By: Professor Dr. Ahmad Ibrahim

DESPITE previous attempts to transform the economy, we are struggling to escape the middle-income trap. There are still holes in our economic formula. Family income remains a major problem. For example, our wage levels have not kept pace with inflation and rising costs. This explains why we have difficulty dealing with price shocks, especially when it comes to food products. We have seen this episode in the recent rice controversy.

Most of the time, we succumb to knee-jerk reactions. We are known for using price controls which we know is not sustainable. Developed economies do not normally use price intervention. They leave that to market forces. The subsidy instrument, especially the general subsidy, is just as difficult. Both price intervention and subsidy are open to abuse. Both are costly to the economy. Many know that the solution lies in strengthening people’s incomes. Most experts agree that moving the economy toward higher income levels will help.

Easier said than done. What is clear is that the economy has become addicted to low-value companies. Apart from the volatility of raw materials, cheap labor is a common feature of such companies. The majority of these low-skilled workers are imported. It is not easy to have an efficient system to bring in such workers. Cases of labor abuse are inevitable. This
creates problems for our exports if international rulings on labor standards are enforced.

We have seen reports of how some of our products have failed to enter the market due to non-compliance with international labor laws. The sectors most dependent on such cheap labor include plantation and construction. Both don’t seem to be making much progress when it comes to adopting new technologies. During the Covid pandemic, there was an attempt to transform. But the momentum failed to pick up steam as conditions returned to normal. Even in the manufacturing sector, a large part of our business involves lower value assembly operations. The higher value is in design and branding, which we are not so strong in.

How do we migrate to the more high-tech sector? MIGHT, the Malaysian Industry Government Group for High Technology, has been trying to do just that for years. Through technological foresight, MIGHT has identified the business sectors where high-quality jobs can be created. Think of aerospace, smart cities and precision production. Progress was mixed. There is still that lethargy in growing such businesses.

Attracting the right investments, both FDIs and FDIs, has also been a challenge. One major obstacle is the great need for talent in such hi-tech sectors. Higher education plays an important role here. It has been suggested that skills development and R&D should focus more on the hi-tech sectors. R&D should also emphasize more applications rather than basics. From now on, our R&D expenditure is more fundamentally focused. As a developing country, such an imbalance in the allocation of research and development is unwise. Moreover, we have limited resources. Whatever fundamental research we do must support closing the knowledge gap to enable applied research, especially research that has good potential for commercialization.

The current blueprint for higher education should end in 2025. Talks have been announced about a new blueprint. Many suggest that stakeholder engagement must start now. This must be thorough and inclusive. It is very important for a comprehensive analysis of the expiring blueprint. Which aspects are no longer relevant? What has been achieved recently?
plan? And what remains undone?

Very often, little account is taken of the lessons learned from the previous plan when drawing up new blueprints. Very often we start all over again. Strategy experts suggest this practice needs to change. The monitoring and evaluation of any new blueprint should be made clear, especially the unit or institution responsible for regular assessment. Sharing assessment outcomes with key stakeholders should be standard practice. Very often the data is kept secret. In addition to a clear communication strategy, collaboration between stakeholders must be made mandatory. Unless such a reinterpretation of the higher education blueprint takes place, it will be impossible to effectively generate the right talent to future-proof the economy.

The author of the Tan Sri Omar Center for STI Policy, UCSI University and Associate Fellow Ungku Aziz Center, University Malaya