Spend more on R&D
Those who need confirmation that the Malaysian economy has to rediscover its competitive edge can find it in the UNDP report The Global Financial Crisis and the Malaysian Economy that was launched last week.

“The extremely low levels of both public and overall investment in R&D and the small number of R&D engineers and scientists per million people have already undermined the capacity of firms in the country to upgrade and compete with firms in the Republic of Korea, Taiwan, Province of China and Singapore,” says the report, jointly produced by the Institute of Strategic and International Studies and Universiti Malaya.

To illustrate, the report notes that in 2006, the number of researchers and engineers per million population in Singapore was 5,713 compared with a sparse 367 in Malaysia. In this area, the gap between us, on the one hand, and Japan, Korea and Taiwan, on the other, is just as massive.

As a result, say the report’s authors, it has been difficult for existing firms to shift to the higher value-added activities of design and R&D.

Moreover, evidence from the developed countries, Asia’s tiger economies and China shows that there are no substitutes for R&D expenditure to stimulate long-term technological catch-up efforts.

“The fiscal stimulus should indeed take the crisis as an opportunity for correcting this problem,” the report says.

Such sound advice is just based on simple logic. If we cannot summon the political will to do the necessary, we only have ourselves to blame for the country’s dimming growth record over the past decade.

Legacy issues linger
Although it has been five years since the authorities endeavoured to reform government-linked companies, for Tenaga Nasional Bhd, it seems that some legacy issues linger.

Last week, Minister for Energy, Green Technology and Water Datuk Peter Chin revealed that Malaysia’s reserve margin currently stands at 53.2%. A respectable reserve margin is between 25% and 30%.

This means that at the moment, the power sector is overproducing the requirement by more than half. Although Chin has given the assurance that there is no wastage, an overly high reserve margin is a needless inefficiency.

What is more troubling is the fact that there were promises made by those in power that the margin would be brought down. Although Tenaga is in admittedly better financial shape than five years ago, the issue of a high reserve margin has never been firmly addressed.
And when the economic crisis led to a drop in demand, the growth in electricity usage that was supposed to utilise the excess never materialised.

But it should be noted that most recent bumps in power capacity came from contracts that were signed before the GLC reform took place. Agreements with Malakoff for Tanjung Bin and Jimah Power meant that the plants were built regardless of demand.

Undoubtedly, poor power planning is the main culprit, but a bigger folly would be to repeat the mistake. With so much excess capacity, does Peninsular Malaysia still need power from the mammoth Bakun or the two proposed plants in Ulu Jerai and Ulu Terengganu?

Admittedly, the power from these plants is only supposed to come in after 2015, when the country is projected to experience a power shortage. But playing the devil’s advocate, what happens if demand doesn’t grow as fast as projected? Will these multi-billion-ringgit plants be mothballed while the public foots the bill?

The issue of proper energy planning is not new, hence it’s disheartening when, after five years of promised change, nothing has.

Be clear and consistent
Penang government leaders need to speak with a common purpose on the proposed monorail test track in Batu Kawan. So far, three different versions of events have emerged since the project made the news on Oct 16.

Following the news break, Chief Minister Lim Guan Eng kept avoiding questions from members of the media who were seeking to confirm that the project was in the works.

Finally, it was Deputy Chief Minister 2 Professor P Ramasamy who spoke on the matter on Nov 29, saying that two companies had been given the approval to build test tracks.

The next day, Lim gave a slightly different version, saying that the government was offering two tracks to be built and that one had been taken up. The other was open for any other firm that wanted it, he said, and if more companies wanted to build test tracks, the state would open up more land for them.

However, executive councillor Lim Hock Seng, who holds the public works, utilities and transport portfolio, gave a different version to the state assembly in his winding-up speech last Thursday.

Hock Seng said MRail Sdn Bhd had submitted a proposal to build a monorail test track in Batu Kawan and requested a 30 to 40-acre site for a factory to assemble the monorail cabs.

He said MRail planned to manufacture the cabs in China. These would later be assembled at the site where a test track will also be built for foreign buyers to view. He said it was not meant as a test track for the Penang monorail system.

While Hock Seng said land sale would not be on a tender basis, but on applications received, Ramasamy had said no land would be sold to the parties.

To add to the confusion, an official who claims to have been present at the government’s meeting with MRail told The Edge that what transpired there was not what was reported to the House.

The key issue here is whether the state will get paid for the land based on the market rate. On that score, can someone please set the record straight?

This article appeared in Corporate page of The Edge Malaysia, Issue 784, Dec 7-13, 2009