HAVE WE MISSED THE FOREIGN INVESTMENT BOAT


In any nation, people have to work as it is the root of health and it opens the window for the attainment of other social fulfillments of any individual. But in order to have the right conception of goals and purposes and in being able to get well paid jobs it will ultimately depend on the educational policies set by the government and on how the laws that govern investment are implemented and the type of investment climate that prevails in any country.

Having a pool of human capital is not adequate. The available human capital must have the required skills as required by investors, as it is a resource over which the investors can exercise some degree of control to manage the required processes in order to achieve a decent return over investment.

Malaysia, in the 1960’s was an agricultural based economy. We exported our rubber, tin and later palm oil from which we received our financial returns which filled our national coffers. Then our political leaders promoted our nation as a low wage country. It brought in investors from the United States of America, Britain, Japan, the Europe Continent and Australia.

The investors, invested in Selangor, Penang and Johore, where the Industrial estates were classified as Free Trade Zones. These investors set up large assembly lines and employed workers by the tens of thousands, who had a bare minimum of educational qualifications, to assemble through a repetitive process mass produced goods, where 100% of the manufactured products were exported.

The wages of these unskilled workers was at the minimum RM 3.00 per day. Their other terms and conditions of employment were governed by the Employment Act 1955. The workers were barred from enlisting or forming a union.

Then by the year 1967 the government promulgated the Industrial Relations Act as more and more workers were faced with employment related disputes with their employers. This act in some way introduced a conciliatory process, to resolve employment related disputes of the mass working pool of unskilled workers.

In the mean time, changes were taking place in the leadership of the political parties that as a coalition formed the government. In 1980 Mahathir, a pseudo Malay, became the Prime Minister. He had a great displeasure for the British. He introduced the Look East Policy and had conveniently forgotten the mass atrocities committed by the Japanese in Malaya during the Second World War.

The Japanese flocked in, in doves and almost every known and unknown named investor, invested not only in the urban industrial free trade zone sectors but further new free trade zone sectors were established like mushrooms, even in the rural areas. The Japanese felt they had economic imperialism as we wanted to learn from them, and they took undue advantage on our willingness to make progress. With them came the semiconductor industry and others.

At about the same time Mahathir changed the education policies. Bahasa Malaysia became the medium of instruction. Racial polarization became the order of the day. All human resource departments had to be headed by a Malay in the multinational corporations. It had become a window dressing or wall flower position, where the  personal manager(s) was basically a  retired police officer or army officer or ex-teacher.

The racial composition of production workers had to be 60% Malays, 25%Chinese, 10% Indians and 5% of other races. But in reality the racial composition was 60% Malays, 20% to 30% Indians who were unskilled workers and the 10% Chinese and a small composition of Indians who were categorized as skilled workers. A large section of the  work force comprised of female workers.

During the period of the years of 1985 to 1997 technological changes were in a state of flux. At the same time we faced various cycles of recession which were caused by the structural change in the economics of the industrialized countries. There was a prolonged period of stagnation, low growth, zero growth or for that matter, negative growth where some nations went into a depression.

Then in July of 1997 we faced the Asian Financial Crisis and the decline in the value of the Ringget. Thereafter with the advancement made in the technologies used in the manufacturing process and with the increase in the wages of the unskilled workers, the Japanese, Taiwanise, and investors from Hong Kong and Singapore moved on to China and other nations where the wages were low for the mass manufacturing processes.

As such we now have a large number of manufacturing operations which have ceased operations. Many factories in a large number of the free trade zones are vacant. On the other hand political events in other countries and the change of policies have changed the face of the world economy. In most countries and in almost all economics sectors unemployment remains on the rise and Malaysia has not been spared.

The days of depending on Foreign Direct Investment(FDI) for the manufacture of goods is receding into the twilight zoon. The world is in the  throes of the knowledge and service based system of operations. Yet our political leaders were unable to fathom or comprehend or for that matter foresee the long term decline in the regenerated manufacturing base.

The educational policies are designed for preferential treatment of the Malays. A Malay student does not have to compete on equal terms with a non-Malay student. As Ahmad Sarji the former Chief Secretary of the Government in his Biography by Lim Chang Moh, entitled “Attaining Eminence at page 218, states:

“ Decdaes ago, before preferential entry was introduced, entry into university was strictly on merit. We had to compete on equal terms with the best. This was reflected in the quality of the people employed by the Government during my time,” he was quoted as saying in the Graduan magazine in early 2008. “But today, many students can enter local universities  with the minimum of  requirements. Coasting their way through the undergraduate years, passing with the barest of margins, they expect to get good jobs with their low passing marks.”…… “ What is the point of having highly qualified professionals if they don’t have character.” Ahmad is now championing the cause of quality education.

If that is the state of our education system, then we have turned our local universities into degree mills. The professionals are mediocre and are a misfit for the knowledge based system of service industries.

A decade or so ago the writing was on the wall. There have been economist and authors, who have written on the paradox in the world wide economy and to name a few, such as, Robert Beckman, John Naisbitt, Kenichi Ohmae, George Gilder and Alvin Toffler. But our political leaders were oblivious to the facts of the changing faces in the world economy.

Since 2008 they have realized that Malaysia’s FDI has plummeted. Then they announced that they are going to liberalise their racial policies to attract investors. Now the politicians realize that it is extremely difficult to attract investors. Even investors from Singapore are shying away. It appears that for the first 6 months of 2009 there has only been 4.2 Billion Ringgit of investment, which is pittance compared to the City State of Singapore or Thailand.

We will not be able to attract FDI especially since we have a Judiciary which does not uphold the Rule of Law. Then we have a complete misfit of professionals who are mediocre and cannot contribute effectively in the new knowledge based industry. Further we have an acute shortage of electronic and electrical engineers.

Under these circumstances, we are aware that the attitude of investors rise and fall as their expectations change. To the investor business growth depends on its own expectation and they will first evaluate the policies of government and simultaneously evaluate the skilled availability of the labour market.

Investors make decisions on the basis of an “animal spirit”  and for them “capital” is the morale of work and the rest of the government policies may be considered as elusive as thinking.

It appears that the government has now got to face the reality of its own contradictions and ill conceived and diabolically executed policies which segregated not only the working populace but also the non-Malay business community.

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One Response to “HAVE WE MISSED THE FOREIGN INVESTMENT BOAT”

  1. boscopa Says:

    Yes. I am the author of this post.

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