Monday, November 19, 2007

Not Running Fast Enough

I've been wanting to blog about this for a while, but never got round to doing it ;-). For a couple of dinners and ceramahs, I've been presenting my Powerpoint slides to give an overview of the state of the Malaysian economy. After all, as the economic advisor to the party's secretary-general, so I had better know my stuff. ;-)

So I'm extremely thankful to Dr K J John who picked up from my speech and presentation at the DAP Petaling Jaya fund raising dinner on the 1st November and wrote about the general state of the Malaysian economy in his regular column in Malaysiakini two weeks back. Saved me a little trouble from doing the write up myself, heh heh.

One of the key points of the dinner to press home the point that our economy is clearly underperforming its potential. All the Barisan Nasional government mouthpieces will tell you is that the economy is "growing", but they don't tell you that we are going much slower than our competitors in the region.

Have a look at the GDP per capita (US$) comparison chart below:

Back in 1966, 10 years after achieving independence, we were regarded as a wealthy country. In fact, our GDP per capita was nearly 3 times that of South Korea's at US$350 versus US$130. Our football team was also probably much stronger as well ;).

However, shortly within 24 years, South Korea's economy caught up and match ours at US$1900 per capita in 1990. And just like an inevitable script, both South Korea's economy as well as its football team trashed us by 2004. South Korea's GDP per capita at US$16,000 is now more than triple that of an average Malaysian at US$5,000. Of course, while our football team is now ranked 140+ in the world, South Korea qualified for the World Cup semi-finals in 2004.

The same story can be repeated with other countries like Taiwan or Singapore (needless to say). Will the story be repeated in the next decade with our other competitors like Thailand, Vietnam or Indonesia?

Looking purely at Foreign Direct Investment (FDI) data, this certainly looks like a real possibility. You will remember just about 2 months ago, the local mainstream media trumpeted the fact that Malaysia achieved a 10 year record of US$6 billion in FDI. It is a relief that the decline in FDI has stalled at least for 2006, however, FDI data cannot be read without putting it in the global context. Globally, FDI has increased tremendously over the past 4-5 years, while Malaysia has benefited little from it.

Let's take a look at the table below which compares the FDI received by Malaysia and Thailand over the past decade.

It is clear that in the mid-1990s, Malaysia consistently out-attracted our northern neighbours in terms of FDI. However, over the past 6 years, Thailand has beaten us for 5 years, with increasing margins! And it doesn't look as if we will be able to overhaul Thailand's achievement any time soon as well... Indonesia beat us last year for FDI for the first time in history. We managed to scrape past them marginally this year. But it is sad that we have now been relegated to a lower division to compete with countries which in the past, were substantially behind Malaysia in terms of development.

To quote Dr John:
I dare not look at the FDI figures for Vietnam but seriously suspect that if they have not overtaken us they will do so in the not so distant future; simply because their labour and land costs are much lower. We should not even think about Indonesia; for, as their political stability improves, their investments in oil palm and manufacturing might help them overtake us.
The only reason why we have managed to stay respectably afloat in the past decade, and particularly in the past few years, has been the fact that Malaysia has been blessed with oil and gas. The revenues from oil and gas has allowed us to mask the failures and weaknesses in the other sectors of our economy. I've written extensively about it here.

The question then is, will things fall apart once our oil lottery money runs out - which it will, not too far in the near future?


Anonymous said...

Yes flush with oil money there is a lot of one off achievements we see in Malaysia. The latest is of course sending that spaceman on a pay ride with the Russians. All these are superficial and hollow just like what the SIL says in the Al Jazeera Forum on Election reforms – “plethora of changes that have taken place by the election commission to make election process in Malaysia more free. Transparent ballot boxes, indelible ink being used to make sure the voters do not vote twice, trying to erase away from the electoral roll people who have passed on and things like that.”
Now what about the behind the scene moves in transferring voters and all the gerrymandering to divide a geographic are into voting districts so as to give unfair advantage to one party in elections?
Look at the Malaysian Parliamentary & State constituencies – all differing widely in size or population because of gerrymandering.

For those who have seen & heard the 101 East Forum Video Clip on the Bersih Protest discussion and if you have missed anything, here is the chance to reread and confirm in the transcript.

Anonymous said...

Oh yes ... football. About 35 years back, we were head to head with South Korea. The Koreans feared our Chin Auns, Mokhtar Daharis. But now, they have attained world standards while we are struggling to beat Laos & Cambodia.

Korean companies such as Samsung, Hyundai, Kia are world reknowned. What do we have? MAS? Proton? Petronas? MAS & Proton struggling to be in the black. Petronas are being milked to help out those bailouts.

Where are those glocal UMNO chaps!!??

Unknown said...


I am no economist. Tell me if i am wrong, for i have said this many times.

Back in the early 70's, general workers, make Rm200 - 300 per month + a single story corner lot cost Rm12,000.

Now the same job pays Rm 1000.00 - Rm 1200.00 per month. The same porperty might cost Rm 150,000 - Rm 200,000.00. Could this be use to reflex that our BN jokers had sold us down the road?

FDI have gone to China,Indonesia + Vietnam. Just ask anyone in the handtools + engineering hardware industries, they can tell you horror stories of the last 5-10 years. These two industries are at the front line for any industrializations.

No fool will invest in a NEP or any racial favored enviroment. Not many people know about Indonesia having more FDI than us last year, but to those who are in the industries, it sure sounds the alarm bell.

Oil is a curse for many. Go talk to a many Latin countries. Well, we deserve who we voted in, not once but for some 50 years. What a incredible timid society we have. Don't be like our PM.....wake up fellow is already a bit late......but better late than never......

Anonymous said...

Jakarta's Jalan General Sudirman is Indonesia's Wall street, it is one of the prestigious locations for reputable banks, international hotels, apartment buildings, foreign companies and embassies; its infrastructure is world class!

For Bangkok, its Wireless Road in Chidlom area is one of the luxury area in Thailand. Even after Taksin is ousted, the area is still flooded with foreigners; not to mention other areas like Sukhumvit, etc.

Back to Malaysia, Do we have the crowds like Jakarta's Jalan General Sudirman or Bangkok's Wireless Road? Compares to those areas, what is Jalan Bukit Bintang? KLCC? Bangsar? Do we see foreigners like what we saw back to pre-1997?

For those who have been in these two places, the answer will tell automatically.

Tony, besides FDI, perhaps you may want to compile a comparison chart for visitors as well. This is to see how successful the Visit Malaysia Year project is :) .

Anonymous said...


That figure explains thousands words of the 'capability' of the corrupted BN government in managing the country's economy!! What a shame!!

It's good to use more figures in your future blog posts as they are very effective in exposing the weaknesses of the corrupted BN government. Keep up the good work! :)

Anonymous said...

Sawatdeekhrap Tony!

Since you are comparing Thailand and Malaysia. It would be good to talk about Thailand's automotive industry. (it helps as I work in it)Malaysia had a headstart in this area compared to Thailand. In fact the Japanese first started assembling their cars in Malaysia long before Thailand. However with Proton taking priority, Malaysia did not develop this industry further. On the hand, Thailand took the bull by the horns and went ahead with their dreams of being the "Detroit of the East". Today in their "Detroit of the East" region called Rayong, they have this big automotive industrial park. It's a vast land and you can see all the engineers doing their test drives. Honda, Toyota all have their plants there. The Japs just love it in Thailand. If you go to Bangkok especially in in the Sukhumvit area it's like a mini-Japan. And even now Ford has recently announced that they will be pumping in money to build a new plant there.

Of course now, Thailand's economy has been blown a little of course with their political turmoil. But should they get their thing going again, with their vast natural resources and their dreams to cut the Genting Kra. Malaysia could be blown of course.

Khorp khun Khrap

Andrew said...

Hi Tony,

I'm no economist, but it seems to me that FDI would decrease as the country stops being a manufacturing powerhouse due to moving up the value chain and also higher operational costs in the country.

I believe most of the FDI is due to foreign companies which set up manufacturing sites here in Malaysia due to (then) cheap labour costs. Most companies are now moving said factories to other lower cost sites, while Malaysian factories are trying (some successfully and some not) to move up the value chain to design/development/services.

The FDI required for design/development/services sector I think will be much less than for factories as there is no expensive equipment to buy; however, I don't think this is to the detriment of the economy as people in general are becoming more knowledge workers and not manufacturing employees.

I guess my point is the the FDI number needs to be looked at with other statistics, like the % of workers in mfg environments, vs. in the design/services sector.

Can you comment on this?

Anonymous said...

Malaysia (Malaya) was the 2nd most developed countries in Asian at the time we became independent in 1957. But we are now far behind Japan, South Korea, Singapore, Taiwan. Vietnam, Thailand and Indonesia are catching up.

It will be very helpful to the opposition parties if they can came out with more statistics and comparison with more Asian countries, especially our neighbour, Singapore.

These may include earning per capita, inflation, performance of shares market etc.

I believe many Malaysian are still unaware that we are lagging behind other neighbouring countries even blessed with rich natural resources, a sign that the country is not properly managed. Else, majority of the votes would not be for BN.

Anonymous said...


Think you have a point there. We need to look at the FDI in terms of whether the FDIs are leaving because the low manufacturing industries have relocated because Malaysia has moved up the economic ladder. However at the same time it needs to be known why can't Malaysia also attract higher types of FDIs? Singapore has done that quite successfully inspite of the fact that they too have lost alot of low added value FDIs over the years. So we have to try to learn from Singapore or other countries what they have done right to attract these kind of new FDIs. But to do that, the restructuring and the retraining must be done quickly, otherwise there will be mass unemployment.

But one thing is for sure is that manufacturing must still remain as one of the bedrock of the economy because of its ability to employ mass number of workers. The services, financial, knowledge industries can only employ so many people.

Anonymous said...

the economist has a publication on countries to be watched in 2008, and some of the economic indicators in it. you can download here.

apparently, malaysia will be took over by a few latin american countries, and even african countries in a few years' time. and look at how singapore fare, compare to european countries. south korean, obviously is on the rise, closing the ranks of developed countries.

when that happens, let's pack our pack and money and move out of malaysia.

Anonymous said...

The Govt will probably respond that "we are better than Kenya, many other African countries and even Sri Lanka"!!! Comparing with the bottom makes them feel GOOD...

Anonymous said...

pak lah : failure is not a choice.

but seem like it's becoming a habit in his administration.

Anonymous said...

Hi Tony,

thank you for writing such informative articles for our reading pleasure. I have always been saying that our economy has fallen behind our neighbours, but have had no facts to carry me through conversations like that. Now I can quote your article in support of my claims.



Anonymous said...

What's the use of FDI if it only benefits the handful chinese?

Anonymous said...

dear hachuah,

singapore has moved up the value chain but its share of FDI was 26 billion USD last year. way way way above's malaysia's 6 billion?