It was such a refreshing breakaway today to attend a discussion forum on Industrial Estates study in Malaysia, organized by the Economic Planning Unit (EPU), and handled by their consultant for this project, the PriceWaterhouseCoopers (PwC). Well, it is not my norm to write about my official job in my blog, but nevertheless, this topic relates very much in the overall economic issues in Malaysia, which is of my interest.
Why do Industrial estates are important to a country such as Malaysia? Early decades of 1900 saw the world experiencing the shift towards engineering revolution which saw bundles of manufacturing factories emerged throughout the world. This shift arrives in Malaysia during the 1970s, where we had received few manufacturing investments as a foreign direct investments (FDIs) to the country. This manufacturing based, initially started in Penang, prospered throughout the country as we drove the Malaysian economy towards the 1990s and the new milleneum. Since then, FDIs in the manufacturing sector has become crucial parts of contributors to the Malaysian GDP. And when we talk about manufacturing sector, we will surely have to talk about one of its main enablers - the Industrial Estates (IEs).
My friends, what do actually foreign investors look into when they did their investment location feasibility study? When I was an MBA geek, well, I thought the main reasons for investors in choosing Malaysia for their investment location is - political stability, knowledgeable workforce, good infrastructure, and bla bla bla. But after gaining few years of working experience, my list of reasons added up and this includes tax structures, fiscal and unfiscal incentives, utilities availability, employment market, logistical facilities and cost competitiveness, country's international world ratings and the proximity with raw materials. When you examine those reasons carefully, about half of them are related with the IEs. Hence, the state of our IE is very crucial in attracting foreign FDIs from the manufacturing sectors.
Now, what is the current development model in establishing and maintaining our IEs? Well, there are no straight forward policies and it is more or less done in an uncoordinated and non-holistic manner. The decisions will be at the hand of the Chief Minister and normally each district will have their own IE just for the sake of having it. There are no proper planning at the state level on what industries do they what to focus, and usually the IE are developed in isolation to other social and community development. During our discussions this morning, the PwC was suggesting a new development model in which one central agency at the federal level oversees and coordinate the development of IEs, which includes the distribution of fund for upgrading and maintaining purposes. Well they had actually gone in suggesting not only a new physical development model but also goes to the extent of proposing a new financial model on how these IEs should be funded.
I found the idea is really great. I can give you one example on the basis why this should be done. I guess all of us knew PEMANDU very well. It is a unit under the Prime Minister's Office and is responsible for all the transformation programs under Y. Bhg. Dato' Sri Najib stewardship. What do this PEMANDU does actually? Well, their existence doesn't has any legal backing nor with any clear cut job scope. But they deliver the goods so well. Actually what PEMANDU has offered is just simple. They provide LEADERSHIP, MANAGEMENT, they put things into a frameworks and put targets on it so that everybody can work togeter to achieve the same target (or KPIs as they love to call it nowadays). In essence, they provide LEADERSHIP which was lost in the public sector. Prior to PEMANDU, everybody seems to work in their own directions, especially those in the middle management and the grass roots. PEMANDU came, saw, and CHANGE that, it's as simple as that. This is what MANAGEMENT is all about. Its all about putting tings into a frameworks so that everybody can work towards achieving the same goal. This is what the late Management Guru Peter F. Drucker preached so long during his life. Coming back to our IEs discussions, this is what exactly the main central federal agencies should do. They should provide coordination in the management of IEs nationwide so that there's no more cannibalizing competition between the states in attracting FDIs.
The financial modelling needs to be more furnished as it is a more delicate matters. We all knows land matters falls under the jurisdiction of the states, as clearly stated in our Federal Constitution. The setting up of the land price, the quit rent and what not will be directly fall under the states. The proposal of having private developer to own and manage the whole IEs, in terms of its financing, well, that should be discussed in more thorough to protect the interest of the states as the land owners.
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