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The Government May Not Know What To Do But Many Malaysians Have Many Ideas On What Needs To Be Done

After the PM’s latest action plan that was revealed a couple of days back Malaysians have ventured their views and thoughts on the matter.

Akhramshah Sanusi has put his thoughts down again, which you can read here :

https://m.facebook.com/story.php?story_fbid=10157627364942136&id=701167135

Tan Sri Rafidah Aziz has listed a bunch of things that need close attention from the Government (here):

https://m.facebook.com/story.php?story_fbid=334986538026219&id=100045446257045

Blog reader Foo Lee Khean has again gone to some effort to put his ideas down for our note.  Here it is in full, a bit long but it is worth a read.

Here is the problem – the politicians and the Civil Servants in charge – they do not seem to understand. 

Anyway here are Foo’s suggestions:

Dear Prime Minister

I have been thinking and asking this question every night – what is next for the country?

What next? The country needs to find a new balance because of the different challenges and problems posed by the pandemic, the jostling for continued dominance by the west against the rise of the east, incredible speed with which our neighbours are rising from this pandemic amongst others.

The country is projected to face a host of issues in the next 3 years or more and principally amongst them would be,

1. Total number of unemployed is projected to hover above the 4% level for the next 3 years. Todate, already more than a million has joined the unemployed due to their employers closing or downsizing their businesses. 

(OSTB :  And the vast majority of this unemployed will be bumiputras. This is going to become another issue.)

2. In a study conducted by the Higher Education ministry, it was revealed that nearly 60% of graduates – totaling almost 300,000 – remain unemployed one year after graduation because of the gap between what is being taught at universities and colleges and the needs of the industries or job market.

(OSTB :  The government universities – IPTA- have no idea about what is needed in the job market. They do not care if their graduates cannot find jobs.) 

3. Moving forward, tax revenue for the country should be lesser as businesses struggled to stay afloat. SMEs, the backbone of the country’s economy, are struggling and some may not survive this pandemic and some could have downsized their operations by now. Even if the situation improves, returning to pre-pandemic days levels would not be immediate but would be 2 to 3 years in the making as business owners are expected to remain cautious. Banks, who has been relied on to provide the lifeline to most of these SMEs would also remain cautious in their risks assessment of the SMEs, thus further constricting the ability of these SMEs to re-scale their operations to the pre-pandemic days assuming they want to.

(OSTB :  Even if the Corona Virus is sucked up into outer space tonite the SMEs have suffered mortal wounds. Yes it is going to take 2 – 3 years for them to recover. many never will.)

4. Digital adoption and upscaling would be laborious and by the time real results are achieved, the world could have move on with their quantum computing & technologies, machine learning and Artificial Intelligence while we are still grappling with Big Data and Blockchain applications for deliveries of our services. Already at present, while we are still trying to roll out 5G and IR4.0, the more advanced countries are already pushing and researching into 6G and IR6.0 concurrently.

Faced with the above, what does the government have to do and sustained it in the next 3 years? I believe the `what next’ that I set out herewith is the expression of a lot of common people on the street:-

a) Helping the SMEs in the country

SMEs has always been the backbone to the country’s economy contributing more than a third of our GDP and providing job opportunities to more than 4 million workers in Malaysia. And banking institutions is the main source of financing for SMEs, providing more than 90% of total financing.

Bank Negara in their report said for the first half of 2020, the banking system as a whole disbursed RM120 billion in lending and financing to small and medium enterprises (SMEs). 

On 11 April 2021, you were quoted to have said in a public event that the federal government’s coffers have been significantly thinned out to prop up the economy and help Malaysians in the Covid era.

What SMEs and micro businesses in the country urgently needs now is a standstill agreement. As with any restructuring of big corporates, the first and initial step performed is to seek a restraining order by the applicants against all creditors. As repayment to the banks takes up a chunk of their costs, a standstill will give the applicants the breathing space for them to utilize the already scarce liquidity to recover from its precarious position  

The standstill would be for a period of 2 years. During this period, these SMEs do not have to make any repayment of the existing debts. They, however, are also not allowed to seek new loans during this period. 

The government creates a binding framework by assuming and guaranteeing the debts owed by the SMEs to all the banks for principal amounts of RM5 million and below. All interests would be accrued while late and penalty interests would be waived. 

SMEs can do an early opt out from the guarantee scheme ahead of the 2 years standstill subject to them fulfilling and repaying the interests accrued and normalize their accounts with their lending banks. 

In the event that any of the SMEs collapsed and closed their business inside the 2 years standstill period, the banks can foreclose and realize the collaterals from the borrowers. The realization must be made within the same period ie the 2 years. Any shortfall from the realization of these collaterals will be guaranteed by the Government who will issue a non convertible unsecured long term tenure bonds to these banks for the shortfall. The government would not guarantee any shortfall for banks that do not realize or failed to realize the collaterals from those borrowers who failed inside the 2 years period, 

Implementing this is definitely more viable than to allow these SMEs to default on their loans which would have a bigger negative effect on bank balance sheets and the resulting downgrade by credit rating agencies.

Moving past the pandemic, our SMEs are well positioned to fill the gap in the re-jigging of the global supply chain where multinationals would no longer rely solely on one or 2 markets for their entire supply chain.

b) Glove manufacturers are a great and immediate multiplier to our economy  

Much has been bandied about imposing tax on the super profits earned by the glove companies in Malaysia. 

Gloves manufacturing has been a consistent contributor to our country’s taxation and economic system since the emergence of AIDS.

We used to be one of the top 3 natural rubber producing countries in the world – thus supply i.e latex to these manufacturers gives us the edge over other countries. Now we are ranked Number 6 in the world, behind even our neighbours, Thailand, Vietnam and Indonesia. 

3 or 4 of the world’s top glove manufacturers are based in Malaysia. Even though natural latex gloves make up 40% of production of Malaysian glove makers, these manufacturers still purchased a substantial part of their raw materials i.e latex from our neighbors due to the inadequate and inconsistent supply in our own country.

In 2019, from the 640,000 tonnes of natural rubber produced, only 36,000 tonnes are in the form of latex. The glove industry consumed 450,000 tonnes of latex in the same year. 

The government can bring a solution to this by creating an ecosystem with a mechanism for pricing with the small holders committing and the manufacturers purchasing a sustainable and long term supply of latex.

With the assurance of a sustainable supply at competitive prices, the manufacturers would be invited to build new capacities at identified and selected locations. A single entity will be set up to fast track the applications.

Land will be leased to these manufacturers at minimal prices for a period of 15 years with the following pre-conditions:-

a) They have to complete the new facilities within a period 12 months from the date of the approval. 

b) Each has to commit to employ no less than say 1,000 workers with preference given to locals failing which the documented and undocumented migrants who are unemployed currently, will be employed. Instead of repatriating those documented and undocumented migrants and incurring costs at the same time, the country is employing them for a productive purpose that can generate a multiplier effect for the country in various areas.

c) Developers will be tasked to build and construct purpose built accommodations based on predetermined specifications for the workers. The manufacturers will lease it from the developers for the same period as the lease of the land – 15 years – at a predetermined rate.

New economic activities would be generated with the building of new plants, reducing the number of unemployed, be it locals or migrants. Through the provision of accommodation, new and emerging townships centered around these new plants would also be created generating a multiplier effect also on all other surrounding land and towns or villages

c) GLCs plans for the future – what next?

Most of the GLCs that accounts for 42% of the total market capitalisation of Bursa Malaysia operates in a near monopolistic environment and each plays an important role in helping the government to achieve its social objectives.  

As with others, GLCs are today routinely doing things remotely that they would have considered impossible such as holding virtual meetings or whole services being developed and delivered remotely.

With health guidance i.e social distance expected to remain a norm, GLCs can play a role by reshaping their existing and future workforce to one where their employees work is less relevant –reducing the importance of physical location – thus providing opportunities for them to employ people from outside the traditional centers to regions that the government is trying to support 

To stimulate and promote growth, break up those GLCs that are operating in a monopolistic environment into several separate entities to create competition. Investment funds, who, reportedly are running out of viable and sustainable investments to invests, will have more choices as there are more sizeable companies for them to invest in. The country might experience and see new capacities in innovation and technological advancements, of doing things from each of the entities.

d) Define priority areas in attracting hi tech FDI to spur digital economy   

Prior to the pandemic, the digital economy was projected to contribute 20% to the nation’s GDP in 2020.

Yes, FDI will improve competitiveness, create employment and increase the welfare of our country.  It could also manifest itself in the creation of spillovers and linkages – typically in suppliers and customers. But if we were to look at past precedents, from the time when the MSC was set up in 1996 with the objective of creating a hub for innovative producers and users of multimedia technology where foreign companies collaborated with government agencies, departments and ministries to enhance the socio-economic development of Malaysia in the information age, where are we as a nation, in terms of being a digital powerhouse and in high tech development? 

Uneven infrastructure and its concentration in main urban areas lead to unequal access. 

Availability of high-skilled labour is one of the key reasons for an organization to locate outside their own country especially for the high tech IT industry. Market size and market growth are important determinants in their decision. These hi tech FDI does not make their decisions overnight. All these decisions to invest in our neighbors were already discussed and made long time ago. The delay in their announcements was probably due to the diversion of attention towards containing the pandemic that created havoc on their organizations.

Thus, before we are blinded by the rush to compete for such investments, the drawing of any such investments should be accompanied with an upskilling of our human capital – a non negotiable prerequisite.

It is worth noting that generally technological developments and applications across the world were developed and commercialised by start-ups, not by established organizations as large companies generally are not eager to contemplate the risky development of a new technology and characteristically doubt the feasibility, the reliability, and the marketability of the potential technology. 

Equipping the new generation of graduates with appropriate skills and knowledge for meaningful participation in the digital economy, both locally and internationally should be the priority. E.g developing cybersecurity as a service (not as in software development) is a skill that has relevance and will be much needed anywhere in the world in addition to supporting our own local organisations

More programs like the #mydigitalmaker movement that started in 2017 by the Ministry of Education and MDEC where computational thinking was integrated into the curricula for primary and secondary schools should be implemented, or else the long term economic importance of the push to attract hi tech FDI to Malaysia would never be realised.

e) Reviving tourism – the 3rd biggest contributor to the country’s GDP

As cheap air fares, one of the key drivers driving the tourism industry across the world is not likely to see a return to the pre pandemic level, the future for the industry in the immediate and near future will come from domestic tourism.

Using the `opportunity’ provided by this pandemic, resources and efforts should be made and given towards using domestic tourism to,

Revitalize regions across the country by creating tourist areas through the formation of sightseeing routes, attractions with a story/theme that includes the natural beauty, cultural traditions, history, cuisine and art & crafts of the areas 

lift the local community in those regions from poverty by working with organizations to develop products and services thus generating employment and economic growth e.g working with the local communities to develop one high value traditional product specific to their community or region so that people travel to their place to taste or see and buy the product for themselves.

Tourists nowadays, local or foreigners– aided by a wide ranging number of social media and the need to connect – are looking for visitor experience in their travels where they wayfind and navigate themselves to their destinations. And this trend is projected to grow further.

You do not need to look very hard for any scientific or technological edge in pulling the country out of its present quagmire. All the solutions are in front of you. All you need now are DOERS to implement it. 

Name : Mr Foo Lee Khean

Email : leekhean.foo@gmail.com

Mobile : 012 292 1863


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