The two sides of the Malaysia Inc 2.0 coin

PETALING JAYA: There are two sides of the coin to the revival of Malaysia Incorporated (Malaysia Inc) concept – if managed well, it could bring economic benefits in terms of tax revenue and a robust private sector; and, if not, corruption and cronyism.
The Malaysia Inc concept was introduced in 1981 and is based on the Japan Incorporated policy. This reflects the pro-private sector stance of the government in managing the economy.
Recently, Prime Minister Tun Dr Mahathir Mohamad announced its comeback.
Sunway Business School Economics Professor Dr Yeah Kim Leng (pix) told SunBiz that the underlying concept of the policy which in a way was a precursor to the Public Private Partnership – was to have a win-win situation for both the private and public sectors.
As the private sector thrives, the government will benefit from higher tax revenues. An economy led by the private sector also has a greater chance of success.
"All this institution development was part and parcel of the push to promote greater collaboration between the public and private sector to enhance the economic competitiveness by reducing red tape at the same time and reducing the regulatory burden to help the private sector to thrive and become more competitive," said Yeah, adding that this also set the tone for the formation of the special task force for the formation of business, Pemudah.
The policy also enhanced Malaysia's competitiveness and its export market despite being a small open economy competing against other larger economies of the world.
When asked if the concept was successful in the first round, he said there was no particular measure to weigh its impacts.
However, Yeah noted that the pro-private sector approach, if not managed well, could lead to cronysim, monopoly and vested interests of certain parties. Some notable negative impacts from the past were the rising level of corruption and poor performance of government-linked companies.
In saying that, he explained that while it is important to relax rules and regulations to promote the ease of doing business, proper safeguard measures have to be put in place to ensure that this does not become a breeding field for cronyism. This in turn is key in ensuring that the market does not lose its competitiveness due to monopoly and vested interest.
Yeah noted, that while Malaysia Inc is beneficial for the new Malaysia, it has room for improvement.
Drawing reference to Singapore which has seen an inflow of over US$62 billion in foreign investment direct investment compared to the Malaysia's US$10 billion, Yeah said there is a need to improve ease of doing business to attract investors.
"This is largely attributed to efficiency of the government and the trust on the ruling government.They (Singapore) have created a very conducive environment where investors have full trust on the rule of law and of course the efficiency of the civil service. In the case of Malaysia there are few areas we need to focus on how to facilitate investors and attract them," he explained.
In that light, there is a need for simpler procedures, less regulatory impediments for doing businesses and support from government agencies.
Noting that systems were not as digitally advanced during the first round, Yeah said authorities could now leverage on technology to integrate their systems.
This can be done by reducing paperwork and improving synergy by integrating the systems of all regulating authorities especially those pertaining to licensing, permits, taxation, customs and immigration.
Improving the efficiency of the civil service will complement these measures in creating trust in the government.
Besides just being dependant on tax revenue, the government has to now rely on the private sector to create employment and income for the people, especially in the face of cutbacks on government expenditure. This will require the government to come up with the relevant strategies to ensure greater efficiency.
On another note, Malaysian Institute of Economic Research senior research fellow Dr Shankaran Nambiar said the prime minister's call for the revival of Malaysia Inc is necessary and timely.
The nation, he said, should be governed on the basis of prudence, efficiency and productivity, as any corporation would be, hence good economic sense must prevail over considerations that do not contribute to growth and happiness.
"Malaysia Inc doesn't and shouldn't imply cronyism. Malaysia Inc is (or should be) about the best use of resources, if anything it is incompatible with cronyism," he said.
"I'm sure the prime minister has the larger interests of the nation at heart but there must be space for the proper functioning of the government in areas where the private sector cannot the relied upon fully – healthcare, education and housing. Malaysia Inc should be complemented with government participation in these areas," he added.