The Economic Continuum and Its Effect on Malaysia

My Respected Blog Readers,

The world economy has develop so much in the past two centuries, mainly due to the technological advances creation.

Previously, the orientation of the world economy is on agriculture-based, self sufficient economy. The world trade are minimum, and if there are any, the majority of it comnes from the agriculture or agriculture-based products.

Then, due to advances in the engineering know-how, the orientation of the world economy started to shift towards Production-Based Economy, where manucaturing companies, particularly from the western hemisfera of the world started to produce myriad of consumer products for the world. The demand for these consumer products, including electrical, automobile, and textile products exceed those supplies and it just a matter of creating an efficient manufacturing operation. There's not many hassles in selling those products and there are less competitors around at that time.

Starting in the 1970s, the orientation of the world economy shifted, again. The world economy shifted, from Production-based to Marketing-Based Economy where the focus is not only in establishing an efficient manufacturing operation for productivity purpose, but the focus has shifted towards Branding, Marketing, Supply-Chain, and Selling programms. During these period did marketing companies gained popularity and becoming influential in the business worlds. Company cannot no more just depending on a solid engineering know-how, but they must master savvy marketing plans to capture more market share. This happens as the manufacturing base becoming more and more mature and the competition is much more stiffer as compared to during the old days.

In the period of 1980s and 1990s, the orientation of the world economy agin takes place, some said for the last time. This time, it shift, from agriculture-based, to production-based, to marketing-based, and now towards, Knowledge-Based Economy where the focus is towards value-creation, innovation, and creativity to drive a company and impose a premium price and hence gain more profit. Last few years, I've read a book titled "Little Knowledge Is A Dangerous Thing" where the writer wrote about a changing environment of the economy and how knowledge will be the next power in leading a person/company/country.

But this Knowledge-Based-Economy do have its own weakness. For the purpose of creating more values, the political leaders are championing what they called "deregulating to encourage creativity and innovation". They campagning on liberal approaches, on free-trades, on deregulations. They asked for more freedom to do business, and picture themselves as "the new generation" as opposed to the "old guards" that believes in tight regulation and centralized approach. And the world economy adhere. Laws are abolished, guidelines are withdrawn, and procedures are relaxed. The effects are eventually disastrous. In 2007-2008, the U.S economy nearly titally collapsed. And the U.S recession has infected the whole world economy afterwards, in which the E.U countries were the most effected. What had happens started with a bunch of smart people in the U.S trying to create "value" in the financial sector by creating toxic financial instruments by manipulating loans in the property sector in the U.S. These toxic financial instruments are then reflected as assets and profits in the financial statements of those powerful financial institutions/companies. They started to have problems when these toxic financial instruments went bad-debted. The banks gone broke and the financial sector froze. This financial crisis aferwards started to effect the whole economy when the industries are having problems getting loans. Malaysia also are effected as a big chunk of our export depend on the stability of U.S market.

Due to this sub-prime crisis, I would like to add another orientation of the world economy as we gather ourselves to the new decades of this new milleneum. I would call this shift as, Governance-Based-Economy. Yes, the focus will still be on knowledge and research & development, but the emphasis is also will be stronger on de-deregulations and good governence. With good-governence, I means integrity, transparency, the adherence to the rule of law, and ethics.

You see.... my friends, integrity is such a strong word. Integrity is not only about bribery or SPRM or the Police Department. Integrity is a lot more than that. Integrity is about telling your boss the true picture without being fear of being punished, being more transparent, having a fair and effective performance evaluation system that promotes the best employees, and about being objective in our approches. And I tell you, it's a lot of things that need to be changed in our systems (economically, politically, socially) if we want to talk about integrity.

Malaysia, for me, we are in the transition between marketing-based economy towards knowledge-based economy. We are matured in the marketing-based economy and should have moved towards knowledge based economy. But we had some problems in this shift. Yes, our infrastructure is ready (some would argue, but I believe we had achieve somewhat encouraging infrastructure in this 21st century), but our human capital resources are not ready. We had not had enough experts particularly in the advance industries such as medical devices, robotics, and pharmaceuticals. We lack that resources to really drive us in the next economic continuum of knowledge-based economy. Our universities are lacking something. I'm not sure whether the sylibus need to be changed or the university-culture need to be changed, but something need to be changed. The quality of our graduates are still not at par with the demand from the industries.

Yes, I agree, the government are doing something to changed this. We had established Talent-Corp to address this human capital issues, and there are talks to re-look at our school's curriculum. But al of this initiatives will need time to be implemented and unfortunately time is not something that we had in our side now. We are relying alot on our natural resources to engine the economy i.e. Petronas which need to be diversified.