COMMENT | Chance to re-assess our priorities after IMD ranking drop

COMMENT | The Small and Medium Enterprises Association of Malaysia (Samenta) noted with concern the drop in Malaysia’s ranking in the International Institute for Management Development (IMD) World Competitiveness Ranking by seven places.

This is a wake-up call and an opportunity for the country to re-assess our national priorities and to build a stronger government and business nexus to drive our economy forward.

The IMD has been publishing the World Competitiveness Ranking since 1989 and ranks all participating economies’ ability to create and sustain an environment in which enterprises can compete and prosper.

This is derived from a blend of economic data and opinions of investors and the business community. Many of our members took part in the survey which forms part of the ranking indicators.

Whilst it is true that this is our lowest ranking over the past 20 years, and Indonesia’s highest in the same period - we need to study deeper to understand better how we have come to this point.

From the 20 sub-factors that provided equal weightage to the ranking, we dropped significantly in five areas: domestic economy, productivity and efficiency, technological infrastructure, management practices and attitude, and values.

Our gains in international investment, employment and education were insufficient to counter drops in the five sub-factors.

What contributed to the drop?

Within the domestic economy sub-factor, we were hurt primarily by the real GDP growth per capita indicator.

This was attributed to the rapid increase in the number of unskilled and semi-skilled foreign workers that entered Malaysia in 2023, at a time when our GDP growth was hammered both by the war in Ukraine and the conflicts in the Middle East.

We dropped by a whopping 20 ranks (from second to 22nd) in this indicator alone. This in turn has also impacted our performance in the productivity and efficiency sub-factor, as the ranking considered growth in productivity in various sectors each year.

Our productivity efficiency sub-factor is our weakest rank – at 53rd (a drop of 17 places from 2023’s 36th).

The drastic drop in two other sub-factors under business efficiency: in management practices, and attitudes and values, reflects the transitional challenges that our businesses are facing, and is indeed an urgent call for help from our business community.

The year 2023 was marked by a rapid increase in compliance requirements for businesses, including in areas such as the environmental, social and governance, big data and corporate boards - leading to many respondents indicating their fatigue and fear of not being able to meet these increased compliance requirements.

There was noticeable negativity surrounding Malaysians’ attitude towards globalisation, foreign brands and culture, value systems and digital transformation - which resulted in Malaysia’s further six-rank drop to 40th from 34th in 2022, within the attitudes and value indicator.

The lower global demand for semiconductors also hit our high-tech exports indicator, as did the talent crunch in the high-tech sector. This talent crunch has also affected our ability to export our information and communication technology service, which also saw a drastic drop in 2023.

Share the burden

From the breakdown in declining sub-factors, it is clear that the government cannot be blamed completely for this drop. Businesses and Malaysians in general must also share the burden of making Malaysia more competitive.

This calls for an urgent relooking at our priorities as a nation. While we aspire to be an inclusive country by having policies that support specific communities, this is hurting our competitiveness, causing talent flight and imbuing a wrong perception that Malaysia does not encourage choice and competition.

The recent calls for boycotts, and our over-zealous reaction to things like concerts by certain performers, are also not helpful in our national branding and perception. This in turn has and will continue to hurt businesses and our economy.

The government is on the right path in reducing our bloated subsidies and closing the loophole in tax evasion via initiatives like e-invoicing. However, we must also do more to liberalise our labour regulations and hold Malaysians accountable for individual productivity.

Given that our poorest indicators in the IMD World Competitiveness Ranking are in business and government efficiency - it is high time for the government and our business sector to work together as Team Malaysia to reboot and resuscitate our falling competitiveness.

We must quickly move away from the government-knows-best approach, and learn to trust businesses more while holding them accountable for their action and results.

Digitalisation and the digital government initiative will help in this, but unless we change the mindset of more government agencies from an enforcement/regulatory perspective to one that facilitates businesses and allows for self-check and self-governance, we will continue to have this disconnect between the government and businesses-at-large.

Similarly, businesses, including SMEs, must quickly cut our reliance on unskilled and low-skilled foreign workers, adapt to the global transition to a low-carbon economy, adopt artificial intelligence and digitalisation tools, and cut our reliance on government procurement and hand-outs.

We need to adopt the mantra that “what is good for business, is good for the country” - as the reality post-pandemic is that the welfare of citizens anywhere in the world, is tied to the country’s prosperity.

When our businesses and the economy do well, Malaysia can earn more for our coffers, build better roads, upgrade our schools and provide better security and comfort to all Malaysians.

This drastic drop in our competitiveness ranking is a once-in-a-generation wake-up call for us to re-assess our priorities as a nation, build a stronger Team Malaysia, and adopt a whole-of-nation approach to make Malaysia the beacon of economic growth and cultural diversity and tolerance once again.

WILLIAM NG is Samenta national president.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

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