Thursday 28 Mar 2024
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This article first appeared in Forum, The Edge Malaysia Weekly on August 10, 2020 - August 16, 2020

I thought the recent Special Report published in The Edge entitled “Pivoting from consumption to production” (Issue 1329, July 27) was timely and framed well the challenges faced by the Malaysian economy going forward. The articles covered the impact of Covid-19’s disruption to production and consumption globally, and commented that the government’s instinctive initiatives to boost consumption as a remedy are unsustainable. I could not agree more and would like to add further insights to granular issues to achieve the economic pivot suggested by the report.

The report charts the early Malaysian economy, which was agrarian-based, trading mainly in commodities and investing in basic infrastructure. It evolved in the 1980s and 1990s to manufacturing, predominantly in electrical and electronics (E&E) consumer goods. I am a Gen X-er and anyone from my generation can remember passing the various E&E factories in Petaling Jaya on the way to school, and seeing the queues of Mat and Minah Kilang (factory workers) on their way to clock in.

This, over time, evolved into queues of foreign workers from neighbouring countries. The intent was that some of those local workers would rise through the ranks to one day take over these operations and Malaysianise them. What happened instead was that most were content to stay employed, and those who did strike out on their own ended up being mainly cost-effective suppliers to the Panasonics and Western Digitals of this world. Today, as global competition intensifies, these multinational corporations (MNCs) are no longer content with having just “good workers” but ask instead for “value adders”.

The report highlights Malaysia’s “intelligent and capable entrepreneurs having the answers”, which I think at this stage of our industrial maturity may be a stretch. I say this primarily because the DNA of the entrepreneur that we need to push the next wave of sustainable production may not be easily found in the pool that has been created.

First, those that were offshoots of locally installed MNCs have not emphasised technology development. The requirement for them was low costs. Second, our education system has been geared, as with most in the world, towards, at best, the requirements of the third industrial revolution characterised by industrial automation.

My company’s recent survey found that the majority of our small and medium enterprises (SMEs) are below that even. Anyone who has had a Malaysian education can attest to the fact that the reproducibility of results (that is, being able to repeat what you have been taught) is held up as the utmost in achievement. There are not enough measures to produce the level of creativity, vision and grit required to create a Tesla or Facebook. More significantly, there is little support or motivation to achieve such farsighted goals, as we are trained and programmed to become the best employee of an MNC, not the creator of one.

The ambition of the throngs of academic talent passing after the Sijil Pelajaran Malaysia into illustrious institutes of higher learning in Europe and the US is predominantly to land that six-figure-income job in a leading oil and gas, consulting, accounting or other such firms, rather than to create a world-class start-up that can last and grow for generations.

The long and short of it is that Malaysians have been cocooned in an economy that The Edge report describes as “driven by domestic consumption” and, as a result, is creating “high levels of household debt”. Malaysians are becoming increasingly risk-averse, with the middle-income earners desperately protecting their children’s right to afford that mid-week hazelnut latte at Starbucks.

We are, as the article says, “living beyond our means” — our insufficient means to create value in an increasingly value-based global economy. Juxtapose this against the economies of South Korea, Taiwan and Japan, all of which after World War II were built from small enterprises producing household equipment that evolved into the technology giants we know today. Their populace and institutions (the academic and financial among the most important) understand how to build. They understand what it takes to create and sustain differentiated value.

In all the above, we are still considering what Malaysia’s value is to the existing global economy, and not that which is emerging from the pandemic. 

Disrupted global supply chains mean that businesses are now looking for business continuity measures, rethinking business models, markets and suppliers.

Recently, to address a bad back, a colleague “subscribed” to Coway’s new mattress-as-a-service, where for about RM140 a month you are given a state-of-the-art orthopaedic mattress that would ordinarily be out of the reach of the common man. Much like with its famous water dispensers and air purifiers, this company seeks to provide health-as-a-service and, in the process, will severely disrupt many product sales-centric business models. Instead of a range of mattresses tailored to what you can afford, you now get the best for a low monthly service fee and, what is more, the asset can be serviced and upgraded to provide you with the long-term value of uninterrupted sleep.

This business model also lends itself to the cyclic economy, as the asset can now be more easily designed to be recycled, unshackled from the burden of private ownership. The issue with these business models is that the bulk of the revenue is repatriated to the country of origin and, like Netflix, creates little to no employment in Malaysia. So, while we mine the earth for resources to sell, other countries will be mining our economy.

The penultimate case study in the article is about “Paying for training programmes upon job placement” and it quite rightly points to the need for academia to align training outcomes with industrial needs. Easier said than done, unfortunately, as education itself has become an industry in Malaysia and its focus is on the mass production of graduates.

Paper qualifications have become a commodity but, now, with companies changing their tune, asking for more “thinkers” rather than “doers”, institutions are struggling to cope with how that can be done in the context of the fast-changing world of technology.

It will not be easy for a bricks-and-mortar institution to become that agile without investing heavily in industrial partnership. Then you will have the problem of finding mature-enough industrial partners that have sufficient requirements for your students.

The devil, as they say, is in the details and, at this juncture, Malaysia will have to roll up its sleeves and address these challenges, as there is no magic bullet to see us through. There may, however, be paths of least resistance and it is those that we must focus our energies and resources on.

We need to select which pockets of which industries to focus on in the immediate term to accelerate the development of through-life design, build, maintain and recycle capability. For example, some companies in the E&E, machinery and equipment and energy sectors, and those manufacturing and maintaining complex products such as medical machinery and industrial automation technologies, have already developed products, processes and skills that are world-class.

The aerospace industry, too, with its cutting-edge technology, uncompromising standards and globally distributed design and build supply chain, is also a quick win. By leveraging these “champions”, we will be able to derive, internalise and implement the plethora of change mechanisms needed to upgrade our Government-Industry-­Academia triple helix construct to the levels required for us to aim for the regional and international markets.


Naguib Mohd Nor is CEO of Strand Aerospace Malaysia, an engineering services and consulting firm with leading capabilities in aerospace

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