[933] Of what’s next, Malaysia?

A couple months back, I was having lunch somewhere outside of Kuala Lumpur with several strangers. One of them — upon discovering that I’m an economic graduate from abroad — asked me a very macroeconomic question. He wondered which sector Malaysia should concentrate on now. I almost choked myself to death when I heard that. I was unprepared for it with a devil’s food cake so full in my mouth. Unable to form an immediate honest opinion, I played it safe and offered an answer that didn’t require too much thinking. I blurted out that Malaysia should concentrate on services. While he was swayed over by the points I offered, I was not. I know that was a lazy man’s answer and is practically, a complete bull. It’s too general to convince anybody inside economics. Zoom forward, I’m still unsure which direction Malaysia should head for. However, I think know where to start though that starting point wouldn’t be astounding at all.

I do think the person that asked me the question was concerned with Malaysia’s current emphasize on agriculture. Between the Badawi administration economic policies and Mahathir’s, current policies appear regressive. Despite appearance of current policies, I’m unwilling to criticize harshly as others had simply because I’m unable to offer solid alternatives. The best I could say right now is to diversify and see which industries are sustainable.

To be fair, the current administration realizes that something gigantic is on the move and it’s affecting Malaysia. The People’s Republic of China as well as India are attracting the very jobs that Malaysia had prospered on. These jobs had once pulled Malaysia off the extraction stage to the manufacturing stage. I’m not sure if Malaysia is moving up the value chain towards services but I’ll wager there’s a real structural change in the economy. I suspect this structural shift is one of the reasons for the current debate on Malaysian unemployment rate.

The problem is that it’s not Malaysia on its own that’s causing the structural change. Instead, it’s the PRC and India that are forcing the structural change on Malaysia. When PRC and India moving up the value chain, it’s only natural the two regional giants to compete with Malaysia. Further, competition doesn’t come from the extraction and manufacturing only. For example, India itself is coming strong on service-based industry. Characteristic of an advanced economy is that it’s dominated by service-based industry. India is not an advanced economy and it’s not even as developed as Malaysia’s. So, if you aren’t distressed yet, this is the time to panic.

In economics, there’s a theory that says a country will specialize in products that utilize the country’s abundance factor. Keeping in mind that PRC and India have approximately two billion people between them, with vast track of land and huge reserve of capital, it’s quite hard to see what Malaysia should specialize in and not face heavy competition.

And so, here comes agriculture.

Revisiting the current administration’s obsession with agriculture, I don’t think it a bad idea after all, at least in the short run. Malaysia has the comparative advantage in agriculture. Whether this is a cliché or not, Malaysia is blessed with excellent climate for agriculture. History itself has shown how kind agriculture has been to Malaysia.

Yet, there are only so many lands. On top of that, different needs are competing for the same fixed quantity of land, showing the fact that Malaysia cannot rely on agriculture forever, even if the third agricultural revolution is upon us.

Perhaps due to my limited knowledge and exposure as well as lack of creativity, in all honesty, I don’t know what is the next step for Malaysia. Except for a few areas, everyone else seems to be able to do something better than Malaysia could. Nevertheless, I know where to start. It’s education. By education, I’m not saying we should specialize in the education industry. Oh my goodness, no.

Any economy has dynamic equilibriums. This is even more so when the world is interconnected once again after so many decades of protectionism and short-sightedness. This dynamism demands adaptability.

It takes a highly educated population to allow a country to adapt perfectly and quickly to changes. With proper knowledge, they would be able to ride out structural and even cyclical changes in the economy through sheer creativity. Flexibility will allow mobility both during the best and the worst of times.

But we need not robots in place of thinking men. If we had needed robots, no need us all of so many ivory towers. Let’s build grand factories in place of schools and colleges instead if we had needed for robots instead of thinking men.

We need are thinking graduates; critical minded individuals that would be able to adapt for themselves. Individuals that are proactive. Individuals that race not with each other to be robots, but individuals that strive to be humans. Cold and warm, mad and sane, all of these emotions with heavy doses of rationalism whenever it matters.

For that, the education system must provide students the liberty to explore possibilities. For that, we need a liberal education. A system that not only allows but even encourages its members to challenge orthodoxies in science to culture to religion to everything. A system unimpeded by conservatism.

The current system is unable to give birth a society that could decide and take the right next step for our country. Our system produces robots. While some of these robots achieve consciousness later in life, time is a luxury the country can’t afford.

Besides, for too long, Malaysian economy has been dictated from the top. Though perhaps a certain degree of central planning does have its virtues, it isn’t as natural as an economy that’s run from the bottom and everywhere. A highly educated society would democratize economic planning — flattens it out as Friedman would say — hence making the economy more organic. And of course, freer.