KUALA LUMPUR: Malaysia's performance in the IMD World Competitiveness Ranking, which is a unique and comprehensive database on the competitiveness of nations produced by the Swiss-based Institute for Management Development (IMD), reveals a pressing need for a re-calibrated development strategy.
Dropping from 10th place in 2010 to 34th this year, the decline underscores the importance of well-coordinated, innovation-driven efforts to restore Malaysia's competitive position.
Productivity and competitiveness are interconnected: higher productivity reduces costs, improves quality and drives innovation.
Malaysia's productivity growth rebound of 5.4 per cent in 2022 in the endemic phase of Covid-19 demonstrates a commendable recovery. The country's productivity growth further normalised at 0.9 per cent last year.
This emphasises the need for strong mechanisms to sustain momentum through innovation and policy reforms.
Relative to its regional counterparts, Malaysia's productivity outpaces Thailand and Indonesia, but trails behind advanced economies like Singapore, Hong Kong and South Korea.
Bridging the gaps in regulatory efficiency, technological adoption, workforce competence and innovation is essential for leveraging the productivity-competitiveness feedback loop to foster long-term economic growth. The productivity–competitiveness feedback loop is a conceptual framework for navigating the future economic direction.
Elevated competitiveness attracts investments, stimulates market expansion and perpetuates productivity gains. This cyclical interplay is indispensable for Malaysia's ambition of sustainable economic ascendancy.
FEEDBACK LOOP
Productivity, epitomising the optimal utilisation of resources to maximise output, forms the cornerstone of economic performance. Competitiveness, embodying the ability to thrive in global markets, builds on this foundation, resulting in a cycle of progressive growth.
Elevated productivity within key industries curtails operational costs and boosts product quality and market positioning.
This confluence attracts investment inflows, fostering an ecosystem of innovation that perpetuates productivity gains. When effectively harnessed, it may position the country as a nexus for high-value industries.
The manufacturing sector exemplifies the loop's potential.
Strategic investments in automation and process optimisation yield productivity enhancements, boosting global competitiveness. The reinvestment of revenue in research and development underscores the sustainable nature of this progression.
Enhanced productivity in logistics is another example, which has improved Malaysia's position as a regional hub for trade.
Digitalising Customs processes and adopting advanced tracking systems have reduced transit time, attracting international clients and driving investments in the infrastructure.
Similarly, the financial services sector has benefited from technology-driven innovations, such as mobile banking and fintech solutions, enhancing customer satisfaction and expanding their market reach.
In construction, the adoption of technology, such as Building Information Modelling (BIM) and prefabrication techniques, have reduced project timelines and costs.
These advancements elevate competitiveness and attract multinational corporations seeking efficient and cost-effective project partners. The reinvestment of revenue in training and equipment perpetuates this growth cycle.
At the macroeconomic level, this dynamic translates into elevated gross domestic product (GDP) growth rates, amplified export revenues and a fortified trade balance.
The productivity-competitiveness feedback loop is a linchpin for constructing a resilient and diversified economy capable of weathering global perturbations.
Embedding this loop in Malaysia's framework equips the nation with the agility to adapt to evolving global paradigms, ensuring economic durability and relevance.
Innovation emerges as the fulcrum of this ecosystem. Productivity gains create fertile ground for innovation.
This, in turn, sharpens competitiveness by unlocking access to new markets and facilitating the emergence of high-value industries.
Malaysia's growing digital economy and its strides in green technology illustrate how innovation drives sustainable growth.
Strategically, industries such as renewable energy and biotechnology epitomise fertile domains for the loop's application. Investments in these sectors accelerate technological progression and solidify long-term growth capacities.
For example, the focus on electric vehicle (EV) manufacturing underscores how productivity gains can invigorate competitiveness in burgeoning global markets.
HARNESSING THE LOOP
Embedding advanced technologies and cultivating a culture of innovation are paramount for businesses. Harnessing tools such as artificial intelligence, data analytics, and the Internet of Things can drive operational efficiency while unlocking new market avenues.
Simplifying regulatory procedures, instituting tax incentives for innovation, and fostering public-private collaboration are also critical levers for catalysing productivity and competitiveness.
Educational institutions bear a strategic responsibility in aligning their academic curricula with industry requisites.
Civil society organisations can amplify the loop's societal impact by championing inclusive policies and advocating for equitable access to opportunities.
ACTION PLAN
The Malaysia Productivity Corporation (MPC) champions the formulation of the action plan for national competitiveness.
The action plan aims to boost economic performance, government and business productivity and efficiency, stimulate innovation, and bolster technological and infrastructure development.
MPC director-general Zahid Ismail said central to the plan are initiatives that streamline business regulations, strengthen the labour market, boost research and development, and expand the digital and physical infrastructure.
"The productivity-competitiveness feedback loop is not just a concept; it is a transformative pathway for Malaysia to secure its place as one of the world's most competitive economies," he said.
"The action plan, known as Pelan Tindakan Reformasi Daya Saing Negara, was formulated through the wisdom-of-the-crowd and whole-of-government approach.
"The national-level competitiveness committee — Jawatankuasa Daya Saing Negara — co-chaired by the investment, trade and industry minister and the second finance minister, is in place to steer and monitor the implementation of the action plan."
He added that the committee aims to elevate Malaysia to be among the 12 most competitive economies by 2033, as aspired by the Madani Economy framework.
"The success of this action plan hinges on collective effort.
"Government bodies, private enterprises and civil society must synchronise their strategies to foster an ecosystem where productivity and competitiveness thrive in tandem.
"The productivity-competitiveness feedback loop represents a definitive pathway towards sustainable prosperity.
"By addressing challenges and capitalising on latent opportunities, Malaysia can unlock economic potential and solidify its global stature," he said.