommunications technology and they are Europe's frontrunners in e-government.
In our case, Malaysia is the regional leader in employing technology in the delivery of public services and we have one of the highest broadband penetration rates in developing Asia that is 60 per cent.
But this is where the similarity ends. If Malaysia is to succeed in its ambition to be a high-income economy, we will be the first multi-racial country to do so - the first ever in world history. It would be an achievement of historic proportions.
When the advanced countries transited to high-income economies, their citizens were united in mobilising all necessary resources to achieve that one single goal - driven by the very basic human instinct - to better oneself, to better one's family, in wealth and happiness.
We are not like Japan, Korea or even China where the populace is highly disciplined, conditioned by an extremely strong societal need to conform to a tightly-defined behavioural pattern.
Nor do we have the luxury of time as Western Europe, the US, Canada, Australia and New Zealand had - taking 20 to 30 years to move from middle- to high-income status. We have six years to go - less than 2,300 days. That is not a lot of time.
Since 2009, the government's expenditure accounted for a large percentage of our GDP (gross domestic product), averaging 23.5 per cent per year. This is clearly unsustainable; not only fiscally but crucially, it is not good policy practice.
The private sector across the spectrum, from large conglomerates right down to the small and medium enterprises, has to contribute. We need to move up the value chain, gain higher productivity and generate higher economic activity. All Malaysians need to come together to achieve this historic common goal.
The government will do its part but the government's principal role is to create the most optimal environment possible for the private sector to grow. It is not our business to be in business.
We buffer the impact of external threats. We have supportive monetary policy to assist investment growth. We control inflation so as not to erode our savings. It is not an easy balancing act but, alhamdulillah, we have managed to sail through thus far.
But, as I said, all plans would find it hard to materialise if we do not have the buy-in, the support from the people executing it, the support of the people who are the end beneficiaries of it.
A simple survey of any advanced country will tell you that without long-term peace and stability, there will not be sustainable economic growth. Without growth, there will not be widespread improvement in the lives of the people, within the lifetime of its citizens.
In 1970, the government introduced the New Economic Policy (NEP). In case some of you may have forgotten, the NEP was introduced to secure this nation's long-term peace and stability, for the benefit of all Malaysians. This is fundamental.
We cannot have long-term peace and stability until the Bumiputeras have economic security and that sense of security can only come when there is no longer inequality in the distribution of wealth in this country.
We now have "Program Permerkasaan Bumiputera" or PPB. The underlying reason for the government to continue championing this objective remains unchanged - to create a more level playing field for the 67 per cent of this country's population.
The Bumiputeras are not asking for a 50:50 distribution - just one-third of the wealth for two-thirds of the population.
Our gross national income last year was RM905 billion. By the year 2020, it is projected to be RM1.7 trillion. Between now and then, an additional income of RM830 billion will be created. This expansion of wealth will benefit all Malaysians.
In this light, we must accelerate our efforts to achieve the 30 per cent target because the base, the size of the nation's wealth, will be bigger.
Our work does not stop on January 1 2020. We will continue reshaping our economy and through this process, our society will reshape accordingly. What is accepted as a norm will cease to be. What was once strange and unthinkable will be an accepted daily fact.
A study in the US has shown that the single most vital factor of assimilation between the various ethnicities is income equality.
In order to reduce the gap between the rich and poor, it has never been the government's policy to stop the rich from getting richer. We work to bring the bottom up.
In this regard, we have been very successful. This bottom-up approach has been consistently acknowledged throughout the last several decades by numerous multilateral organisations.
We have much work to do. If all of us work together to secure our nation's peace and prosperity, I am sure many good things will come our way, insyaallah, God willing.