Laying the groundwork for innovative growth

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At a recent public lecture jointly organised by Khazanah Nasional Bhd and the Socio- Economic and Environmental Research Institute (seri), leading economists argued that Malaysia has the innovative potential to be much more competitive and productive.

During the talk at Wawasan Open University’s main campus on April 20, 2010, World Bank economist for Malaysia Philip Schellekens emphasised that “innovation is key for Malaysia’s longterm prosperity”.

Schellekens, during his presentation of World Bank’s April 2010 Malaysia Economic Monitor themed Growth Through Innovation, clarified that innovation potential can be dramatically improved by developing the capabilities for innovation, the driving force of innovation, and the amplifiers of innovation.

In the area of capabilities, he felt it was important to nurture, attract and retain talent, to upgrade home-grown technological efforts, and to improve access to finance for innovation because “in Malaysia, 40% of those who want to innovate cite lack of finances as a major obstacle to innovation activity”.

 

Dr Lim autographing copies of his book, Nowhere to Hide.

Schellekens said that competition, the driving force of innovation, could be increased by facilitating fluid market entry and exit – since it takes a long time to start or wind up businesses in Malaysia – and by promoting a performance-driven labour market. “It is very costly to reduce head count in Malaysia. A worker with 20 years experience will receive severance pay equivalent to 75 weeks, compared to four weeks in Singapore and 10 in Hong Kong,” he explained.

Schellekens described amplifiers of innovation as promoting product specialisation in niches so as to ensure growth outcomes when innovation picks up. He shared that a robust recovery is underway and Malaysia will reach 5.7% growth by year-end, with manufacturing as the major locomotive of growth and the improvement of labour markets. In reviewing Malaysia’s innovation performance, he said despite product sophistication, surveys suggest limited local innovation efforts with domestic value-add remaining low. The challenge is therefore to move the nation’s source of competitiveness from low-cost manufacturing towards a high technology, high innovation economy.

Meanwhile SERI senior fellow Dr Lim Mah-Hui in his talk Nowhere to Hide – The Great Financial Crisis: Causes and Challenges Ahead, pointed out that from 1970 to 2007 there were 124 banking crises – an average of 3.4 per year, and a big financial crisis every decade!

He mentioned that some of the causes of recent global financial crisis include industry practices (or malpractices) and failure of regulation, noting that in the United States, the financial sector is becoming the master and driver of the economy instead of servicing the real economy.

Dr Lim urged Asia to re-think its uscentric export growth model by looking at China and other regional neighbours; to reexamine capital controls as these undermine monetary policy and destabilise the real economy; and to look at alternatives to the US dollar as international currency.

The session ended with the launch of Dr Lim’s book, Nowhere to Hide, by Khazanah Board member Datuk Seri Panglima Andrew Sheng, Bukit Bendera MP Liew Chin Tong and SERI chairman Datuk Dr Sharom Ahmat. Over 200 people attended the lecture, including Datuk Seri Stephen Yeap and WOU Vice- Chancellor Prof Dr Wong Tat Meng.

Selvarani Suppiah, a former journalist, is currently attached to the communications department of a private higher learning institution in Penang.



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