Tuesday, October 02, 2007

Oil & Gas Windfall: Malaysia's Boon or Bane? (II)

I wrote in Part 1 of this article published in Aliran Monthly, on how economies blessed with ample amounts of natural resources tend to under-perform their potentials, particularly those afflicted by the Dutch disease. Malaysia might in fact be suffering from what is academically termed as the political Dutch disease. Our apparently healthy macroeconomic numbers such as growth rates above 5% masks the fact that the fundamentals of the economy are shifting negatively. How do we overcome this?

We fear that with Malaysia becoming a net oil importer very soon, and with oil reserves lasting only for the next 2 decades, these leakages left unchecked will soon have a major impact on the country's economy. This impact will be aggravated by the fact that the other productive sectors of the economy reliant on human capital such as the high-tech manufacturing, information and biotechnology remains stagnant and insufficiently developed to replace the economic contribution from our oil and gas sector due to complacency or neglect.

Faced with such a possibility, it is imperative that Malaysia re-think its strategy on enhancing human capital. The two ministries of education must be applauded for their efforts to fine-tune our educational institutions to achieve the human capital goals such as the setting up of “cluster schools” as centres of excellence. The Minister of Education, Datuk Seri Hishammuddin Tun Hussein has also recently announced that some 27% of the education related infrastructure projects under the 9th Malaysia Plan have either been completed or are under implementation.

However, our efforts on physical infrastructure must be matched equally, if not more, with soft infrastructure such as the quality of teachers, the rigour in our course syllabus as well as the examination standards. No cost must be spared for example, in bringing the best teachers and lecturers from around the world to teach in our local schools and universities populated with our cream of the crop.

Misguided nationalistic philosophy must be cast aside in favour of a pragmatic policy in areas such as attracting the world's top academics to head our institutions of higher learning. Within our educational institutions, performing teachers and academics must be granted their due reward, financial and otherwise, as further incentives for themselves and others to continue to excel. It is of great irony that even Malaysian academics who were never in contention for top positions in Malaysian universities are head-hunted as vice-chancellors or faculty deans at the world's top universities.

In our quest to develop and retain our human capital, no stone must be left unturned and no sacred cows must be left untouched. Then and only then, will Malaysia be able to diminish its reliance on natural resources and depend instead on her people's creativity, resourcefulness, intelligence and productivity to drive the country's continued development. While oil wells may one day run dry, our population will only continue to grow and renew itself.

Therefore it is critical that the Government sets aside or even legislate that a substantive portion of our windfall from oil and gas is kept under lock and key, with the sole purpose for investment in human capital, over and beyond our typical expenditure on education and training. This way, the funds will be prevented from being expensed to a unproductive and wasteful rent-driven economy. To quote Economics Nobel Prize winner, Joseph Stiglitz, “abundant natural resources can and should be a blessing, not a curse. We know what must be done. What is missing is the political will to make it so.”
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