THE 2024 World Competitiveness Report (WCR) by the International Institute of Management Development, a Swiss business school, placed Malaysia as the 34th most competitive nation.
Malaysia was in 27th position last year.
To improve our competitiveness, the government must double down on efforts to improve productivity, the essence of competitiveness. Here are five strategies.
FIRST are sound macro-economic policies. While Bank Negara is a steady hand in monetary-policy management, the 2023 Public Finance and Fiscal Responsibility Act should help the government better manage the budget deficit and public debt. Both are key indicators in the WCR.
The budget deficit is projected to be 4.3 per cent of the gross domestic product (GDP) by year end. And the public debt has hit the statutory limit of 65 per cent of the GDP.
The 2007-2008 global financial crisis and the pandemic resulted in the government borrowing money to inject liquidity to keep the economy afloat. Targeted subsidies should save money that can be used to pare down our deficit and debt.
SECOND, productivity of firms is enhanced when interconnected firms, suppliers, specialised institutions and other related industries are co-located in a geographical location.
By co-locating in clusters, firms reduce their costs through their proximity to resources, logistics and related services. Additionally, intracluster competition drives productivity gains.
The New Industrial Master Plan 2030 prioritises cluster development as a cornerstone of industrial growth.
We can therefore hope to improve our competitiveness once cluster development becomes de rigueur for industrial development.
THIRD, we must continue to aggressively develop a business-friendly ecosystem to attract foreign direct investments (FDIs).
Malaysia experienced a handsome 23 per cent jump in FDIs in 2023 compared with 2022. This increase will stimulate inter-firm rivalry and, consequently, productivity.
FOURTH, implementing structural reforms to taxation, subsidies and labour market are vital in boosting competitiveness.
The talent gap must be narrowed. Only 25 per cent of Malaysia's workforce is skilled and 42 per cent of graduates are in jobs unrelated to their degrees.
Labour-market reforms that allow flexi-hours, easier hiring and firing, skills enhancement through work-based learning and attractive wages aligned with skills should enable companies to draw and retain talent.
These reforms will also encourage the 49 per cent of school-leavers who do not further their studies to pursue higher education and subsequently enlarge the country's talent pool.
FIFTH, political stability, despite political bickering, and good governance should ensure a conducive business environment for enhanced competitiveness.
Although we have improved in the corruption index, from 61st position in 2019 to 57th today out of 180 countries, and the Malay-sian Anti-Corruption Commission is at war against the corrupt, more needs to be done.
Singapore owes its pole position in global competitiveness partly to being squeaky clean.
Innovation buttresses productivity improvement and competitiveness.
Leading innovative economies —for example, the United States, South Korea and Germany — are highly competitive.
They spend double or triple the amount, as a percentage of GDP, on research and development compared with the paltry one per cent that Malaysia spends.
Comprising 97 per cent of all business establishments in Malaysia, small- and medium-scale enterprises (SMEs) stand to profit from digital technology for productivity improvement and contribute to the nation's competitiveness.
A 2021 study by the University Consortium of Malay-sia said SMEs increased productivity by 23 per cent by using social media.
E-commerce operations registered a 27 per cent productivity increase while digitalisation of back-end operations, such as data management, boosted SME productivity by as much as 60 per cent.
Alas, technological sophistication among SMEs is subpar with only about 80 per cent of them at a nascent stage of digitalisation.
With these strategies, we should be able to achieve higher competitive rankings.
The writer is a former public servant, academic and columnist with this newspaper for over a decade