We live at a time when the cost of living continues to increase. More importantly, increases in household income are falling short of the increasing costs. Yet, governments state that the economy is growing and improving. So why isn’t this growth felt by the ordinary people?
The economic benefits are disproportionately experienced by society. This is mainly due to the limited reallocation of wealth. Which means, the rich continue to get richer, and the poor continue to get poorer. Wealth remains with the same class of society as it has always been. If we look at the Forbes’ list of top 20 richest Malaysians, it is quite obvious that the richest people in Malaysia have been the richest people in Malaysia for quite a long time. There are very few new wealth, “new-economy” wealth. I’m not saying that this is bad or good, but if we want the economy to create new wealth, we need to create conditions for resource, capital and wealth to be re-allocated.
Naturally, there is a short-term option and a long-term solution to solving the cost of living issue. The short-term term option such as subsidies, handouts etc is only temporary given that not much will change to raise household income.
It is therefore important that the long-term solution is given a bigger spotlight – which should be about “Jobs and new wealth creation for the 21st century Malaysia in a global and disruptive world” – I think any government or party that owns this cause has a strong chance to win the hearts and minds of the people.
Jobs and new wealth creation for the 21st century Malaysia in a global and disruptive world
To achieve this, the reality of the world must be accepted – it is more global, and it is becoming more disruptive. The old economy will be overtaken by the new economy, new technology will change the way our world operates, and capital and wealth reallocated globally. This can be an opportunity for Malaysians to be the ones to gain from the reallocation of capital and wealth if we do it well.
Specifically, I see three areas of focus:
People: We should aim to incentivize the private sector more to invest in people, in education, STEM (science technology engineering mathematics), TVET (technical vocational education and training) and entrepreneurship. Additionally, firms and public sector should aim to support the people to adapt to these disruptions. Some examples are incentivizing employers to help people cope with costs by encouraging teleworking, energy efficiency and other similar solutions. On entrepreneurship, I believe firms should be in a position to help their employees become entrepreneurs as an alternative career change.
Innovation: More investment will be needed in new technology and new business. The private sector will need to be incentivized to take a bit more risk on such investments. Incentivise the establishments of more private equity firms (not Government sponsored, please) to reallocate capital to enterprises with new technology, products, business models etc. Create catalysts and conditions for selected industries to restructure in order to create new opportunities and new value.
Innovation needs money. Although liquidity is not a problem in Malaysia, investment for slightly more risky ideas is. With interest rates low, returns for investors are becoming less attractive. It is good that we move towards encouraging and creating right conditions for private equity and venture capital investors. These are the people who can take a bit more risk for a higher return (without having to worry about losses of public funds) and move faster (unencumbered by bureaucracy), by taking many bets in new technology, new business, new business models etc. I personally think this needs to be significantly accelerated. There may be failures no doubt, but there will also be big opportunities to learn and gain.
Environment: I heard a few weeks back at a Utility conference that “moving the world off of carbon is the biggest business opportunity of the century”. We need to position Malaysia towards the front end of this in order to be able to capture the new business opportunities ourselves (as opposed to continue to be users). Incentivize energy efficiency and renewables in a big way. Dis-incentivize dirty fuels, wastage, driving etc. Costs of renewable energy will continue to reduce – not because of fuel, there isn’t any, but because of the technological advances, production improvements and economies of scale. It only needs some catalyst such as short-term incentives for renewables and disincentives for non-renewables for this to happen. Once the cost reaches parity, these incentives can be withdrawn.
A new narrative for Malaysia
I strongly believe with this confluence of factors such as technology changes, globalization, environmental concerns etc – there is a strong need for Governments to put a stake in the ground around creating 21st century-ready jobs, with opportunities for new wealth creation. We see the public, specifically some youths, tired of seeing the political narrative being very reactive and revolve around same old tired issues.
Yes, cost of living is a problem. But it is a problem because the economy is not creating new opportunities, it is just rehashing old stuff. Wealth is stagnating and stagnating within the same circles, the same sectors and the same entities. Institutions with large funds in Malaysia tend to be Government-linked, and thus is often risk-averse (due to needing to avoid losing public money) and will allocate capital primarily to low-risk investments – which will only benefit the incumbents. Thus continuing the cycle of keeping wealth in the same places.
New opportunities need to be created, so new jobs can be created. Capital needs to flow to these new opportunities. Rightly or wrongly, Trump’s campaign was centred around bring jobs back to the USA. This issue about jobs (and wealth) is similarly relevant here in Malaysia.
Make no mistake, the job creation narrative is not about creating more administrative or bureaucratic jobs etc – it has to be about 21st century-ready (global and innovation led) jobs. The opportunity for Malaysia is to ride the wave of the Decarbonization, Digitalization and Decentralization (the 3D theme of the recent European Utility Week in Amsterdam) of the world. The emphasis must be global, not just Malaysia. We don’t want jaguh kampungs anymore. By strongly emphasizing the global and innovation perspective to jobs, I believe it will make our society realise that we must be much more tolerant and celebrate our cultural diversity and solve another ticking bomb social issue that we face today.